Steel giant ArcelorMittal (MT - Analyst Report) announced that its unit ArcelorMittal Long Carbon Americas will extend its partnership with the Bekaert Group in Latin America. Bekaert is a global market and technology leader in steel wire transformation and coatings. ArcelorMittal’s shares were up 0.6% yesterday before retreating to close at $16.56.
ArcelorMittal and Bekaert Group intend to extend their alliance into Costa Rica and Ecuador. The companies will invest in ArcelorMittal’s existing steel wire plant in Costa Rica and also build a new Dramix steel fibre manufacturing plant on the Orotina industrial site in Costa Rica. The companies plan to invest about $20 million over two years in the new plant. The plant is estimated to have an annual production capacity of 20,000 tons of Dramix steel fibres.
ArcelorMittal will have a minority shareholding in the Ideal Alambrec Ecuador wire plant, a company controlled by Bekaert, to take advantage of growth opportunities in the country’s civil construction sector. Bekaert will become the controlling partner of Costa Rica steel wire and ArcelorMittal will transfer its 55% stake in rope business, Osasco Brazil - held through Belgo Bekaert Arames (BBA) - to Bekaert.
Ideal Alambrec Bekaert will retain the same name in Ecuador and the steel wire products business in Costa Rica will be called BIA Alambres Costa Rica SA. On the other hand, the new Dramix manufacturing business will be named Bekaert Costa Rica SA.
The deal will not affect ArcelorMittal’s controlling position in BBA, which was a partnership established in 1997 with the Bekaert Group in Brazil.
The transaction also involves wire rod supply agreements, and a rope wire supply agreement for BBA. In Brazil, the agreement entails transferring the cable business of Cimaf Cabos, which produces steel cables for infrastructure, mining, oil and gas projects in Osasco (Sao Paulo), to the Bekaert Group. Cimaf Cabos will no longer be part of BBA. However BBA will continue supplying rope wire for cables to Cimaf Cabos, which will be renamed Bekaert Cimaf Cabos.
ArcelorMittal currently carries a Zacks Rank #3 (Hold).
Better-ranked companies in the steel and similar industries include Companhia Siderurgica Nacional (SID - Analyst Report) , United States Steel Corp. (X - Analyst Report) and Worthington Industries, Inc. (WOR - Snapshot Report) . While Companhia Siderurgica holds a Zacks Rank #1 (Strong Buy), United States Steel and Worthington Industries hold a Zacks Rank #2 (Buy).