Steel giant Arcelor Mittal has entered into a 50:50 joint venture with Nippon Steel and Sumitomo Metal Corporation to acquire 100% of Thyssen Krupp USA for $1.5 billion.

Based in Calvert, Alabama, ThyssenKrupp USA consists of hot rolling, cold rolling, coating and finishing lines and has the capacity to produce 5.3Mt of steel.

Included in the transaction is a six-year agreement to purchase 2Mt per annum of slab from ThyssenKrupp CSA, based in Rio de Janiero, Brazil. A three-year extension option is open to the Rio-based integrated steel mill at terms more favourable than the current JV agreement, which uses a market-based price formula.

According to an official statement from Arcelor Mittal, ‘the remaining slab balance will be sourced from ArcelorMittal plants in the US, Brazil and Mexico. ArcelorMittal will be responsible for marketing the product on behalf of the JV. The price ArcelorMittal will receive for its slabs will be determined by the volume, price and cost performance of the JV.’

Lakshmi N Mittal, chairman and CEO of ArcelorMittal described the deal as ‘an important strategic acquisition’ for the company, adding that the Calvert, Alabama plant is the most modern finishing facility in the world. “It ideally complements our existing operations in the United States and the Americas, and will improve our ability to supply customers in the automotive and other markets in the Southern United States, where we do not have comparable facilities today,” Mittal said.

ArcelorMittal believes that the acquisition will strengthen its position in respect of supplying the NAFTA energy industry where demand for energy pipe and tube products is expected to grow due to increases in oil and natural gas exploration and production. While half of the Calvert plant’s output will service the energy sector, the other half will go to the North American automotive industry.