The timing of the recent flurry of investments and announcements of additional near-term plans to increase US steelmaking capacity may seem curious given the overabundance of steel supply worldwide and the domestic industrys struggle to raise operating rates, but a closer look at these developments reveals the market dynamics driving them that are not otherwise immediately apparent.
With average US capacity utilization for steelmaking standing at only slightly over 70%, there might not seem to be a need to build additional steel mills or expand capacity at existing facilities, but John Anton, director of steel analytics for the pricing and purchasing service of IHS Markit, says that, locally, individual steelmaking companies see certain rationales for doing so.
Amy Bennett, principal consultant for Metal Bulletin Research, says that in general these investments are for specific, targeted production aimed at niches that are not largely supported by the industry and/or include new technology that enables new or upgraded facilities to better compete with older mills. And it is generally believed that there is always room for low-cost, high-technology steelmaking capacity, according to Christopher Plummer, managing director of Metal Strategies Inc, West Chester, Pennsylvania.
With US steel demand strong, and expected to improve further this year helped along by tax reform, a more friendly regulatory environment and the possibility that an infrastructure spending plan could become a higher priority in 2018 Philip K. Bell, president of the Steel Manufacturers Association, reminds that the new steelmaking investments are not state-sponsored capacity expansion. These are private companies that are confident about the direction of the economy, who are making investment decisions based on market fundamentals, he says.
The types of steel capacity investment vary by product. Most of the long-product investments, especially greenfield plants, are for steel reinforcing bar (rebar) micro-mills with the capacity to produce no more than 500,000 short tpy. They tend to be regional in nature, located in remote areas that are not currently well serviced by the domestic mills. They offer the steelmaker the ability to save on both raw material and finished steel transportation costs. They also are better able to integrate electric arc furnace (EAF) melting with continuous casting, according to Bell. Meanwhile, many investments in flat-rolled steel production are aimed at exploiting the strength in the automotive market.
Plenty of examples
Anton notes that Big River Steel LLCs flex mill in Osceola, Arkansas, which started ramping up at the end of 2016 first making hot-rolled, followed by cold-rolled and galvanized sheet was built with expansion in mind. According to Bennett, its 1.65 million tpy Phase 1 is already largely up and running and the company has stated its intention to double production capacity to about 3.2 million tpy within the next 30 months. In doing so, the company will add other, higher-value-added products to its product line, including cold-rolled motor-lamination electrical steels and advanced-high-strength steel (AHSS).
Big River Steel is noted as a high-technology plant, where the benefits to be had from multiple sensors, big data, automation and artificial intelligence are being actively sought to create a state-of-the-art smart plant. Big River is working closely with plantmaker SMS group and US-based software and data business Noodle.ai to reap advantage from the combined technologies.
Other US flat-steel-product capital investments include German-owned Bilstein Cold Rolled Steel starting up a greenfield cold-rolled sheet facility in Bowling Green, Kentucky, in May, which it plans to ramp up gradually. Initially it has the capability to produce 140,000 tpy of cold-rolled ultra-high-strength steel (UHSS) aimed at the continuing push for lightweighting in the US automotive industry with the potential of stepping that up to 300,000 tpy by 2027.
In September, US Steel and Kobe Steel announced that they plan to add a 500,000 tpy UHSS continuous hot-dipped galvanizing (HDG) line at their Pro-Tec Coating joint venture in Leipsic, Ohio. Plummer maintains that when this line comes on-stream in 2019, it will bring Pro-Tecs total AHSS production capacity to 1.5 million tpy and will result in Pro-Tec being the first company to produce third-generation (Gen 3) AHSS.
Motivated by its desire to extend its presence in the automotive market, Nucor is in the process of adding a 500,000 tpy galvanizing and pickling line at its Nucor Steel Gallatin sheet facility the former Gallatin Steel Co in Ghent, Kentucky. Plummer notes that this 72-inch wide line will be the widest hot-rolled coil HDG line in North America when it comes online in late in 2018 or early in 2019.
Bennett notes that even though market conditions have been improving for energy pipe and tube, US Steels plans to add an EAF at its Fairfield Works in Birmingham, Alabama, remain on hold. In the latest of a flurry of additional oil country tubular goods (OCTG) capacity additions over the past decade, Tenaris started up its 650,000 tpy seamless OCTG mill in Bay City, Texas, in mid-November, which, once fully ramped up could make Tenaris the largest US domestic producer of seamless energy tubulars.
On the long products side, Commercial Metals (CMC) is commissioning its 350,000 tpy micro-mill for rebar, in Durant, Oklahoma. CMC stated during its recent earnings conference call that the mill is expected to produce about 25,000 tpm of steel by May or June and is to begin producing spooled rebar there this spring. CMC also plans to invest in a spooling line at its rebar micro-mill in Mesa, Arizona, with the intention to begin spooled rebar production there next year.
Nucor has announced plans for several rebar and merchant bar investments, which the company has stated to be based on a desire to more fully match its melt and product offerings in each region to the regional markets, and to enable more efficient logistics. This includes plans to build a 350,000 tpy greenfield micro-mill for rebar in Sedalia, Missouri, and to add a 500,000 tpy merchant bar mill at its Nucor Steel Kankakee facility in Bourbonnais, Illinois. Both of these projects are expected to come on line in 2019.
John Ferriola, Nucors chairman, president and CEO, said in a statement that by strategically locating the micro-mill for rebar in the Kansas City area, it will give Nucor a sustained cost advantage over other domestic steel producers supplying that product from outside the region. Nucor has also stated that with the Midwest being one of the largest markets for merchant bar, Kankakee is ideally situated to take advantage of existing operating and commercial capabilities to meet this regional demand, while also allowing Nucor to fully utilize the companys existing bar mill by optimizing its melt capacity and infrastructure that is already in place.
Several other US steelmakers have invested in incremental investments. For example, Plummer notes that Steel Dynamics Inc is undertaking brownfield upgrades that do not necessarily add much production capacity, but rather increase the operating rates and product range at some existing operations. This includes adding a new 240,000 tpy rebar rolling mill in Columbia City, Indiana, which will allow the company to adjust its melting/ semis mix from its rail and structurals mill there, and the addition of a 60,000 tpy long product batch galvanizing plant in Wurtland, Kentucky, at its subsidiary Steel of West Virginia. Both are scheduled to come on-stream later this year.
By: Myra Pinkham