who built their fortune on Soviet-era steel giants have spent nearly $9 billion
in the last few years acquiring U.S. mills to expand their global presence. At today's
knockdown prices, investors believe it's a gamble worth taking.
buying them because they're cheap. The underlying motive behind buying these
mills is making money, not enhancing the political glory of Russia," said
Tim McCutcheon, a partner and fund manager at DBM Capital Partners in Moscow.
on U.S. steel is risky, analysts say, as the once-mighty automotive and
construction sectors are in decline and demand growth has been eclipsed by
emerging economies such as China and India.
this has not deterred Alexei Mordashov, owner of Severstal, whose acquisitions
have pushed his company into the top five steelmakers in the United States -- a
scenario unthinkable when the countries were Cold War enemies.
remain committed to growth in North America and believe in the long-term
promise of the U.S. market," Mordashov, ranked the world's 18th-richest
man by Forbes magazine, said last month after announcing Severstal's latest
says the weak dollar is making Russian companies, which derive most of their
revenues supplying a domestic market expanding at more than 7 percent annually,
more competitive in the United States. The dollar has lost nearly 15 percent of
its value against the ruble in the last two years.
country'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.
was the first Russian company to buy a U.S. steel asset when it bought
Dearborn, Michigan-based Rouge Steel, once the in-house steel unit for Ford
Motor, in late 2003.
Group, part-owned by billionaire Roman Abramovich, followed with the
acquisition of Oregon Steel Mills and Claymont Steel Holdings. Last month it
also agreed to buy IPSCO's North American assets from Sweden's SSAB.
barons have avoided the political scrutiny that has hampered other Russian
attempts to invest overseas by spending at a time when parts of the U.S. steel
industry are on their knees and limiting their ambitions to small or midsized
has, however, raised questions over asset quality.
Bradford, New York-based metals analyst for Soleil Securities Group, said
Russians had bought assets nobody else wanted and face a huge challenge in
turning them round.
of these plants were so bad. I don't know if they could have been sold as
scrap," he said.
outdated mills shunned by U.S. firms present less fear to those well acquainted
with the overmanned behemoths that once served the Soviet military-industrial
who comes from Cherepovets or Lipetsk is not going to have a problem with an
integrated mill," DBM Capital's McCutcheon said, referring to the home
cities of Severstal and NLMK.