Trade Threat Spurs Gupta to Spend More on European Steel Plants

(Bloomberg) --

British tycoon Sanjeev Gupta’s Liberty Steel plans to weather the trade war threat to its steel business by pumping money into the European plants it recently bought from ArcelorMittal.

Liberty Steel plans to invest more than 400 million euros ($443 million) in five years at the seven sites to maintain capacity, expand product ranges and make more higher quality products, Chief Executive Officer Jon Bolton said. The move comes as the industry faces challenges from U.S. tariffs that are rerouting exports to Europe and higher raw material and energy costs.

About half of the investment will go to the Galati plant in Romania, as growth prospects there are better than in other parts of Europe, Bolton said.

“We continually assess how international trade conditions affect our operations, but we believe our continental European operations are well positioned to deal with any negative impacts,” Bolton said in an emailed response to questions. “We expect key markets for our recently acquired European operations to outperform the European average, with Romania growing at 3.1%, for example.”

It’s been a challenging year for steel producers in the European Union, as sales have been squeezed by weak automotive demand, sluggish global growth and cheap imports. Some of the extra supply has come from countries including Turkey, which rerouted sales after the U.S. slapped tariffs on imports.

Read More: Steel Industry Sounds Alarm Bells About Economic Growth

Liberty Steel paid 740 million euros in July to buy plants in the Czech Republic, Romania, North Macedonia, Italy and Belgium from ArcelorMittal. Gupta’s group now employees about 30,000 people, following the deal

The producer plans to expand sales from the new plants by 50% by 2022, and wants governments to boost infrastructure and energy investments to help support the economies and steel industry growth. There’s positive progress on that in the Czech Republic and Romania, Bolton said, adding that he’s “very positive” about the future of the steel sector in central Europe.

“A reinvigorated steel industry in these countries will support supply chains, spur the development of new sustainable sources of power, retain and generate new skilled jobs, and create a more sustainable and competitive future for the industry,” he said.

--With assistance from Elena Mazneva.

To contact the reporters on this story: Andra Timu in Bucharest at atimu@bloomberg.net;Irina Vilcu in Bucharest at isavu@bloomberg.net

To contact the editors responsible for this story: Andrea Dudik at adudik@bloomberg.net, Nicholas Larkin, Lars Paulsson

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