Severstal’s acquisition of Sparrow’s Point
Severstal recently closed its acquisition of the Sparrow’s Point mill owned by ArcelorMittal. The price paid by Severstal, $810 million, works out to just over $200 per ton of installed steel making capacity. This is well below what assets have been selling for in North America. As can be seen in the graph below, the acquisition cost per ton paid for steel making capacity has risen from around $200 per ton when the consolidation process started, to over $1,000 per ton in the last couple years.
Of course, Sparrows Point was not operating at capacity and generated only $25 million of EBITDA in 2007. So we’ll have to wait and see whether or not this was a good buy by Severstal. On the surface, however, $200 per ton for a fully integrated plant on deep water seems like a bargain.
