Russian steel giant eyes National Steel

The second biggest steel manufacturer in Russia has teamed up with local downstream producers of steel products in a bid to acquire the National Steel Corp. (NSC) and reopen it for commercial production of steel products.

According to an industry source, downstream producers have started negotiating with the Russian company to determine the terms of the partnership and make a bid or strike a joint-venture with the current owners of the NSC, Hottick Holdings Inc. of Malaysia.

The company was identified as Novoliptetsk Iron and Steel Corp. (NISC) and according to the source, it has begun conducting a due diligence review of NSC to determine its actual prospects and rehabilitation requirements.

Of all the parties interested in NSC, only downstream producers are not asking for tariff protection from imports, saying they can reopen and operate the company viably even without being shielded by import restrictions on competing products.

The group is led by the Philippine Steel Rolling Mills Association (PSRMA) which counts a membership of 18 companies engaged in the production of so-called long steel products which use steel billets in the manufacture of products such as nails, steel bars and the like.

The PSRMA and its Russian partner will have to compete with another local group led by Cathay Pacific Steel Co. (Capasco) which has made representations to the government that they are considering the acquisition of NSC's assets and reopening the business as a new company. Downstream producers were originally planning to wait for NSC's creditors to put the company's assets on the block, saying that without its non-viable operation, the company can reopen and operate with a profit.

However, Hottick had filed a petition for the suspension of debt payments before the Securities and Exchange Commission (SEC), halting the bidding procedures and suspending all claims on NSC pending the resolution of its request for the appointment of a rehabilitation receiver.

In the meantime, government said it is preparing a package of support measures designed to help NSC get back on its feet.

Under consideration are plans to impose quantitative restrictions on the importation of steel billets, hot rolled coils and rolled coils which the NSC produces and sells to local downstream users.

The package also includes the waiver of some government fees and charges, continued tariff protection against competing imports and other forms of assistance.

The source did not specify how much NISC is willing to infuse into NSC but the Department of Trade and Industry had earlier estimated that it would need $130 million in fresh capital to resume operations and recover from its collapse. As creditors ruled out debt restructuring for NSC, government said that unless the company was able to close a deal with a new partner, its days were numbered and it would have to be liquidated ultimately.