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Customers of Portland's Evraz Oregon Steel say that support from the Russian government could help the 80-year-old Oregon business survive the global crash in steel prices.Michael Rubenstein/The Oregonian/2006During their recent heyday, Russian billionaires bought far-flung companies, London mansions, massive yachts and private jets.Few of the reclusive oligarchs loomed larger than Roman Abramovich. The owner of Britain's Chelsea soccer team is one of two controlling shareholders in Evraz Group, which bought Portland-based Oregon Steel Mills for $2.35 billion in 2007.Now some of the oligarchs, reeling from the global economic meltdown, are proposing a mega-merger-including Evraz-that would give the Kremlin a stake in the resulting Goliath and, hence, in Oregon Steel.Russian Prime Minister Vladimir Putin endorsed the approach recently after bailing out Evraz and other companies for debts incurred buying businesses abroad.The merger could amount to a slow-motion re-nationalization in which the Kremlin could settle scores with unruly oligarchs. U.S. customers of Evraz Oregon Steel say Russian-government backing, whatever the broader impacts, could prop up an 80-year-old Oregon business suffering from a global crash in steel prices."It might help keep them from closing up some things here," says Alan Humbard, purchasing manager at Fought & Co., a Tigard fabricator that buys slabs from Evraz Oregon Steel.As recently as last summer, Evraz Oregon Steel and other mills were sitting almost as pretty as Russia's uber-wealthy.Steel prices soared.Customers clamored for products. Humbard says Fought & Co. had signed contracts to buy steel plate at agreed prices for two Oregon bridges from Claymont Steel, a Delaware company that Evraz bought last year for $565 million."They just tore them up and charged us huge increases," says Humbard, who said Evraz managers in Portland dictated the revised terms. "We would probably sue them, but we're so limited on who we can buy domestic steel plate from."Kelly Brossart, communications officer for Evraz Inc. NA, the group's North American subsidiary, declined to comment on the steel deal, saying it was proprietary. She would not say how Evraz Oregon Steel's business is going now.
Layoffs in Oregon
Layoffs in Oregon
Since last summer, global steel prices have plunged, squeezing Evraz worldwide.In November, the company's Oregon Steel Spiral Pipe Mill laid off 130 workers-13 percent of the firm's Portland work force. Last month, Evraz announced 400 layoffs from Canadian plants it bought in a $4billion deal last year."Oregon is probably a viable operation long term," says Rodger Parr, sales and purchasing manager at Seaport Steel in Seattle."But no steel mill is viable right now. You better hope big brother's got a lot of money, and big brother is behind the curtain back there."In this case, big brother behind the former Iron Curtain is Chelsea-owner Abramovich, ranked by Forbes last year as the world's 15th-richest man at $23.5 billion. Abramovich is now reported by Moscow newspaper Izvestia to be worth $3.3 billion.Abramovich still lives the high life. He's suing the Sunday Times in London for suggesting he wants to sell Chelsea, a Premier League team.The Evening Standard, a London newspaper recently acquired by a former KGB colonel, says Abramovich is building the world's largest pleasure vessel. The ship, named Eclipse for upstaging his current fleet, will have multiple helicopter pads, a submarine, a missile-detection system and anti-piracy equipment, the Standard says.Evraz Group, Russia's largest steelmaker, is struggling with enormous foreign debt resulting from almost $8 billion in acquisitions abroad. Russia's state bailout agency, chaired by Putin, has loaned Evraz $1.8 billion to refinance its foreign debts.Asia Times reports Evraz is using the funds to avoid forfeiting its properties such as Evraz Oregon Steel to foreign banks that hold the mortgages.As it accepts government support, Evraz has cut steel production at home more sharply than abroad, raising questions whether Moscow protects oligarchs at the expense of Russian workers. The Kremlin, which has allowed the billionaires to flourish as long as they serve state aims, apparently hasn't required them to secure bailouts with personal assets.Evraz shares have plunged, from a $125.50 high in May to an $11.60 close Friday on the London Stock Exchange. The collapse complicates Evraz's attempt to buy a Chinese steelmaker, Delong Holdings Ltd.Two oligarchs, Norilsk Nickel shareholders Vladimir Potanin and Oleg Deripaska, propose merging their company with Evraz, mining-and-metals firm Metalloinvest, steel-and-coal producer Mechel and potash-producer Uralkali. The deal could also include Russia's VSMPO-Avisma, whose titanium customers include Boeing's Gresham plant.Russia's government-through its arms agency, Russian Technologies-would receive a 25 percent stake plus one share of stock in the merged colossus in return for liquidating debts.
Putin backs merger
Putin backs merger
Putin signaled his support for the merger during his opening remarks at the Davos Economic Forum on Jan. 28. The behemoth would be large enough to compete with Australian-British giants Rio Tinto and BHP Billiton, a long-held dream of Russian tycoons.But Alexei Ulyanov, Russian Antimonopoly Service industrial-monitoring director, criticizes the idea of government involvement in a giant conglomerate. "This would be a monster comparable in size to Gazprom," said Ulyanov, referring to Russia's largest company.Moscow analyst Michael Kavanagh, of Uralsib Equity Research, sees advantages in creating a diversified Russian metals-and-mining colossus.The vast company could attract low-cost capital, he says, and spread risk across numerous countries and commodities. But Kavanagh says Moscow will likely bundle more distressed metals companies before including Evraz.There are limits to Putin's embrace of mergers. He told his Davos audience that the Soviet Union found state control of industry didn't work."This made the Soviet economy totally uncompetitive," Putin said. "This lesson cost us dearly. I am sure nobody wants to see it repeated."
By Richard Read,The Oregonian
By Richard Read,The Oregonian
As in the days of Noah...
