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July 23, 2014

Steel Dynamics Acquires Severstal Columbus

Steel Dynamics, Inc., Fort Wayne, Ind., has agreed to purchase Severstal's Columbus, Miss., mill for $1.625 billion. Russian parent OAO Severstal exits the U.S. market with its concurrent sales of the Columbus mill to SDI and its Dearborn, Mich., mill to AK Steel (see related story). Located in northeast Mississippi, Columbus is one of the newest and most technologically advanced minimills in North America. The acquisition expands Steel Dynamics' annual steel shipping capacity by 40 percent to 11.0 million tons, making it the fourth largest steel producer in the United States.

John Packard, publisher of Steel Market Update, says news of the two acquisitions is being well received by the marketplace. The exit of Russia's Severstal means there will be one less competitor in the market by the end of the year. "Fewer competitors reduces the opportunities for buyers to pit one mill against another and should result in firmer pricing and less price volatility throughout the year," he says.

The addition of the Columbus mill should be a great fit for Steel Dynamics, Packard says. It gives Steel Dynamics a firm foothold in the South with a mill capable of producing extra wide coils. It moves SDI into the automotive, appliance, and pipe and tube markets in the region, as well as deeper into southern service centers and the Mexican market.

To put the acquisition in perspective, Packard says, consider that SDI has purchased the newest, most modern minimill in the country with 3.4 million tons of capacity for $1.625 billion. In comparison, Big River Steel will soon break ground on a new 1.6 million ton minimill in Osceola, Ark., which is projected to cost $1.3 billion.

Commissioned in 2007, Columbus is one of the only North American flat-roll mills to have 76-inch-wide hot-roll, 74-inch-wide cold-roll, and 72-inch-wide galvanized sheet capabilities. These and other production capabilities will broaden Steel Dynamics' product portfolio with regard to width, gauge and strength, says CEO Mark Millett.

"The acquisition of Columbus represents a significant step in the continuation of our growth strategy," he says. "It leverages our core strengths and at the same time fulfills our initiatives to further increase value-added product and market diversification."

Responding to an analyst's question, Millett said SDI is unconcerned about Big River Steel being built in the same region. "When you are the lowest cost producer, well, to be honest, we'll take anyone on," he said.

SDI is one of the largest domestic steel producers and metals recyclers in the United States with annual sales of $7.4 billion in 2013 and over 6,800 employees. Its holdings include five existing steel mills, six steel processing facilities, two iron production facilities, over 90 metals recycling locations and six steel fabrication plants.

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Saturday, October 25, 2014