TOKYO -- JFE Steel will likely make a bid to acquire the U.S. steel business of Severstal, seeking to utilize the facilities of the Russian steel giant for automotive sheet production.
Severstal is Russia's second-largest steel company, operating under a state-run parent. Its group sales came to $13.3 billion in 2013. In North America, the company has two plants, one in Dearborn in the state of Michigan, and the other in Columbus, Mississippi.
The Michigan plant has all the equipment needed to make auto steel sheets, from blast furnaces to galvanizing lines. The Mississippi site has electric furnaces and thin slab casters. Last year's crude steel production at the two locations amounted to 5 million tons or so.
With the business struggling to grow profits in recent years, Severstal has approached other steelmakers, both in the U.S. and elsewhere, to buy the facilities.
JFE Steel has likely told Severstal about its intention to take part in the bidding, but the final decision will be made after thorough assessments of such factors as the state of equipment and investment returns.
It may buy just one of the two plants, and a joint acquisition with another company is a possibility. Rivals like U.S. Steel and CSN from Brazil are showing interest in the facilities. Acquiring both locations could cost over 100 billion yen ($976 million). If JFE wins the deal and obtains blast furnaces, it will be the first Japanese company to handle upstream processes of auto steel production in the U.S.
As Japanese automakers expand production in North America, demand for high quality steel sheet is rising. JFE Steel has a 3% stake in U.S. peer AK Steel, but has struggled to increase its production capacity for automotive sheets.