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Reuters reported that the July-August issue of the American magazine Foreign Policy points out to its readers that Russian firms, such as Evraz and Severstal, now own 10% of the US steelmaking market. Russia's foray into North American steel marks the growing power of its leading steel firms, which are unburdened by high raw material costs after absorbing their own mines during a carve up of the country's mineral assets in the late 1990s.
Severstal was the first Russian company to buy a US steel asset when it bought Dearborn, Michigan based Rouge Steel, once the in house steel unit for Ford Motor Co in late 2003. Later it added Sparrows Point and WCI. Evraz Group started with the acquisition of Oregon Steel Mills and Claymont Steel Holdings and last month it also agreed to buy IPSCO's North American assets from Sweden's SSAB.
Whereas many American analysts see US steelmaking as a sunset industry that cannot compete with cheap imports from China, Russian tycoons, who have experience modernizing outdated Soviet steel mills back home, see value, especially with a weak dollar making US assets cheap in comparison to acquisitions in the Euro zone.
Furthermore, skyrocketing oil prices in the past year have actually doubled and in some cases tripled the cost of sending a standard shipping container from China to the US, making American steel much more competitive with cheap imports in the North American market.
Billionaires who built their fortune on Soviet-era steel giants have spent nearly USD 9 billion in the last few years acquiring US mills to expand their global presence. At today's knockdown prices, investors believe it's a gamble worth taking.
Mr Tim McCutcheon partner and fund manager at DBM Capital Partners in Moscow said that "They are buying them because they are cheap. The underlying motive behind buying these mills is making money, not enhancing the political glory of Russia.”
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