| April 2006 |  |
| Metal Industry News | |
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Mittal
Executives Stump At
the Steel Business Briefings Steel Markets North American Conference
in Chicago last month, Mittal Steel CEO Lou Schorsch said the proposed
merger is an “incredible opportunity” for both companies. “Both
companies’ stocks went up immediately after the announcement.
It’s very rare to see an acquiring company’s stock go
up, but this puts together the largest two steel companies in the
world.” Schorsch
said Mittal and Arcelor are complementary, with strengths in different
parts of the world. Mittal is strong in Eastern Europe and the United
States while Luxembourg-based Arcelor has a solid position in Western
Europe and South America. “One
of the reasons it’s so exciting is that the fit is phenomenally
good,” Schorsch said. “This is a remarkable opportunity,
one we shouldn’t let go of.” Arcelor
CEO Guy Dolle delivered the keynote speech at the Chicago conference.
Though his remarks didn’t directly address the acquisition
attempt, he disputed the idea that the two companies are a good
fit in general remarks on consolidation. “Their
product mix, between commodity products and specialized products,
is really dissimilar. This makes a huge difference between an apparent
clever addition of steel plants and a successful consolidation to
reinforce key players’ competitiveness in their field. “Only
a well-focused consolidation can serve value,” Dolle said. Earlier,
Wilbur Ross, non-executive director of Mittal Steel, said “a
combination of Mittal and Arcelor would take consolidation to a
new level and bring about further considerable benefits for all
stakeholders.” Ross
said that despite the progress the industry has made in recent years
towards a more consolidated business model, the sector is still
afforded comparatively low ratings by the financial markets. “We
still have to demonstrate that consolidation has progressed enough
to have a real benefit in terms of reducing volatility and ensuring
sustainability of earnings. Ultimately this will be improved by
better management of supply and demand, which will further improve
through having a more consolidated production base.” Ross
founded International Steel Group in 2002 after purchasing the assets
of Bethlehem, LTV, Weirton, Acme and Georgetown. Ross said despite
ISG being a profitable, well-managed, stand-alone business with
good growth prospects, the company made the decision to merge with
Mittal Steel. “Trying
to emulate the global profile and portfolio of Mittal Steel would
have taken years,” he said. “Merging with them, on the
other hand, would enable us to accelerate our long-term strategy
and growth plans, enabling our shareholders to benefit immediately
from exposure to low-cost, fast-growing developing markets.” Ross
compared the benefits of a Mittal-Arcelor merger to the Mittal-ISG
merger. “Combining with Mittal will accomplish Arcelor’s
stated plan in the most efficient way, simultaneously creating a
much stronger, more balanced company that should act as the catalyst
for a re-rating in the sector.” Industry
analyst Chuck Bradford, president of Bradford Research in New York,
called the acquisition attempt by Mittal “brilliant” at
the SBB Steel Markets Conference. “I agree consolidation is
good. The more the better,” he said. While
Mittal executives were openly speaking about Arcelor, the Luxembourg
company’s board of directors chose to focus its attention on
Arcelor’s recent takeover of Canadian steelmaker Dofasco. The
board said the acquisition is a key milestone in Arcelor’s
North American strategy, allowing the company to become a major
supplier to the American automotive industry and giving it access
to significant iron ore resources in North America. To
that end, the Arcelor board unanimously resolved to prevent a sale
of Dofasco, which would be against the interests of Arcelor shareholders.
Effective April 3, the Arcelor group transferred its shares in Dofasco
to an independent Dutch foundation, Strategic Steel Stichting. Under
this new structure, the Arcelor board retains full control over
Dofasco operations, but gives up the authority to sell Dofasco.
Mott
Takes Over as Stelco Mott
has significant experience with the restructuring and consolidation
of the North American steel industry. He was president and CEO of
International Steel Group Inc. until its sale to Mittal Steel Co.
in April 2005. He has also had senior roles at U.S. Steel, Nucor,
Lone Star Steel and Pechiney Rolled Products. “We
are very pleased to welcome Rodney Mott to Stelco. He is a highly
regarded industry leader with the skills and experience to enhance
our success going forward and create opportunities and value for
all of our stakeholders,” says outgoing President Courtney
Pratt. Mott
had been serving as a consultant to Tricap Management Ltd., one
of Stelco’s three financial sponsors. “Stelco
has a great reputation and tremendous potential. I am excited by
the opportunity to work with the management team, employees and
the unions to return Stelco to profitability and its leadership
position in our industry,” Mott says. The
company satisfied the conditions of its restructuring plan under
the Companies’ Creditors Arrangement Act and the reorganization
of its corporate structure under the Canada Business Corporations
Act. The
new Stelco has a $600 million asset-backed loan facility; a $375
million secured revolving term loan; a low interest loan of $150
million from the Province of Ontario; a plan in place to pay its
pension plan deficiency; and $143 million in new equity through
the issuance of New Common Shares to Tricap. A
new board of directors has assumed office. Its members are Pratt
(chairman), Dennis Belcher, Laurie Bennett, Steve Cohn, Pierre Dupuis,
Peter Gordon, John Lacey, Cyrus Madon and Tony Molluso. The
board has adopted an employee stock option plan. Like similar plans
in other companies, it is designed to assist in the retention and
motivation of key employees. The plan is also intended to assist
in the company’s pursuit of improved shareholder value and
long-term financial performance. A
number of new securities issued in connection with Stelco’s
restructuring plan were listed and commenced trading on the Toronto
Stock Exchange on Stelco
is one of Canada’s longest-operating steel companies. It is
focused on its two Ontario-based integrated steel businesses in
Hamilton and in Nanticoke. These operations produce hot-rolled,
cold-rolled, coated sheet and bar products. ITC
Extends Antidumping At
the same time, the ITC concluded that the antidumping duty orders
against imports of these products from Brazil and Canada should
be revoked, and that the countervailing duty order against Brazil
also should be revoked. “The
U.S. brass mill industry, like the brass mill industries of the
other countries, relies heavily upon production and sale at reasonable
prices of C.D.A. 200-series brass sheet and strip for its successful
overall operations. Without a large base load of this brass, the
ability of the U.S. brass mill industry to produce a full range
of world-class brass mill products would be in jeopardy,” says
Joseph L. Mayer, president of the Copper & Brass Fabricators
Council in Washington, D.C. These
actions by the ITC come under the second five-year review process.
