Ternium resumes talks to buy ThyssenKrupp's Brazilian steel mill CSA

26 Oct 2016

Italian-Argentine steelmaker Ternium SA has resumed talks to buy ThyssenKrupp AG's loss-making Brazilian steel mill CSA Cia Siderúrgica do Atlántico SA, months after talks broke down because of legal and environmental concerns, Reuters yesterday reported, citing three people familiar with the matter.

Talks between both steelmakers are in an advanced stage with price being the focus, but Ternium has not yet made a formal offer for CSA, the report said.

Quoting some analysts, Reuters said that CSA is worth less than $3 billion, but Ternium is expected to pay significantly below market price.

ThyssenKrupp started operating its CSA steel-slabs plant in Rio de Janeiro in 2010, which has a capacity to produce five million tonnes of steel annually, while its steel mill in Calvert, Alabama, was also opened in 2010.

Brazilian mining giant Vale SA, which held a 26.9-per cent stake in CSA, sold its stake in April to Thyssenkrupp for a token sum.

Due to cost overruns, the overall cost of building the plants in Brazil and Alabama was nearly €10 billion, much above its original estimates of €8.3 billion.

In 2007, ThyssenKrupp had developed a strategy for Steel Americas based on two basic premises: slabs were to be produced at low cost in Brazil and shipped with cost advantages to the US. After processing they would then be sold in the North American market.

But the German steelmaker put both CSA and the Alabama steel plant for sale in 2012 due to increasing production and labour costs in Brazil, inflation, the appreciation of the Brazilian currency and a decline of demand, especially in Europe and China.

Although suitors like ArcelorMittal, the world's largest steel producer and Brazilain steelmaker Companhia Siderurgica Nacional (CSN) had shown interest, a deal did not materialise because global demand for steel was slowing faster than expected.

Ternium was formed in 2005 by the consolidation of three companies: Siderar of Argentina, Sidor of Venezuela and Hylsa of Mexico. Siderar was established by Argentine-based industrial conglomerate Techint in 1992.

It is the leading steel company in Latin America with integrated processes to manufacture steel and value-added products. It produces flat and long steel products and has facilities in Argentina, Mexico, Guatemala, Colombia and the US.