ArcelorMittal to Exit Algeria Via Stake Disposals -- Update
October 07 2015 - 10:37AM
Dow Jones News
By Alex MacDonald
LONDON--Steel giant ArcelorMittal (MT) said Wednesday it entered
into a preliminary agreement to exit its three Algerian investments
as part of a plan to streamline its portfolio of assets and pay
down debt.
Under the agreement, the Luxembourg-based steelmaker, the
world's largest by output, will transfer to Algeria's state-owned
IMETAL its 49% stake in both an integrated steel mill called
ArcelorMittal Algeria and two iron-ore mines that constitute
ArcelorMittal Tebessa. It will also transfer to IMETAL its 70%
stake in its steel-processing facility called ArcelorMittal Pipes
& Tubes, such that the Algerian government will become the sole
shareholder of all three units.
The deal is in keeping with the Algerian government's ambition
to expand its steel industry at a time when ArcelorMittal is paring
back spending on steel projects, cutting costs and selling assets
to pay down a heavy debt load. The company is restructuring its
U.S. and South African businesses amid excess steel supply globally
and waning demand in several of its key markets, including
Africa.
An ArcelorMittal spokesman declined to provide any financial
details about the deal, which is expected to be completed in coming
weeks.
ArcelorMittal's exit from its Algerian investments marks a stark
change from two years ago when it jointly announced with the
Algerian government a $763 million plan to more than double the
steel-production capacity of their jointly owned Annaba steel plant
on the northeast coast of Algeria. The project, which would have
been largely financed by the government, aimed to boost the steel
plant's production capacity to 2.2 million metric tons of steel a
year by 2017 from less than 1 million tons in 2013.
North African steel demand, however, has remained stubbornly
weak due in part to continued conflicts in the region, which have
dented economic growth, according to steel consultancy firm MEPS
International Ltd. "The steel industry in general is not in the
best of shape," said Kaye Ayub, a MEPS analyst.
Algeria, Africa's fifth-largest steel-making nation, produced an
estimated 415,000 tons of crude steel last year, down 0.5% from the
previous year and 17% below 2012's level, according to data from
World Steel Association.
Nevertheless, the Algerian government still intends to push
ahead with the steel plant's expansion plans.
"This agreement will allow the Algerian party to have total
control of the three companies...which will facilitate decision
making and mobilization in particular of financial resources to
ensure the success of the revamping and the start-up of operations
in good conditions," said Davinder Chugh, head of ArcelorMittal's
Algerian operations.
As part of the deal, ArcelorMittal has agreed to continue
providing technical support for the implementation of the expansion
project.
Write to Alex MacDonald at alex.macdonald@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
October 07, 2015 11:22 ET (15:22 GMT)
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