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Columbus to target higher-value marts: SDI

Keywords: Tags  Steel Dynamics, SDI, Mark Millet, Richard Teets, Columbus, Miss., M&A, Severstal Severstal NA


CHICAGO — Steel Dynamics Inc. (SDI) will look to boost results when it takes control of the Columbus, Miss., mini-mill by expanding output of value-added products and continuing efforts to push into profitable energy and automotive markets, company executives said.

Under the Fort Wayne, Ind.-based steelmaker, the Columbus mill should also see shipments to Mexico grow exponentially as SDI looks to supply existing customers who also have operations south of the border, they said.

The big potential for moving into higher-value markets comes thanks to the Columbus mini-mill sporting two degassers, thick slab casting capability and advanced rolling technologies, president and chief executive officer Mark Millett said.

"That provides greater capability than our Butler (Ind.) facility to make high-end energy-pipe scalp and advanced, high-strength dual-phase auto grades," he said July 22 during SDI’s earnings conference call, noting that the Columbus mill will be able to make both heavier gauges and wider widths than SDI’s current flat-rolled mills.

The Columbus facility, for example, is working to get into the market to supply X70 substrate for the energy tubular market and also has had "preliminary success" in making dual-phase steels for nonexposed automotive applications, Millett said, adding that both products command "good premiums."

Millett dismissed suggestions that Columbus supplied large volumes of commodity steel to tubers. "The focus on Columbus has not been to supply absolutely basic carbon ERW (electric-resistance welded tubing)," he said, noting that the mill already ships a full complement of X40 to X60 grades to tubers.

But SDI will look to realign the Columbus mill’s product mix to look more like that of its Butler mill, where about 45 to 50 percent of output is comprised of hot band and the balance value-added products, said Richard P. Teets Jr., SDI’s executive vice president of steelmaking and president and chief operating officer of steel operations.

Teets’ comments came after one analyst estimated that hot-rolled band accounted for some 70 percent of Columbus’ output in 2013. One way SDI will bring down that number is by pushing more tons into either hot-rolled or cold-rolled galvanized, Teets said, adding that the company also will look to make better use of a "push-pull" pickle line at Columbus that currently runs only one or two turns per week.

"I won’t say it’s tragic. But it’s an asset that is being totally underutilized," he said, noting that making better use of such capabilities should allow SDI to ship more pickled and oiled material from Columbus than the mill does at present.

Having a flat-rolled mill in the South, in addition to the company’s Midwest facilities, should allow SDI to "direct the right orders to the right place for the least amount of freight," Millett said, noting that SDI also would have a "slight" cost advantage in getting scrap and other raw materials to the Columbus mill.

SDI also has high hopes for the Columbus mill as a supplier to the Mexican market, Millett said, pointing out that Columbus currently ships few tons south of the border. "It’s a very large growth opportunity coming from a low base," he said. "We have existing customers that have assets in Monterrey, in particular. ... And I think we can expand on those (relationships) and create commercial opportunities for the Columbus mill."

SDI likely will focus on supplying cold-rolled sheet, cold-rolled galvanized and hot band to the appliance, automotive and energy sectors, according to the two executives.

But until the deal for the Columbus mill closes, SDI remains a "full competitor" of what is still part of Dearborn, Mich.-based Severstal North America Inc., Millett said.

SDI has agreed to acquire the Columbus plant from Russian steelmaker OAO Severstal, Severstal NA’s parent, for more than $1.6 billion. The deal is expected to close by year-end (amm.com, July 21).


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