CSN Is Only Hope for ThyssenKrupp Americas, Nucor Says

ThyssenKrupp AG (TKA)’s only hope to sell its unprofitable Americas steelmaking unit is Brazil’s Cia. Siderurgica Nacional SA (CSNA3), the chairman of former bidder Nucor Corp. (NUE) said.

“We’re out, U.S. Steel (X) is out, Mittal and Nippon are out,” Nucor’s Dan DiMicco said in a July 29 interview at Bloomberg headquarters in New York, referring to a joint offer made by Luxembourg’s ArcelorMittal and Japan’s Nippon Steel & Sumitomo Metal Corp. (5401) The Brazilian company, known as CSN, “is their only hope, and they can’t get that deal done,” DiMicco said.

ThyssenKrupp has spent more than a year trying to dispose of the unprofitable Americas plants. Chief Executive Officer Heinrich Hiesinger is selling them as waning demand from the auto and construction industries and competition from China weakens prices and squeeze profit margins. The Wall Street Journal reported July 25 that negotiations with CSN, Brazil’s third-largest steelmaker, had failed.

ThyssenKrupp is in “advanced negotiations with a leading bidder on the disposal of Steel Americas,” Stefan Ettwig, a spokesman for the Essen, Germany-based company, said by phone yesterday. “We are also in talks with other interested parties.”

CSN was the leading bidder for the unit, people with knowledge of the matter said in May. ThyssenKrupp, Germany’s largest steelmaker, will have to accept less than the $3 billion it was said to be seeking in May for a unit with a book value of 3.4 billion euros ($4.5 billion), DiMicco said. ThyssenKrupp recorded a 3.6 billion-euro writedown on the unit in December and a 683 million-euro writedown in May.

“If they could get a billion and a half, they’d do that deal,” said DiMicco.

Waning Demand

U.S. Steel Corp., ArcelorMittal and Sao Paulo-based CSN declined to comment. CSN fell 5.9 percent to 6.67 reais in Sao Paulo yesterday, the biggest decline since April 2.

ThyssenKrupp owns 73 percent of a steel plant in the state of Rio de Janeiro. Vale SA, the world’s largest iron-ore producer and a supplier to the plant, owns the rest. The German company built the Brazilian facility, with a capacity of 5 million metric tons a year to supply steel slabs to its mills in Alabama and Germany.

ThyssenKrupp intended to produce low-cost slabs in Brazil and sell flat carbon steel from its U.S. plant for high prices. Since the plans were made, labor costs in Brazil increased, the country’s currency appreciated against the dollar and iron-ore prices rose.

Missing Parts

Iron ore rose as high as $158.90 a metric ton in February from a 2010 low of $117.60, according to data compiled by The Steel Index Ltd., as Vale, Rio Tinto Group and BHP Billiton Ltd. (BHP), the world’s biggest exporters, scrapped a 40-year custom of pricing supplies in 12-month periods and replaced it with quarterly contracts. The price, which is based on transactions in the port of Tianjin, China, has since fallen to $130.90.

DiMicco, the 63-year-old former chief executive officer of Charlotte, North Carolina-based Nucor, compared ThyssenKrupp’s U.S. steel plant to a sports car with missing parts.

“It’s a Ferrari all right, without the engine, without the wheels, without the brakes,” he said.

To contact the reporters on this story: Sonja Elmquist in New York at selmquist1@bloomberg.net; Tino Andresen in Dusseldorf at tandresen1@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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