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US govt refuses to grant $730 mln credit to Severstal branch

January 08, 2012, 1:57 UTC+3

The Department of Energy has not given details of the causes that led to the refusal

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NEW YORK, January 8 (Itar-Tass) — Severstal North America ··- the North American branch of the Russian steel giant JSC Severstal – will not receive from the US government a loan worth 730 million dollars for the modernisation of the enterprise in a suburb of Detroit (Michigan). American media reported that the decision was made by the US Department of Energy.

According to the steelmaker’s spokeswoman Katya Pruett, Severstal was “deeply disappointed” by the government’s statement. The Dearborn plant’s modernisation work is 60 percent complete, and Severstal North America expected the final approval of the decision for the work completion. According to Pruett, the company is now going to consider other sources of funding.

The Department of Energy has not given details of the causes that led to the refusal. According to some experts, the decision was dictated by the desire to cut costs. Department spokesman Damien LaVera said the project has “merit” but not all projects that receive conditional commitments get green-lighted. “The additional due diligence the department conducts after a conditional commitment is signed is an important part of the process (of the loan approval) and is vital to protecting the (interests) of the taxpayers,” he said.

It is also not ruled out that the decision to refuse to provide the loan was taken under pressure from conservative lawmakers who expressed dissatisfaction with the government’s desire to participate in the modernisation of the plant in Dearborn.

The Democrats, who sharply criticised the decision of the Department of Energy stick to a contrary view. John Dingell representing in the Congress a Michigan district, urged the government not to abandon projects that create high paying jobs – such as Severstal.

According to the steel company’s estimates, the modernisation of its plant in Dearborn should involve about 2.5 thousand builders. After the commissioning of the facility its staff is planned to be increased by 260 people.

The steel plant located in the territory of the River Rouge industrial complex belonged to Rouge Industries that was part of the Henry Ford automaker. Severstal purchased the plant and other assets of Rouge Industries for 285.5 million US dollars in 2003.

Severstal North America is a steelmaker in the United States with headquarters located in Dearborn, Michigan. Severstal North America produces high-quality flat-rolled carbon steel products, including hot rolled, cold rolled, electro-galvanized, and hot-dip galvanized. Major markets include automotive, appliance, construction, container, converter, service centre and other industries, according to the company website.

Pursuing its commitment to an exceptional quality product and to the protection of human and environmental health, Severstal North America facilities have earned TS 16949, OHSAS 18001 and ISO 14001 certifications, the international standards for quality, health and safety, and environmental management systems, respectively.

Severstal North America is a wholly owned subsidiary of OAO Severstal, Russia’s largest steelmaker by volume and one of the most global. To further extend its participation in additional value-added products, Severstal North America has several joint ventures for electrogalvanizing and hot-dipped galvanizing. These operations supply the highest quality coated steel products with unparalleled precision to demanding customers. The joint ventures are located in Michigan, close to major consuming markets including the automotive industry.

The company was founded in 2004 with the acquisition by OAO Severstal of substantially all of assets of the former Rouge Industries and its operating subsidiary Rouge Steel Company. Alexei Mordashov, OAO Severstal’s Chief Executive Officer, hailed the purchase of Severstal Dearborn as an important milestone in the global consolidation of the steel industry. He viewed the acquisition as an opportunity to combine the best qualities of the respective companies and to strengthen their economic effectiveness and market position.

In 2005, Severstal entered into a joint venture agreement to develop SeverCorr, the newest mini mill in the United States. In early 2008, Severstal acquired the full ownership of SeverCorr, which is located in Columbus, Miss., and renamed the facility Severstal Columbus. The purchase of this electric-arc furnace shop, built in the mid 2000s, allowed Severstal North America to expand into the growing market for light flat rolled steel products in the south-eastern United States.


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