Steelmaker Severstal Denies Write-Off Rumor

Denies report that its Russian parent plans to exit the U.S. market

The fourth-largest domestic steelmaker is denying a report that its Russian parent plans to exit the U.S. market, just five years after it began investing billions to gain a regional presence. The report contends that Moscow-based OAO Severstal officials, as well as new Severstal North America executives named after a recent shakeup, notified United Steel Workers International officers of their plans. The union officials then notified local union presidents of the impending exit.

The report does not indicate how the steelmaker would pull itself from the domestic market. Within the past month OAO Severstal replaced two of the leaders heading its overseas organization. Severstal International CEO Gregory Mason left the company, as did Severstal North America chief operating officer Thomas Cera.

Severstal North America spokeswoman Bette Kovach issued a careful denial to the published report: "While our new leadership team in North America is reviewing a variety of operating strategies for our facilities, we expect our three facilities currently in operation to continue to run with a focus on greater efficiency and internal cost reduction," she stated.

OAO Severstal is among the worlds largest steelmakers by volume, and its domestic capacity is estimated at about 17.5 million tons/year. It began investing in domestic capacity with its 2004 of the former Rouge Steel, in Dearborn, Mich. That was followed by a joint-development of the Severstal Columbus mini-mill in Mississippi, which started up in 2007.

Those two operations remain the core of the organization. "Ongoing production at these facilities will allow us to meet the obligations of our order book while we also work to further enhance our ability to respond to customer needs," according to Ms. Kovach.

As steel prices spiked in the past four years, Severstal aggressively fought competitors to buy more domestic capacity. It acquired integrated plants once operated by Bethlehem Steel (Sparrows Point, Md.), WCI Steel (Warren, Ohio), and Wheeling-Pittsburgh Steel (Wheeling, W Va.)

Once industrial demand collapsed in 2008, Severstal followed the market pattern of idling operations. The latter three acquisitions have been shut down since late last year, and Severstal has no plans to restart. "As previously stated when issuing the WARN notifications in May 2009, the Warren and Wheeling operations will remain idle until the market returns for their products," Ms. Kovach concluded.

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