Severstal to invest $16 bln in 2008-2012

In 2008-1012, Severstal plans to invest more than $16 bln in its assets. Furthermore, the company is mulling the acquisition of a coal company in the USA. We view this news as a positive for the metal maker.

According to its Eurobond issue memorandum, over the period of 2008-2012, Severstal plans to spend $16.3 bln on the rollout of its in-house assets (vs. $2.9 bln in 2006-2007), $ 8.8 bln of which will be allocated to the metal maker’s Russia-based facilities. Also, the company’s rollout strategy calls for investing $ 1.2 bln and $2.2 bln in Severstal North America and Lucchini, respectively.

In 2006-2007, the amount of investments in Lucchini reached $326 mln. The new strategy aims to slash costs, boosting steel output, diversify production and improve the quality of long rolled products.

For the record, Severstal earlier announced plans to launch rail supplies from its Italian Lucchini plant for high speed railway projects implemented by Russian Railroads Co. Annual rail output at this production facility currently stands at 300,000 tn and is to be raised to 500,000 tn over the next two years.

Furthermore, the memorandum also says that Severstal has placed a bid to take over a coal company in North America.