Severstal’s European steel distribution unit released from sanctions through sale

• Sale to Italy’s Marcegaglia enables it to establish presence in Northern Europe, Baltic
• Severstal: sanctions on shareholder Mordashov made business ‘impossible’ in Europe
• Distribution will restart first in Latvia; then in Poland, Ukraine

Russian mining and steel company Severstal has completed the sale of its European steel distribution network, Severstal Distribution, to Marcegaglia Carbon Steel, a subsidiary of Italian steel rerolling group Marcegaglia, releasing the unit from EU sanctions, the two steel companies said in separate statements April 21.

Marcegaglia Carbon Steel had renamed its purchase Marcegaglia Baltics, it said.

“The EU sanctions against [Severstal’s majority shareholder] Alexey Mordashov made it impossible for our distribution division to operate in Europe,” the Russian company said. “Despite these restrictions, which we consider unreasonable and illegal, it is important for us that our colleagues from Severstal Distribution keep their jobs, and the assets that we have been developing for many years continue to work. Therefore, we are happy to hand them over to the new owner.”

Founded in 1992, Latvia-headquartered Severstal Distribution supplied Severstal’s steel products to the EU and Ukraine, processing some of them at its own major service center specialized on coil and plate slitting and cutting.

In 2021, the last full year before Moscow’s invasion of Ukraine prompted sanctions on many Russian businesses, the unit sold 1.85 million mt or over half of Severstal’s total exports while turnover reached Eur1.53 billion. The volume covered 30% of the Baltic countries’ apparent consumption of hot-rolled and galvanized coils and shaped pipes, S&P Global Commodity Insights has reported.

Its network will now process and distribute the output of Marcegaglia Carbon Steel, which has capacity of 4.65 million mt/year of flat rolled products and welded tubes.

Marcegaglia’s move allows it to establish a commercial presence in Northern Europe and the Baltic countries, the Italian company said, adding that the distribution company’s activities will be restarted firstly in Latvia, and then in Poland and Ukraine.

The buy comes a few months after Marcegaglia’s purchase of the long stainless-steel products division of Finland’s Outokumpu.

The companies did not disclose the value of the deal, saying that payment had not been made to Severstal and would remain frozen in a special escrow account until the sanctions regime implemented by the EU following the Russian invasion ceased.

Author Ekaterina Bouckley, katya.bouckley@spglobal.com