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Worthington expects boost from auto demand

Keywords: Tags  Worthington Industries, steel processing, galvanizing, Spartan Coating, Severstal, automotive demand, strip steel capacity increase, Andy Rose John McConnell


CHICAGO — Worthington Industries Inc. has seen its steel business profits squeezed over the past 12 months, due in part to lower selling prices and a temporary loss of some coating volume.

But the company anticipates an upturn as automotive build rates increase over the next few years, and the company is preparing by expanding its cold-rolled strip rolling mill and strip annealing capacity ( amm.com, May 30), executives say.

Worthington’s joint-venture Spartan Steel Coating LLC saw a reduction in steel tonnage during its fiscal year ended May 31 because Dearborn, Mich.-based partner Severstal North America Inc. "moved business to their in-house galvanizing facility in Dearborn," Worthington vice president and chief financial officer Andy Rose said during a conference call.

"The main driver of the shortfall was tolling volume, which was negatively affected by (Severstal’s) balancing of production between Spartan and Dearborn," Rose said. "But by the end of the quarter, Spartan’s volume began to recover as Severstal’s new line is now full. So we expect Spartan’s volume to continue to improve."

The Columbus, Ohio-based company expects to boost cold-rolling and annealing capacity by 15 to 20 percent when it concludes its capital projects in Cleveland and Columbus. Its 2010 acquisition of the strip steel assets of Buffalo, N.Y.-based Gibraltar Industries Inc. ( amm.com, Feb. 1, 2010) "basically doubled our capacity but now we’re full again, so we need to increase it," Worthington president and chief operating officer Mark Russell said.

The market for strip production "has been in consolidation mode for a long time, and it’s now where it needs to be," chairman and chief executive officer John McConnell said. "If the (vehicle) build rates get any higher, we need to make sure we can keep up with demand."

Russell offered tentative support for recent mill-announced coil price increases ( amm.com, June 27), citing rising scrap tags, but added that "there isn’t a whole lot of demand-side drive for that at this point."

If prices "get out of hand, (domestic producers) know that will invite more imports," Russell said. "And you see some of the signs of imports starting to increase. So if they get greedy, the imports will come and discipline them. We’ve seen that before and that will happen again."


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