ArcelorMittal SA subsidiary AM/NS Calvert LLC wants a waiver to Section 232 tariffs for 755,000 tonnes of carbon and alloy steel slabs from Mexico.
That volume amounts to more than 90% of the 836,181 tonnes that Mexico shipped to the United States last year, according to data from the US Commerce Department's Enforcement and Compliance division.
About 1,900 jobs at the Alabama slab reroller, one of the most modern flat-rolled steel processing plants in the United States, could hinge on whether the exclusion is granted, the company warned.
“AM/NS Calvert is unable to domestically source these slabs, which it must have in order to continue its steel rolling operations,” the company said in a petition to the Commerce Department dated Monday June 18 but not posted online by the US government until July 18.
Can you spare 4 million tonnes?
Calvert, Alabama-based AM/NS Calvert makes about 4.9 million tonnes of flat-rolled steel annually from slabs sourced from its US operations as well as from material imported from its mills in Mexico and Brazil, the petition indicates. The mill makes a full range of hot-rolled, cold-rolled and coated flat-rolled steels for a wide spectrum of end-use markets, including automotive, energy transmission and distribution.
ArcelorMittal can produce 14.9 million tonnes of slabs per year from its mills in Indiana, Illinois, Ohio and Pennsylvania. About 13.6 million tonnes are rolled into sheet and plate, which in theory leaves 1.3 million tonnes for AM/NS Calvert to roll.
But in practice that number amounts to about 900,000 tonnes per year, once such factors as maintenance outages and yield loss are taken into account, the company said. The result is that AM/NS Calvert needs about 4 million tonnes from outside sources.
"This necessitates purchasing slabs from other sources to keep the mill viable," the company added.
One big problem is that there were only 447,967 tons of slabs available on the merchant market from other US producers in 2017, the company said, citing data from the American Iron and Steel Institute. “There is little or no functioning commercial market for slabs in the United States.”
And AM/NS Calvert isn't counting on restarted US blast furnaces to make up that shortfall, given the "hundreds of millions of dollars" necessary to reline and restart idled capacity and complementary casting facilities.
Mexico or bust
Mexican tonnage is critical for ArcelorMittal to supply AM/NS Calvert in 2018 and 2019 both due to limited US slab supplies and the US import quota against Brazil, the company said.
Brazil has agreed to limit semifinished steel exports to the US to 3.5 million tonnes annually, of which about 1.4 million tonnes had been filled as of mid-June.
But that pace will probably accelerate because no one in the Brazilian government appears to be in charge of administering that quota celing, AM/NS Calvert said.
The result of that administrative vacuum is that “there is a rush to export slab from Brazil, including from Brazilian mills that have not previously supplied slab to US producers,” the company said.
That rush to the doors means Brazil could hit its slab quota “well before” the end of this year, according to AM/NS Calvert. “As a result, access to slabs from ArcelorMittal’s Mexican operations has become critical to the continuation of operations at AM/NS Calvert."
Should AM/NS Calvert lose access to Mexican slabs, the disruption could flow downstream to customers in the energy transmission and automotive sectors. The company supplies almost all major automakers – including General Motors Co, Ford Motor Co, Fiat-Chrysler, Honda, Hyundai, Nissan, BMW and Toyota, it noted.
AM/NS Calvert also risks losing business with ArcelorMittal Mexico, another subsidiary of Luxembourg-based ArcelorMittal SA. The Mexican unit supplies slabs to AM/NS Calvert, which rolls them into hot-rolled coil and re-exports them to Mexico.
“If the exclusion is not granted, the business will simply be lost,” the company warned.
AM/NS Calvert was built in 2010 by German steelmaker ThyssenKrupp. It was acquired in 2014 for $1.55 billion and operates as a 50-50 joint venture between ArcelorMittal and Japanese steelmaker Nippon Steel & Sumitomo Metal Corp.