Dongkuk Steel Mill Sells Entire Stake in Brazil CSP Steel Plant for 841.6 Billion KRW

1 Trillion Won Payment Guarantee Resolution
"Proactive Response to Complex Crises"

Brazil CSP Steelworks. Photo by Dongkuk Steel Mill

[Asia Economy Reporter Choi Seoyoon] Dongkuk Steel is selling its stake in the Brazilian CSP steel mill to the global steel company ArcelorMittal.

On the 12th, Dongkuk Steel's board of directors resolved to sell its entire 30% stake in the Brazilian CSP steel mill to ArcelorMittal for 841.6 billion KRW (646.2 million USD).

Other shareholders, including POSCO and Vale, will also sell all their shares in the Brazilian CSP steel mill to ArcelorMittal. The total sale amount is 2.154 billion USD.

The proceeds from the sale by the three shareholders will be paid as subscription payments for new shares of CSP and will be used to repay debt. Accordingly, Dongkuk Steel will be able to completely eliminate its payment guarantees of about 1 trillion KRW (approximately 780 million USD) related to CSP.

Vice Chairman Jang Sewook stated regarding the sale, "We decided to sell CSP as a preemptive response to prepare for the global complex crisis." He emphasized, "By minimizing potential risks, we have laid the foundation for improving corporate credit ratings. We will focus on leading the eco-friendly era and sustainable growth in the future."

As part of establishing future growth strategies, Dongkuk Steel has been reviewing its global investment strategy, including growth plans such as additional blast furnace investments and downstream process investments (hot rolling, heavy plate, etc.) at the Brazilian CSP steel mill. Dongkuk Steel judged that concerns about the global complex crisis could materialize and concluded to block risk possibilities in advance rather than pursuing aggressive overseas investments.

In particular, although Dongkuk Steel needs to make additional blast furnace and downstream process investments within a few years to grow the CSP steel mill, it judged that such additional investments would impose a significant financial burden on Dongkuk Steel. The shift in Dongkuk Steel's business portfolio from heavy plate-focused at the time of CSP planning to currently focusing on long products and cold rolling, which weakened the synergy between Dongkuk Steel and CSP, also influenced this decision. Major shareholders such as Brazil's Vale consider the CSP steel mill a non-core strategic asset, and the continuous weakness of the Brazilian real exchange rate was also taken into account.

With this sale of the Brazilian CSP steel mill stake, Dongkuk Steel will completely eliminate all burdens including management uncertainty regarding CSP, guarantees for borrowings, additional investment burdens, and Brazilian real exchange rate risks. Previously, in July, Dongkuk Steel sold a 90% stake in its Chinese subsidiary (DKSC) and United Logistics Co., Ltd. for a corporate value of 97 billion KRW, including guarantees for borrowings of 40 billion KRW.

Dongkuk Steel expects to smoothly meet the conditions for credit rating upgrades through the sale of its Brazilian CSP stake and the disposal of its Chinese DKSC stake.

While selling the Brazilian CSP steel mill, Dongkuk Steel's strategy is to focus on sustainable growth such as domestic electric arc furnace steelmaking business ("Steel for Green") and differentiated global growth such as the color steel sheet business ("DK Color Vision 2030") instead of aggressive investment support for overseas blast furnace steel mills.

Dongkuk Steel is gaining attention as an alternative to blast furnace steel mills by recycling 4 million tons of steel scrap annually through its domestic electric arc furnace steelmaking business, which has the highest energy efficiency in Korea. Dongkuk Steel plans to enhance competitiveness through the advancement of such sustainable businesses and pursue global expansion with its differentiated premium color steel sheet business represented by "LUXTEEL."

Meanwhile, ArcelorMittal, which is acquiring CSP, is the world's second-largest global steel company with a crude steel production capacity of 69.1 million tons and branches in over 60 countries. It was formed in 2006 when Chairman Lakshmi Mittal merged Arcelor Group and Mittal Group, which were the world's first and second largest steel companies at the time. ArcelorMittal recorded sales of 76.6 billion USD, EBITDA (earnings before interest, taxes, depreciation, and amortization) of 19.4 billion USD, and net profit of 15 billion USD in 2021.

This content was produced with the assistance of AI translation services.