U.S. Steel to buy Stelco for about $1.1 billion

The deal will make U.S. Steel the world’s fifth-largest
steelmaker.

PITTSBURGH (AP) — United States Steel Corp. is buying the Canadian steelmaker Stelco Inc. for about $1.1 billion in a move expected to bolster its position as a supplier to the North American automotive industry.

The Pittsburgh-based company said slabs produced at Stelco’s Lake Erie and Hamilton plants will supply finishing facilities for flat-rolled steel — used in the auto and appliance industries — and tubular steel used mostly in the energy sector.

After the acquisition, U.S. Steel will become the world’s fifth-largest steel maker. It will have with a production capacity of about 33 million net tons of raw steel annually, up from its current yearly capacity of 26.8 million tons.

Stelco emerged from bankruptcy protection last year and announced plans to cut 15 percent of its work force after settling a new four-year contract with the United Steelworkers union.

John Surma, U.S. Steel’s chairman and chief executive, said Stelco was an important strategic acquisition that would increase U.S. Steel’s ability to respond to market demands and customer needs.

“We have some optimism about the long-term outlook for North American steel,” he said in a conference call with analysts and reporters Monday. “[Stelco] fits nicely into our Midwestern consumption patterns.”

Surma said that Stelco’s management team had done an “excellent job” of restructuring the company, partly through facility shutdowns, and that it could become a “very high-performing” part of U.S. Steel’s business.

Consolidation trend

Global steelmakers have been consolidating in recent years to deal with intense competition, the need for major reinvestment in aging mills and new opportunities in Asia.

Last year, U.S. Steel bought Texas-based Lone Star Technologies Inc., which makes welded pipe used in oil fields, for $2 billion.

Charles Bradford, an industry analyst with Bradford Research/Soliel Securities in New York, said U.S. Steel’s acquisition of Stelco would strengthen its position in the automotive sector.

He noted that the automotive industry accounted for the largest portion — 38 percent — of Stelco’s business and that the combination would raise U.S. Steel’s automotive industry shipments from 18 percent to 22 percent of total business.

It’s also a good fit geographically, he added, pointing to the close proximity of Stelco’s Lake Erie plant to a U.S. Steel facility in the Detroit area.