CHICAGO — Steel Dynamics Inc (SDI) plans to unveil the location of its new flat-rolled mill in the US Southwest in the next two months, the company’s top executive said.
“Six week to 8 weeks, we should have that in hand… We should be able to announce the specific site. And once we do, I think you’ll see the incredible strategic logic in that site,” SDI president and chief executive officer Mark Millett said during the company’s fourth-quarter earnings conference call on Tuesday January 22.
Corpus Christi calling
Millett did not mention specific locations on the call. But “sites have been certainly optioned, [and] we’re concluding the incentive package negotiations,” he noted.
Industry sources have told Fastmarkets AMM that Corpus Christi, Texas, is the leading candidate to land the flat-rolled mill. Corpus Christi offers rail, road and both shallow- and deep-water port access. Voestalpine’s hot-briquetted iron (HBI) plant is in Corpus Christi, and the facility's output could be used to supply the mill’s meltshop.
Voestalphine's feedstock, which is cleaner than scrap, would allow SDI to enter more demanding end markets such as the automotive sector. And while Voestalpine exports some of the HBI from its Texas plant to its mills in Europe, there should be tons to spare to feed SDI, one source said.
Voestalpine did not respond to a request for comment on January 23. Millett declined to comment on the matter.
'A brute of a mill'
SDI in November announced plans to spend nearly $2 billion to build a flat-rolled steel mill in the southwestern United States. The mill is expected to have annual capacity of 3 million tons per year, and SDI earlier this month named a management team for it.
Millett said during the earnings call that the mill is scheduled to start up in the summer of 2021 and swatted aside analyst concerns about domestic overcapacity and lower hot-rolled coil prices in that time frame.
US HRC prices have been drifting lower partly due to band capacity that was restarted last year. And more tons are on the way.
“It’s going to be a brute of a mill,” Millett said, noting that it will feature an electric-arc furnace feeding an integrated-mill-style caster and hot-strip mill. That configuration will allow the plant to make high-strength American Petroleum Institute (API) grades that remain a bastion of integrated mills.
“Will we gain market share there? I would certainly hope so,” Millett said.
Millett expects to see strong demand from customers in Texas, Louisiana, Oklahoma and Arkansas in particular. There is an “absolute void” of flat-rolled capacity in certain parts of that four-state region, which is also the hub of the US energy tubular goods sector.
“Unfortunately, given the freight expense to get domestic steel down there, the American pipe manufacturers have been at a disadvantage,” he said.
HRC, one of the sheet products the mill will make, is the substrate necessary to produce energy tubulars such as welded line pipe and oil country tubular goods (OCTG).
Customers in the area are supplied either by imports - most of which arrive via the port of Houston - or from domestic mills that charge a significant freight premium. A local mill will allow customers to avoid the two- to three-month lead times associated with imports as well as the three- to four-week transit times necessary to barge material in from existing US mills, Millett said.
The Southwest mill will also target northern and central Mexico, where SDI sees the most growth potential thanks to that country's growing automotive industry and the limited capabilities of its mills. “There is a dislocation between mill capability within Mexico and demand requirements," especially when it comes to the auto sector's need for cold-rolled and coated sheet, Millett said.
Industry sources have told Fastmarkets AMM that SDI’s plans to build a mill to serve Mexico indicate that the company does not anticipate overly burdensome trade barriers remaining in place long term between the US and its southern neighbor.
The US has hit exports of steel from most countries, including Mexico, with Section 232 tariffs of 25%. Mexico has responded with retaliatory measures against the US trade action.
Millett made no specific mention of Section 232, the North American Free Trade Agreement (Nafta) or the US-Mexico-Canada Agreement, which the Trump administration hopes will replace Nafta. But he stressed that the mill did not hinge on protection from imports.
“This is not a trade play, hoping that the trade environment is going to be positive forever. It’s a market play,” he said.