Severstal Seeks to Expand U.S. Sales to BMW, Nissan by 2016

OAO Severstal (SVST), Russian billionaire Alexei Mordashov’s steelmaker, plans to expand the share of its U.S. unit’s sales to automakers such as Nissan Motor Co. to as much as 42 percent by 2016 to benefit from an industry revival.

“Demand in the automotive sector is recovering at a higher pace than in any other segment, and in the next five years we expect it to rise especially in the south of the U.S. and in Mexico,” Sergei Kuznetsov, chief executive officer of Severstal International, said in a telephone interview from London.

The unit sold about 30 percent of its steel to automakers including Ford Motor Co. (F), General Motor Co. and Chrysler Group LLC in the first half, he said. It has already begun shipping to Bayerische Motoren Werke AG (BMW) and Mercedes-Benz, while talks have started with Nissan and Toyota Motor Corp. on gaining necessary certification to supply those companies, Kuznetsov said.

The international division, focused on North America, had first-half sales of $2.16 billion, after $1.57 billion a year earlier, as output rose about 40 percent, it said last week. Severstal expects the U.S market to grow 6 percent this year.

Prices, up about 7 percent to 8 percent since July to $680 to $700 a metric ton, began recovering after slumping 20 percent from the first quarter to the end of July, Kuznetsov said.

“There is a danger that some of ArcelorMittal’s facilities may be halted for a period,” so a lot will depend on the talks between unions and ArcelorMittal about a new contract, he said, adding that the U.S. market is set to grow 3 percent next year.

The U.S. Department of Energy in January canceled a planned $730 million loan for Severstal to finance construction of a new line in Dearborn for ultra-thin steel for energy-efficient cars.

“It’s on hold and we are looking for an alternative way of financing it, such as finding a partner,” Kuznetsov said.

To contact the reporter on this story: Yuliya Fedorinova in Moscow at yfedorinova@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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