Mechel OAO announced the acquisition of a 100 percent stake in Metals Recycling OOO, a Chelyabinsk, Russia-based metal scrap processing company. Mechel, a Russian-based metals and mining concern, made the acquisition through its subsidiary, Mechel Service OOO. The company made the acquisition for about $6 million. The transaction is a part of Mechel’s policy to ensure its steel segment’s self-sufficiency in raw materials.
Metals Recycling OOO is a full-scale metal scrap collector and processor, and is comprised of eight operating facilities. It produced 178,000 metric tons of metal scrap last year. The company has invested in a modernization program that it expects will boost its total output.
The consolidation of Metals Recycling OOO into Mechel is expected to lower the purchases of metal scrap on the open market by Chelyabinsk Metallurgical Plant and Izhstal, reducing overall operating costs.
Last year CMP and Izhstal together consumed about 2.6 million metric tons of scrap, including more than 1.1 million metric tons of scrap produced internally. The acquisition will increase these facilities’ control over metal scarp supplies and help reduce their exposure to fluctuations on the metal scrap market.
“One of the main objectives of our overall strategy is to increase the efficiency of Mechel’s steel segment. The key factor here is the reduction of our production costs by expanding our own raw material base.” said Mechel’s COO Alexey Ivanushkin.