Nucor pushes back vs. Correnti's Big River Steel

NEW YORK — Nucor Corp. has pushed back against Big River Steel LLC’s proposed $1.1-billion steel mill in Arkansas, claiming that an oversupplied steel market and competition over raw materials could hurt the Charlotte, N.C.-based steelmaker if plans move forward.

"The Big River Steel Project will directly impact the Nucor mills in Arkansas by driving up our costs for raw materials, energy, labor, rail car and truck transportation," Nucor said in a letter sent to legislators in both the state Senate and House of Representatives. The project could also impact Nucor by "reducing our operating rate, which will reduce the pay of our teammates, lowering our overall profit margin" as well as by possibly forcing the company to "shift orders, tons and jobs to our three sister divisions."

The pushback is in response to Big River Steel’s proposed venture in Osceola, Ark., announced earlier this year by the state governor, to produce steel products to serve the automotive, oil and gas, and electrical energy industries (amm.com, Jan. 29). The project is spearheaded by industry veteran John D. Correnti, who resigned as vice chairman, president, chief executive officer and director of Nucor in 1999.

If approved, 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. Big River’s 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.

But while Nucor contends the project would be disruptive, Correnti told AMM in a March 18 interview that that’s not the case.

"I’ve seen this movie before ... (but) there’s always capacity for low-cost quality producers. The U.S. is a steel importer to the tune of 15 to 20 percent. Why is that?" Correnti said in the interview. "At Big River, we’re touting the high-end product—electrical steels, automotive steels, high-strength low-alloy steels, motor lamination. ... Sure, we’ll make some vanilla-grade steels, but the bottom line is that Nucor just doesn’t want the competition."

Nucor did not respond to requests for comment, but in its letter, it claims there’s no room for additional capacity in the United States with the steel sheet sector today running at between 70 and 75 percent of capacity.

Additionally, Nucor claims that Big River Steel will make 100 percent of the same products made at its Hickman, Ark., facility, which it said is particularly problematic since the mill hasn’t operated at full capacity since September 2008 due to a "lack of demand."

Nucor Hickman has been producing sheet and plate products since 1992 and has an annual capacity of some 2.8 million tons per year—also the estimated combined tonnage of unused capacity at Nucor’s four sheet mill locations, it said. The letter added that if Big River Steel is built, "Nucor will seek to maximize profitability" by diverting orders, tons and jobs elsewhere.

"While Nucor is opposed to laying off teammates, we are not opposed to transferring them to our other sheet mills in Crawfordsville, Ind.; Decatur, Ala.; or Berkley, S.C.," it added.

The U.S. sheet industry has been hit hard since the recession, with RG Steel LLC filing for bankruptcy last May and ThyssenKrupp AG’s Mobile, Ala., facility now up for sale. In recent earnings calls, AK Steel Corp., a West Chester, Ohio-based producer of electrical steels, said that the electrical steel market has been difficult as well.

"Concerning the electrical steels, there is currently a 21-percent oversupply in the market of grain-oriented electrical steels a 30-percent oversupply in the non-grain-oriented electrical steels," Nucor said in the letter, obtained by AMM from a reporter at the Blytheville Courier News. "The selling price for these steels is half of what it was in 2008, and China is still building steel mills to produce (these products)."

But Correnti denied that Big River would pose a threat to Nucor, adding that it would focus on higher-quality steel products rather than commodity-grade material. While Correnti’s mill could produce the same products as Hickman, Big River would only produce, at best, a 20-percent overlap, he said.

"This (mill) is bringing manufacturing back to the United States. I think there’s a niche for high-quality steel," Correnti said. "Just use common sense. Big River can make everything Nucor can make, yes, but we’re putting in an RH (Ruhrstahl-Heraeus) degasser to make higher-grade steels. Why would I make vanilla ice cream steel that I have to sell at $600 per ton when I have the equipment ... (to make steel) that I could sell for $1,000? It would be foolish wasting my mill time."

Correnti’s Big River Steel venture is contingent on the state legislature issuing a $125-million bond for funding. Earlier this month, the Mississippi County Planning and Development Committee, which is separate from the state, approved $14.5 million in funding for the mill.

Arkansas Economic Development Commission director of marketing and communications Joe Holmes told AMM that both the speaker of the Arkansas House and the president pro tempore of the Senate received independent economic analysis reports on March 15, and that both houses are likely to vote on the bond issuance in the coming weeks.

Editor’s 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.


Latest Pricing Trends

Poll

Are you stocking more inventory today than 18 months ago?

Yes
No


View previous results