Offers for Hayange could see it sold separately from British Steel: sources

There have been four offers for French rail producer Hayange, which could lead to the British Steel unit being sold separately from the rest of the company, sources close to the matter told S&P Global Platts Thursday.

The bidders for Hayange are ArcelorMittal, UK-based industrial group Liberty House, special steel producer Ascoval (through its holding company Olympus), and German steel producer Saarstahl, the sources said.

Saarstahl told Platts it was interested in Hayange, while the other three declined to comment.

The French government, which considers Hayange to be a strategic national asset, put it up for sale last year separately, as a contingency plan in case the deal for Chinese Group Jingye to buy British Steel did not go through.

Hayange produces 250,000-300,000 mt of rails per year, mostly for SNFC, France’s state-owned railway operator. The mill currently rolls blooms produced at British Steel UK in Scunthorpe.

A source close to the matter said that while all four companies submitted their offers independently, it could be possible that Liberty will make an offer in a joint venture with Ascoval.

According to market sources, Hayange would seem to have good synergies with all the possible buyers.

ArcelorMittal Europe is one of the leading producers of rail products, covering the main European and export markets, with mills in Dabrowa Gornicza, Poland, Gijon, Spain and Rodange, Luxembourg. ArcelorMittal produces around 550 000 mt of steel rails per year.

Saarstahl has a continuous cast blooming line in Volklingen, which could supply Hayange as it is close to the French mill.

Ascoval is a client of Hayange and recently won an order to supply 140,000 mt of blooms to Hayange for the manufacture of rails for SNCF from this September for four years.

Ascoval was taken over by Olympus in the spring. Liberty is focused on growing and, for the time being, does not have a rail production capability, so if it were to team up with Ascoval it will have good synergies.

Market sources said the offers for Hayange could make it more difficult for Jingye Group to purchase all British Steel units, but the purchase will go ahead with the Chinese mill expected to complete the deal next Monday.

Two days ago, Jingye Group said it had agreed to proceed towards the completion of its purchase of British Steel next Monday.

Subject to the acceptance of employment offers, Jingye will acquire British Steel’s steelworks at Scunthorpe and UK mills at Teesside Beam Mill and Skinningrove, as well as subsidiary businesses FN Steel and TSP Engineering.

Jingye said the transaction does not include the assets of British Steel France, because “the French government has not yet made a judgment on Jingye’s proposed acquisition of British Steel France nor, at this stage, indicated when it may be in a position to do so”.

A spokesman said Thursday Jingye remained interested in purchasing the Hayange plant, hoped to see a positive decision from the French authorities in the near future, but that it “has agreed with the [UK] Official Receiver’s proposal, they will complete the transaction in stages, first completing on the UK and Netherlands”.

Chinese market sources said that, Hayange to one side, British Steel was a good opportunity for Jingye as China has banned capacity expansion and decreed any capacity swaps must lead to capacity reductions.

Jingye will lose about 1 million mt/year pig iron production capacity and 0.4 million mt/year crude steel capacity in 2021, when iron and steel capacity swaps at its Chinese steelworks are done.

Jingye has been looking for overseas investment opportunities. Market sources said it looked at Myanmar and Malaysia before it decided to acquire British Steel. Sources said it remained to be seen how Jingye could keep British Steel’s running costs down.

Jingye Group operates 18 blast furnaces, producing 15 million mt of steel annually and exports to 80 countries around the world. Based Hebei province in China, Jingye had total sales of Yuan 90 billion ($13 billion) and employs 23,500 people. It also has operations in chemicals, hotels, real estate, and trade.

British Steel, which went into compulsory liquidation on May 22, has about 3 million mt/year of production capacity in the UK, France and the Netherlands.

Completion of the purchase will preserve 3,200 jobs in Scunthorpe, Teesside and elsewhere, securing a future for steelmaking in the region. About 100 jobs will transfer to Barrett Steel following the sale of four British Steel distribution centers.

— Annalisa Villa, Jing Zhang & Laura Varriale