US Steel confirms expressions of interest in Slovakian flat steel subsidiary, China's Hesteel in running
US Steel has received multiple expressions of interests in its integrated steel mill and coke batteries in Slovakia, a company spokeswoman said on Wednesday September 17.
But while the Pittsburgh-based steelmaker owes it to its shareholders to investigate all such opportunities, “no decisions have been made at this time”, she told Metal Bulletin sister publication AMM.
Her comments came after Bloomberg reported that US Steel had agreed to sell its Slovakian subsidiary, US Steel Košice, to China’s Hesteel (formerly known as Hebei Iron & Steel) for $1.40 billion.
“I will not comment on unsubstantiated media reports,” the spokeswoman said.
Local media in Slovakia reported in January that US Steel and Hesteel had signed a Memorandum of Understanding (MoU) related to the purchase of US Steel Košice for €1.4 billion.
And Czech steelmaker Moravia Steel was named as another potential buyer at the time, but later denied any interest. The Slovakian government was also said to be considering buying the plant.
However, eight months on, analysts have been quick to question whether a deal with Hesteel is any more likely than the rumoured MoU in January.
Discussions with US Steel’s management did not provide a clear rationale for a sale, especially given that the company’s balance sheet is “in the best shape it’s been in a while,” Gordon Johnson, managing director at New York-based Axiom Capital Management said in a research note on Tuesday.
Management reaction to talk of a deal with Hesteel ranged from, “What sale? We didn’t say anything about a sale”, to “A Slovak press rumour with no source cited?” Johnson said.
A sale also wouldn’t make sense, given that US Steel’s European division (now just US Steel Košice), has been its only consistently profitable segment over the past two years, Johnson said, adding that, if a sale were to occur, “it would be an admission [that] global steel market fundamentals are about to turn down, and we are at peak optimism today”.
U.S. Steel bought the Košice steel plant in 2000, but, 17 years later, there are “no synergies” between the steelmaker’s assets in the US and Slovakia, Novid Rassouli, an analyst at New York-based Cowen & Co, said on Wednesday in a research note. And if a sale were to take place, US Steel would use the proceeds to pay down debt, he added.
But the rumoured $1.40 billion price tag is probably not enough to entice US Steel to sell, given that the company has approximately $1.50 billion on its balance sheet and no immediate need for cash.
US Steel Košice is an integrated steel mill that makes hot-rolled coil (HRC), cold-rolled coil (CRC) and coated steel (HDG), as well as tin mill products, electrical steels and spiral-welded pipe. It also sports its own coke batteries.
The mill was said to be for sale in 2015, when steel prices plunged around the world.
Former US Steel chairman, president and ceo John Surma said in 2013 that the company had received expressions of interest in US Steel Košice and in 2012 Slovak prime minister Robert Fico said in the US parent company was likely to leave Slovakia sooner rather than later.
Hesteel does, however, have a history of scooping up former US Steel operations.
It bought Serbia’s sole steelworks, Železara Smederevo, in June 2016, the plant having been bought by the Serbian government from US Steel in 2012 for just $1.