Italy: Marcegaglia buys Russian steelmaker Severstal’s Latvia unit

Milan: Marcegaglia has acquired Russian steelmaker Severstal’s (CHMF.MM) unit in Latvia, the Italian steel firm said on Friday, after sanctions on Severstal’s main shareholder made it impossible for the business to operate.

The deal by Marcegaglia Carbon Steel was completed after it obtained clearance from the Latvian government and the European Union’s (EU) competition watchdog, Marcegaglia said in a statement.

Funds for the purchase have not been paid to Severstal but instead transferred into an escrow account where they will remain frozen as long as EU sanctions against the Kremlin remain in place.

Severstal, which came under U.S. sanctions last June, said EU sanctions on its main shareholder, Alexey Mordashov, had made it impossible for its distribution division to operate in Europe.

“Despite these restrictions, which we consider unjustified and illegal, it is important for us that our colleagues from SIA Severstal Distribution keep their jobs and that the assets we have developed over many years continue to operate,” Severstal said in a statement.

Severstal said it was happy to hand the assets over to the new owner.

SIA Severstal Distribution, founded in 1992, had about 270 staff in Latvia and Poland when the restrictions were introduced.

More than 50,000 tonnes of Severstal steel products – imported from Russia before sanctions were imposed and for previously agreed sales – got stuck in warehouses in Latvia, Estonia, Finland, Poland, Belgium, Netherlands, Germany and Denmark last year.

Severstal suspended steel exports to the EU after sanctions were imposed on Mordashov on Feb. 28, 2022, and has failed in it its attempts to have steel products held in those warehouses unfrozen.