March 25: A slowing Chinese economy is triggering upheavals in the world steel market.
Chinese steel producers, faced with a demand crunch at home, are flooding world markets with cheap steel that are forcing some global majors to look for buyers for their facilities.
The world's largest producer ArcelorMittal today said it was selling its LaPlace and Vinton Long Carbon facilities in the US to an affiliate of asset management firm Black Diamond Capital Management.
Essar Steel Minnesota LLC, on the other hand, a US affiliate of India's shipping, natural resources and power conglomerate Essar Global Group, has hired financial and legal advisers to help it to restructure its debt, according to people familiar with the matter.
Both ArcelorMittal and Essar Steel have been at the receiving end of overcapacity of Chinese mills that have led to depressed world prices.
The selloff will help ArcelorMittal to reduce its debt that stood at $15.7 billion for the quarter ended December 2015.
The LaPlace facility in Louisiana along with a rolling mill in Harriman (Tennessee) manufactures steel billets, flats, channels, angles and beams. The Vinton facility, located in El Paso in Texas, produces rebar and grinding media.
"Simultaneously, ArcelorMittal has entered a transition services agreement with Black Diamond, in order to facilitate a smooth transition period and ensure no business disruption," the company said.
The steel giant reported a decline in net sales at $63.58 billion in 2015 against $72.28 billion in 2014.
Essar Steel Minnesota has hired investment bank Guggenheim Partners LLC and law firm White & Case LLP as debt restructuring advisers. The company has about $1 billion in debt.
The sources asked not to be identified because the appointments were not public. Spokespersons for Essar Steel Minnesota, Essar Global, Guggenheim and White & Case did not respond to requests for comment.
Essar Steel Minnesota's move to restructure its debt comes less than six months after the bankruptcy filing of its Canadian sister company, steel manufacturer Essar Steel Algoma Inc.
Essar Global moved into Minnesota in 2007, shortly after it acquired the Algoma manufacturer. At the time, the company said it was positioning itself to be close to high-value steel markets and sources of iron ore.