Mechel Sells Romanian Steel Assets


On Tuesday, Russian steelmaker-cum-coal miner Mechel OAOannounced it has signed a series of agreements, the effect of which is to dispose of all its steel assets in the nation of Romania.

Specifically, Mechel has sold Ductil Steel Mechel, Campia Turzii S.A., Mechel Targoviste S.A., Mechel East Europe Metallurgical Division SRL, and Laminorul S.A. to Romanian private equity firm Invest Nikarom SRL. Referencing the poor market conditions for steel in Europe right now, unfavorable prices, and weak demand, Mechel noted in the press release that the sales will produce for it only "nominal" income.

According to an SEC filing, the transaction is for $70.

Mechel announced a few months ago that it had shut down operations at the Romanian plants because there was simply no economic justification for keeping them open. Today, Mechel says it prefers to focus on its key production lines, and exit the "chronically loss-making" business of steel production in Europe. In so doing, Mechel may not be making a profit. But at least the company thinks it will be able to avoid "the Romanian assets' planned loss of 2.4 billion rubles" ($79.6 million) in 2013. The company says the "freed cash flow will be used for operational activities as well as decreasing the company's leverage."


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