“The transaction reflects a significant strategic opportunity to add complementary assets and scale to Severstal’s existing US business,” the company said in a statement.

Sparrows Point, a fully-integrated steel mill based in Maryland, US has a capacity of 36 lakh metric tons of crude steel and shipped 23 lakh metric tons of finished steel products in 2007. It is the only integrated producer of flat rolled steel on the US East Coast and is a major North American supplier of tin mill products.

Severstal expects to realise significant business improvements and synergies at Sparrows Point in conjunction with a five-year investment programme at the plant, it said. The acquisition is expected to close in the second quarter of 2008-09, subject to customary closing conditions, including approval by the US Department of Justice.

India’s Essar Steel was earlier reported to be in the race to buy the plant, which the US Department of Justice ordered ArcelorMittal to divest as part of anti-trust concerns related to tinplate production in the eastern United States. Evraz Group SA and OJSC Novolipetsk Steel were also considered to be in the fray.

Unlocked growth

“With Sparrows Point, Severstal brings into its US portfolio an asset with significant existing value as well as unlocked growth potential,” Severstal CEO Alexei Mordashov said.

The company expects to synergise the new mill with its current US operations in Dearborn, Michigan and Columbus, Mississippi. With the addition of Sparrows Point, Severstal will improve its distribution channels and increase its reach as the plant provides direct ocean access and proximity to a number of major US railways and highways.

Severstal is an international steel producer and is listed on the Russian Trading System and the London Stock Exchange. Last year, Severstal produced 1.75 crore tons of steel and its revenues were $5.2 billion.