Bloomberg News

Novolipetsk May Gain From Tata Plant Closure, Renaissance Says

December 08, 2009

OAO Novolipetsk Steel, Russia’s largest steelmaker by market value, may gain from Tata Steel Ltd. (TATA)’s planned closure of a plant in the U.K., Renaissance Capital said.

Novolipetsk may supply as much as 60 percent of the steel slabs, a form of semi-finished steel, needed by its joint venture with Switzerland’s Duferco Group once the Tata plant shuts, Boris Krasnojenov, an analyst at the Moscow-based brokerage, said today by phone.

Novolipetsk’s so-called cash production costs for slabs was $199 a metric ton in the third quarter and is about half the average for European producers, Krasnojenov said.

Corus Group, the European unit of India’s Tata, said Dec. 4 it will mothball its Teesside plant at the end of January after a group of four customers walked away from a 10-year agreement to buy slabs. Duferco is one of the customers that stopped taking slabs from Teesside

Novolipetsk increased third-quarter sales of slabs to its Duferco venture to 338,000 tons, 71 percent up from the previous quarter, the Russian steelmaker said yesterday in a regulatory filing. The venture’s semi-finished steel mill in Carsid, Belgium was idled earlier this year.

“It may now make sense for Novolipetsk to raise its participation in the venture to a controlling stake,” Krasnojenov said.

Novolipetsk has an option to add one share to its 50 percent stake in the venture, Novolipetsk said in e-mailed response to questions from Bloomberg News, which would give it control.

“We will consider the possibility to exercise this option as the venture’s synergies with the Russian production assets increase,” Novolipetsk said.

To contact the reporter on this story: Ilya Khrennikov in Moscow ikhrennikov@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net


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