* Prosecutors seek judicial order to shut down furnace
* Comes as ThyssenKrupp seeks to sell money-losing CSA
By Sabrina Lorenzi
RIO DE JANEIRO, Jan 18 Brazilian prosecutors are
seeking to shut down one of two blast furnaces at ThyssenKrupp
AG's CSA unit over alleged irregularities, presenting
a new challenge for the German steelmaker as it tries to sell
the money-losing mill.
The investigation centers on allegations that CSA was
improperly awarded an operating license for the facility about
two years ago, and could result in a series of lawsuits against
the company, Leonardo Kataoka, a state prosecutor in Rio de
Janeiro, told Reuters in an interview.
CSA, formally known as Companhia Siderúrgica do Atlántico
SA, is already facing two separate lawsuits over alleged
pollution offenses that took place in December 2010. And last
week, the city of Rio de Janeiro ordered CSA to halt operations,
alleging it does not have an operating license.
ThyssenKrupp said this week that the mill is still operating
and that it had provided all the necessary documents to renew
its operating license.
The new legal challenge could complicate ThyssenKrupp's
plans to sell CSA, Brazil's biggest foreign investment project
to date. Germany's No. 1 steelmaker invested over $8 billion in
its Brazilian foray, which has been plagued by a weak global
economy, growing operating losses and poor management.
Brazilian rival Companhia Siderúrgica Nacional SA, known as
CSN, and ArcelorMittal SA have emerged as
leading bidders for the two steel mills that ThyssenKrupp is
trying to sell in the United States and Brazil, a source told
Reuters on Thursday.
Whoever wins the bidding process will also inherit the
lawsuits, said Kataoka.
"All the company's legal responsibilities will be
transferred to whoever buys it," he said.
CSA declined to comment on the investigation into the
operating license, which, according to Kataoka, was granted in
December 2010 even though Rio de Janeiro's environmental agency
Inea recommended otherwise. The state government awarded the
permit based on a report by an independent consulting firm that
was commissioned and paid for by ThyssenKrupp, the prosecutor
"There are indications that the report contained false and
misleading data," Kataoka said. "The start-up of the blast
furnace was approved without hearing Inea's recommendations and
contradicting its technical guidelines."
ThyssenKrupp has struggled with delays and cost overruns at
CSA that led the former to report losses in 2011 and 2012. The
German steelmaker has also been unable to escape from the bleak
outlook for steelmakers in Brazil, as rising raw materials costs
and a gl ut of slab hav e sapped margins and hindered factory
According to Kataoka, CSA's second blast furnace should
never have started operation because the furnace hood was
smaller than required. An ingot pouring facility that was closed
for similar reasons meant that pig iron had to be deposited in
an emergency well.
The problem, he said, is that the well also had poor
emission controls. The situation could have caused damages to
the population living in the CSA mill area, Kataoka said.
Despite agreeing with Inea to straighten up environmental
controls and improve the quality of its facilities, CSA's
operations are still not safe enough to minimize emissions and
pollution, according to the prosecutor.
The company denied those accusations, saying that its blast
furnaces are in compliance with environmental codes.
CSA, which has total production capacity of 5 million tonnes
a year, began operating in 2010 and was meant to export slabs
that could be further processed in the United States.
CSA is 73 percent-owned by ThyssenKrupp, with the remaining
stake belonging to Brazil's Vale SA, the world's No.
1 producer of iron ore.