Severstal (SVST)

SeekingAlpha  Aug 13  Comment 
By Anup Singh: Steel Dynamics (NASDAQ:STLD) has gained remarkably in the past one month. Shares of the steel player have gained 20% over the last one month, with the primary trigger being the withdrawal of Russian steelmaker Severstal from the...
Benzinga  Jul 22  Comment 
The following are the M&A deals, rumors and chatter circulating on Wall Street for Monday July 17, 2014: AK Steel to Acquire Severstal Dearborn for $700M in Cash The Deal: AK Steel (NYSE: AKS) announced Monday, that it has signed an agreement...
Motley Fool  Jul 21  Comment 
And yet, as Russian steel giant Severstal leaves the U.S. market, it looks neither bruised nor battered.
Wall Street Journal  Jul 21  Comment 
Russian steel manufacturer Severstal has sold its U.S. subsidiaries to two American firms for a combined $2.34 billion.
Financial Times  Jul 20  Comment 
Russian steelmaker agrees to sell its North American assets to two US steel groups for $2.3bn as it sheds its international assets to cut costs
newratings.com  Jul 16  Comment 
LONDON (dpa-AFX) - Russia-based steel firm OAO Severstal (SVST.L) Monday announced definitive agreements to sell its Severstal Columbus, LLC and Severstal Dearborn, LLC subsidiaries, together called Severstal North America, in cash deals totaling...
Reuters  Jul 15  Comment 
Russia's Severstal has agreed to sell Pennsylvania-based metallurgical coal producer PBS Coals to Canada's Corsa Coal for an enterprise value of $140 million, the Russian...
Reuters  Jun 26  Comment 
Brazilian steelmaker Companhia Siderurgica Nacional said on Thursday it is participating in a bidding process to acquire U.S. assets of Russian steelmaker OAO...




 
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Business Overview

Severstal is one the world's top vertically integrated steel producers[1]. In 2010 the company produced close to 17 million metric tonnes of steel, placing it amongst the top ten steelmakers in the world.

The company is run by Alexey Mordashov, a Russian steel industry oligarch who is also a main shareholder.

Business and Financial Metrics

Consolidated Severstal Group revenue in 2010 was $13.5 billion. EBITDA for this period was $3.3 billion[2].

Business Segments

The Severstal Group operates in three main segments. These are:

  • The Russian Steel Division, which is the biggest division accounting for some 65% of sales. It mainly comprises the Cherepovets steel plant that produces ~9 million tonnes of steel per year, the Kolpino plate mill [850 kt / year of heavy steel plate] and the Izhora Pipe Mill [~600 kt / year of large diameter pipe].
  • The Resources Division. This produces coking coal in Russia of ~ 8 mt / year, plus iron ore pellets and concentrate amounting to Russian output of some 14 million tonnes of iron ore per year. PBS Coals in Pennsylvania (a leading provider of ~1.5 mt / year of metallurgical coal and of ~1 mt/year of thermal coal - located by the U.S. east coast) is within this division. Gold mining assets in Russia, Kazakhstan and in West Africa [with production of ~ 590 k oz gold in 2010] are also within the Resources division.
  • The International Division. Following the March 2011 sale by Severstal North America of steel making facilities at Warren, OH, Wheeling, WV and Sparrows Point, MD to the Renco Group, the International Division now mainly comprises US assets that include the 2.3 million tonne crude steel per year flat rolled steel plant at Dearborn, MI [auto cold rolled steels] and the 1.5 million tonne per year crude steel per year Columbus steel plant in Mississippi (formerly known as Severcorr).

Trends and Forces

Some of the trends impacting the Company include:

  • Internationalization of the production base, which is pushing many large steel companies to new geographies in order to match the geographic breadth of key clients (e.g. in the automotive sector).
  • Domestically, the evolution of the steel distribution network - with emergence of modern steel service centers and increasingly more sophisticated steel stockholding operations in Russia - which represents both a threat and an opportunity to Severstal.
    • increasing environmental and emissions costs in regions such as the European Union, which is pushing steelmaking into countries such as Russia
    • the desire for adding value through hot and cold processing of steel, which is pushing rolling operations towards industrialised markets.

Competition

Within its core business of steelmaking, it should be noted that Severstal has a major competitive advantage from being almost fully self-sufficient in supply of key steelmaking raw materials that include iron ore and coking coal. This strong vertical integration gives Severstal a marked cost advantage in the production of steel. As a result, Severstal is ranked as being amongst the lowest cost producers of hot rolled steel coil, ranking in terms of cost performance with steelmakers in the top decile on the world cost curve for hot rolled coil.

Important competitors include EvrazHolding in Russia, the Novolipetsk Metallurgical Kombinat (NLMK) in Russia, the Magnitogorsk Iron and Steel Works in Russia and ArcelorMittal's Termitau production plant in Kazakhstan.

References

  1. History of Severstal
  2. Severstal Corporate Presentation, Page 3 "Severstal Overview", June 2011
  3. [NLMK Presentation, 'Europe and the CIS: What does the future Hold?' SBB European Steel Conference, Barcelona, May 2011]
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