ArcelorMittal buys minority stake in Vallourec

Luxembourg-based ArcelorMittal has agreed to buy a 28.4 percent equity interest in Vallourec, a France-based producer of recycled-content steel pipe and tube with electric arc furnace (EAF) melt shops in Brazil and in Ohio.

ArcelorMittal purchased its Vallourec shares from funds managed by New York-based Apollo Global Management Inc. for about $1.04 billion. The closing of the transaction is subject to regulatory approvals and is expected to close in the second half of this year.

Although ArcelorMittal still operates blast furnace/basic oxygen furnace (BOF) sites in some parts of the world, the move continues a company trend this decade to invest in recycled-content EAF production.

In Belgium, Canada, France, Luxembourg and Spain, ArcelorMittal has worked with governments to secure partial funding to—in three of those cases—convert former blast furnace/BOF sites to EAF mills and, in Luxembourg, to expand an existing EAF mill.

In the U.S., Arcelor sold its BOF mills to Cleveland-Cliffs earlier this decade but has remained a joint venture partner in an EAF mill in Alabama. Now, it will own a minority stake in an EAF mill in Ohio.

“Vallourec is a quality, high added-value tubular business, with established positions of strength in the attractive Brazilian and U.S. markets,” ArcelorMittal CEO Aditya Mittal says.

“As a producer of premium tubular solutions, it has a critical role to play in the energy transition, producing vital products for hydrogen, carbon capture and storage and geothermal applications, for which demand is expected to grow. It also has a comparatively low carbon footprint with ambitious improvement targets. We look forward to being part of the company’s future.”

Vallourec’s traditional market is more tightly tied to the petroleum and natural gas sectors, including oil country tubular goods (OCTG) products used in oilfields, pipelines and refineries.

ArcelorMittal describes Vallourec’s steelmaking facilities in Brazil and the U.S. as having low carbon emissions, pegging the Ohio mill at 0.29 tons of CO₂ emitted per ton of steel produced (measured by Scopes 1 and 2 emissions) and the Brazil plant at 0.945 tons of CO₂ emitted per ton of steel (measured by Scopes 1, 2 and 3 upstream emissions).

In 2023 financial results announced earlier this month, Vallourec reported earnings before interest, taxes, depreciation and amortization (EBITDA) of 1.2 billion euros ($1.31 billion) on sales of 5.1 billion euros ($5.57 billion).

In an investor presentation accompanying its results, Vallourec calls 2023 “the group’s best year in nearly 15 years,” and says it sees durable strength in in the premium tubes market that will contribute to another year of "robust" results in 2024.

As to whether the minority stake could grow into a majority position, ArcelorMittal says as of this March it does not intend to launch a tender offer for Vallourec’s remaining shares over the next six months.