NEW YORK John D. Correntis proposed $1.1-billion steel project in Osceola, Ark., aims to displace steel imports by offering higher-grade product domestically, the steel industry veteran says.
"We hope to sell a lot of steel that today is imported into the country for whatever reasonprice consideration is one, but more than likely its size and a grade situation where some of the mini-mills wont be able to make (product)," Correnti told AMM. "Were always importing steel here. In robust times, we import a lot more than (in) recessionary times ... and, of course, freight and logistics are very important factors."
Correntis new venture announced last month, Big River Steel LLC, is contingent on the state legislature authorizing the issuance of $125 million in general obligation bonds under Amendment 82, which allows the legislature to approve up to 5 percent of Arkansas general revenue budget for bonding of "superprojects." The money generated by the sale of the bonds would provide a $50-million loan to the company, $50 million for site preparation, $20 million associated with piling and subsurface stabilization and $5 million for bond issuance costs.
Once the bill is officially referred to the states House of Representatives and Senate by Arkansas Gov. Mike Beebeexpected later this weekthe legislature has 20 business days to conduct an economic impact study, after which it will advance through the usual committee process and be scheduled for a vote.
After the governor officially sends the measure to the legislature, "the clock starts clicking. At the end of that, it will be debated and voted on," Joe Holmes, director of marketing and communications at the Arkansas Economic Development Commission, told AMM. "If the deal is approved, it will move forward."
The new mill is expected to produce hot-rolled, cold-rolled, galvanized, and pickled and oiled coil for the automotive sector; grain- and non-grain-oriented electrical steels for the electrical sector; and substrate for the pipe and tube sector (amm.com, Jan. 29). Correnti said the mill would have an annual capacity of 1.7 million tons, and would have the ability to make 76- to 78-inch-wide by 1-inch-thick coils
The proposed mill in Mississippi County will face some opposition. Charlotte, N.C.-based steelmaker Nucor Corp.s sheet mill in Hickman is in the same county, as is Luxembourg-based steelmaker Tenaris SAs mill, also in Hickman.
"With Nucor (as a competitor), one problem would be the competition for scrap. (Also), Im not sure if Hickman aims for the auto market, but they have a (vacuum) degasser, which would allow them to get into the auto market," Charles Bradford, president of New York-based Bradford Research Inc., told AMM. "When it comes to pipe and tube, thats a market all the flat-rolled mini-mills go after because the product is pretty ideal."
While Correnti declined to comment specifically on competition, he noted that "there is always room for a low-cost, quality producer. In my tenure at Nucor, thats how we grew the company. In the U.S., theres always capacity shortfall."
Arkansas Economic Development Commission executive director Grant Tennille said during a Senate committee meeting Feb. 4 that Correntis track record in steel is proven and that he feels "very good" about Big Rivers projections for the Arkansas plant, according to local media reports. He added that Big River believes theres a 20-percent overlap with products made at Nucors Mississippi County plants, but representatives from Nucor had told Tennille that the "percentage might be low."
Market participants have noted that ThyssenKrupp AGs plant in Mobile, Ala., is on the market and would be a good option for investment. But Correnti said he was not interested in the mill as he would need to install a melt shop, gassers and continuous casters, which would have a difficult cost structure.
Even if the bond sale is approved, the state will not invest any money until $300 million in equity from company investors and commitments from other lenders is deposited into an escrow account, Holmes said. He added that $250 million of company money must be spent before any bond proceeds can be given to the project.
"This amendment was put in place not by the legislature, but by the citizens in Arkansas to attract industry," Correnti said, adding that the proposed mill would provide some 525 permanent jobs and 2,000 construction jobs.
Nucor and Tenaris could not be reached for comment.
Editors note: This story was updated March 22, 2013, to clarify the products that are expected to be produced at the proposed Big River mill in Arkansas.