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Thyssenkrupp to sell AST stainless steel mill to Italian group Arvedi

Highlights

Deal expected to close 1H 2022

Thyssenkrupp may retain minority AST stake

Arvedi to announce 'green' investments for AST

Thyssenkrupp is to sell its stainless steel mill unit Acciai Speciali Terni (AST), including the associated sales organization in Germany, Italy and Turkey, to Italian steel producer Arvedi, the German steelmaker announced Sept. 16. The transaction is subject to approval by the supervisory board of thyssenkrupp AG and merger control clearance, Thyssenkrupp said in a press statement. The closing of the transaction is expected in first half 2022.

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Thyssenkrupp is also examining the possibility of retaining a minority shareholding in the AST group: details of this will be negotiated up to the closing, it said.

AST, often referred to as Terni, is the only integrated stainless mill in Italy. It has capacity to produce around 1.3 million mt/year of crude steel of which 70% is stainless and the rest carbon steel. According to unions contacted by S&P Global Platts, the company this year is likely to reach its 1 million mt production target.

"The tie-up with Arvedi will create a strong European player in the steel business," Thyssenkrupp said in the statement. "Arvedi has announced significant investments in connection with the acquisition of AST."

Neither Thyssenkrupp nor Arvedi immediately divulged further details of these investments. Sources close to the matter said an announcement on investments should be made after the deal is closed and will include "green" investments at AST.

"This transaction has a compelling industrial rationale for Arvedi Group, which becomes stronger by successfully completing its product mix", Cavaliere Giovanni Arvedi , founder and president of Arvedi, was cited as saying in the Thyssenkrupp statement. "Furthermore, this transaction is strategic for the whole Italian economy and represents an initial step towards new exciting developments. We are very pleased that tk is considering a potential minority shareholding in AST, guaranteeing continuity and showing trust in the know-how and capabilities of our Group."

Arvedi's core business is primary steel production and processing. Arvedi is Italy's second largest steelmaker with a capacity of around 4 million mt of crude steel. Arvedi has two electric arc furnaces (EAFs) at its headquarters mill in Cremona. The No. 1 furnace has 1.4 million mt/year of crude steel capacity and the No. 2 furnace was upgraded and expanded last year to increase its capacity to 2.6 million mt/year.

Arvedi is not an integrated flat stainless producer and buys part of its stainless hot and cold rolled coils requirement from AST. Industry sources contacted by Platts said that it takes around 15% of its feedstock from AST for its two stainless re-rolling companies: Ilta Inox and Arinox. According to the company's website, Arinox produces stainless steel thin and ultrathin rolled strip and has a capacity of over 55,000 mt/year while Ilta Inox produces welded stainless tube and a capacity of around 100,000 mt/year.

Jefferies' analyst Alan Spence noted Sept. 16 that because Arvedi is not an integrated flat stainless producer this "should limit risk of competition concerns." Other industry sources agreed that the greenlight for the acquisition could come relatively soon from the European Commission's antitrust authorities.

Thyssenkrupp stated that the "parties have agreed not to disclose the purchase price." Analysts in the past estimated that a deal could have been close to Eur400 million ($471 million), but sources heard by Platts indicated that thanks to the excellent market conditions the price could have been even higher.

AST group employs around 2,700 people and generated sales of around Eur1.7 billion in fiscal year 2019/2020, Thyssenkrupp stated. "With the sale thyssenkrupp is disposing of the fourth portfolio company in the Multi Tracks segment. This is a further important step in the transformation of thyssenkrupp into a high-performing Group of Companies", it said.

Thyssenkrupp put the company back on the market for sale in May 2020 as part of a wider restructuring. In 2018, following a restructuring of Thyssenkrupp Materials, AST became one of the company's core assets and was withdrawn from sale.

"This fourth transaction shows once again clearly that we are working through our priorities and making decisive progress in the transformation of thyssenkrupp," Martina Merz, CEO of thyssenkrupp AG, was cited as saying.

Volkmar Dinstuhl, CEO of the Multi Tracks segment and chairman of AST added: "We are pleased to have found a new owner for AST in the Arvedi Group, who will drive the development of the company with investments and innovations."