Liberty House Closer to Buying Australia’s Arrium Steel Producer

19 December 2016

Liberty House Group is closer to taking over Australia’s steel producer Arrium Ltd., as the London-based steel manufacturer and metals trader is completing the purchases of units of Tata Steel Ltd. and Rio Tinto Plc in the U.K.

“We’re in the second round on Arrium, we’ve been shortlisted among four bidders,” Sanjeev Gupta, 45, executive chairman of Liberty House, said in an interview in Dubai.

Global steel producers, including Arrium, have been pressured by rising exports from China, maker of half the world’s steel, which have weighed on prices and eroded profits. Liberty House, with steel operations from the U.K. to Africa, has been pursuing a strategy to acquire distressed assets.

Australia is the biggest exporter of iron ore, the raw material needed to make steel. Liberty House wants to revive U.K. steel manufacturing and expand into the U.S., with an eye on producing metal from scrap parts rather than from iron ore, Gupta said. The U.K. probably has almost 1 billion metric tons of steel in existing infrastructure such as bridges that can be recycled into other products through mini mills, he said.

“Australia should be a powerhouse of steel because it’s endowed with the best natural resources as far as steel is concerned,” Gupta said. “There is an opportunity to recycle steel in the U.K. because at the moment we export all our scrap. There’s also a lot of room for steel growth in the U.S. where quite a lot of scrap is still exported. There’s room for more mini mills in the U.S.”

Liberty House plans to boost its U.K. steel production to 5 million metric tons within five years, from about 3.3 million tons now, Gupta said. The company is conducting due diligence on the purchase of Tata Steel’s U.K. specialty steels business for 100 million pounds ($125 million), with plans to complete the deal by the end of February, he said. The business has capacity to produce about 1.3 million tons of liquid steel that can be turned into parts used in the automotive and aerospace industries.

Liberty House expects to complete the acquisition of Rio Tinto’s aluminum and hydroelectric plants in Scotland on Friday, a deal valued at 330 million pounds, Gupta said. The smelter has capacity to produce 50,000 tons of aluminum, and Liberty House plans to use about half that output to make aluminum alloy wheels for car companies, he said.

Source – Bloomberg