SeverStal Takes Over and Plans Rouge Steel Mill Upgrade

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated, Houston, Texas). Russian steel giant, SeverStal, has finalized its purchase of the former Rouge Steel Works in Dearborn, Michigan (Plant 1514765). Rouge Steel was Henry Ford's answer to a steady steel supply for his Ford Motor Company (NYSE:F) (Dearborn, Michigan) assembly plants. However, Rouge fell on hard times and was forced to look around for a buyer last year.

SeverStal, Russia's second-largest steel producer, bought out Rouge's facilities and assets, including two joint venture businesses, for $285.5 million. SeverStal also agreed to significant new investment into the Dearborn facility, up to $45 million a year in its new U.S. subsidiary to be known as SeverStal North America. SeverStal has agreed to maintain the blast furnace capacity or even replace it with an electric arc furnace capacity, according to a statement by UAW Vice President Gerald Bantom. "We see this commitment and others as a win for workers who just weeks ago were unsure if they would have jobs at all." As things stand, the Russians are at Rouge this week, gathering information for a decision on the scope of the upgrades it has promised, and the decision should be forthcoming within a month or so.

As part of its revitalization plans for Rouge, SeverStal intends to ask the U.S. Commerce Department to allow it to import more steel slab from Russia. The company shipped 2,000 tonnes of steel and products to the United States last year. It is thought that Washington's recent decision to abolish three-year steel import duties imposed by the U. S. on foreign steel is likely to trigger major export growth from Russia. SeverStal's Sales Director, Dmitry Goroshkov thinks SeverStal could sell hundreds of thousands of tonnes of steel to the U.S. in 2004 as a result of abolishing the import duties.

SeverStal's Rouge purchase was the second move by a major Russian metals company into the U.S. market, after Norilsk Nickel (Moscow) took over U.S.-based platinum firm Stillwater Mining (NYSE:SWC). Norilsk Nickel is now owned by Russia's most powerful bank, Uneximbank. It will be interesting to see how successful these new Russian ventures will be as they play in the U.S. capitalist market.