On Friday, ThyssenKrupp AG announced that it would sell its troubled but state-of-the art Calvert Alabama steel finishing plant to the 50-50 joint venture of ArcelorMittal and Nippon Steel & Sumitomo Metal Corp. for $1.55 billion. The announcement concluded an 18 month effort to sell two packaged facilities, in essence a vertical integrated supply proposal. The price garnered in this sale was considerably lower than the $5 billion that Germany based Thyssen originally invested in the Alabama steel rolling facility.  

Three years ago, the Calvert plant was paired with Thyssen’s other raw steel producing plant in Brazil in an effort to provide auto manufacturers located in the southern region of the United States a more technology laden supply of fabricated rolled steel for product design and supply purposes. It was an effort to benefit from the resurgence of auto manufacturing in the U.S., but ran astray because of the rising production costs involved in the Brazil facility, and lower than expected global steel demand.  Thyssen initial attempts for sale involved both the Brazil and Alabama plants as a package, but that resulted in lack of attractive bids. Thyssen later agreed to sell the Alabama facility itself, and managed to garner five different bids for the facility, including U.S. based Nucor.

For the potential new owners is the ability to utilize raw steel supplies from other U.S. or Mexico based steel fabrication facilities.  However, the deal reportedly includes a pledge to annually procure a minimum of two million tons of raw steel from Tyson’s Brazil facility over a 6 year horizon. The new owners can further leverage the higher capacity and productivity that the Alabama plant provides along with a shorter logistics chain for manufacturers with plants in the southeast U.S. region.

The deal itself is still subject to regulatory approvals.  According to reports published in business media, AccelorMittal currently accounts for roughly 40 percent of the steel supplied to the North American market and that may be a sticking point for regulators. Nippon-Sumitomo currently operates a 2.9 million square foot finishing facility in Indiana that supplies U.S. Midwest auto and appliance manufacturers with rolled steel products.

Because of possible concerns, reports now indicate that the review process is not expected to be completed until at least July of next year. One would hope that regulators would have a strategic sourcing perspective for insuring that the current resurgence of auto, appliance and other steel focused manufacturing in the southeastern United States continues with an Alabama plant that now has other options for vertical integration.