The original investigations in these cases led to issuance of nine
antidumping and two countervailing duty orders in 1987 and 1988.
The antidumping duty orders with respect to imports from Korea,
The Netherlands and Sweden were revoked in 2000 as the result of
the first sunset reviews, and the countervailing duty order with
respect to imports from France will be revoked following a second
sunset review recently completed by the U.S. Department of Commerce,
which found that further significant subsidization of French brass
sheet and strip is not likely. International
trade rules require that the Commerce Department revoke an antidumping
or countervailing duty order after five years unless Commerce and
the ITC determine that such an action would likely lead to continuation
or recurrence of dumping or subsidies and of material injury to
the industry within a reasonably foreseeable time. Oregon
Steel, Bredero Shaw to Build Pipe Coating Facility Bredero
Shaw will supply coating services for fusion bond epoxy corrosion
coatings and internal linings, in exchange for the exclusive right
to provide Oregon Steel with all of its coating requirements at
the new pipe mill, the use of land and buildings for the coating
facility, and the provision of pipe handling services. The
coating facility will be installed adjacent to Oregon Steel’s
new 60-inch API large-diameter line pipe manufacturing mill that
is currently under construction. The pipe mill is scheduled to begin
production this July. Nucor
Buys Connecticut Steel, Located
in Wallingford, Conn., the bar products mill has an annual capacity
of approximately 300,000 tons of wire rod and rebar and approximately
85,000 tons of wire mesh and structural mesh fabrication. In
other action, Nucon Steel Commercial Corp., Denton, Texas, and LFB
Engineered Systems Inc., Stockton, Calif., have formed Nexframe
LP, a joint venture to provide light-gauge steel framing for residential
construction markets across the nation. Nucon is a wholly owned
subsidiary of Nucor Corp. and LFP is a subsidiary of Lennar Corp.
“Nucor
believes the opportunity for the use of light-gauge steel framing
in residential construction is significant today, is growing, and
will continue to grow in the future. We are extremely pleased to
have the opportunity to form this joint venture with a Lennar company,
and believe there are a great many synergies between our two companies
that the joint venture can immediately begin to capitalize upon,”
said Don Moody, Nucon’s general manager. The
net loss figure was attributed to losses related to Chapter 11 restructuring
and includes three large non-recurring special items: the $366 million
gain in the second quarter of 2005 related to the company’s
sale of interests in Queensland Alumina Limited; a fourth-quarter
non-cash charge of $1.1 billion associated with the liquidation
of commodity subsidiaries; and a fourth-quarter non-cash charge
totaling $42 million associated with resolution of a third-party
claim against one of its commodity subsidiaries. Operating
income for 2005 reached $59.8 million, up significantly from 2004
when the company reported an $817.6 million operating loss. Net
sales for 2005 were approximately $1.09 billion, up from $942.4
million in 2004. Although
fourth-quarter results were also adversely affected by the two special
non-cash charges, operating income in the fourth quarter totaled
approximately $14.3 million. Net sales for fourth-quarter 2005 grew
to $273.8 million, up $16.1 million from 2004. “We
experienced particularly strong fourth-quarter results in our core
fabricated products operations and currently expect such strength
to continue into and past the first quarter of 2006,” said
Jack A. Hockema, president and CEO of Kaiser Aluminum. International
Wire Group Inc., Camden, N.J., has agreed to acquire Phelps Dodge
High Performance Conductors of South Carolina and Georgia from Phelps
Dodge Corp. for $42 million. HPC has manufacturing operations in
Inman, S.C., and Trenton, Ga. IWG
manufactures wire products, including bare and tin-plated copper
wire and insulated copper wire products, for other wire suppliers
and OEMs. Alcoa
Plans Smelter Alcoa
intends to build a 341,000-metric-tons-per-year aluminum smelter,
an associated anode plant and cast house. First metal production
at the $1.5 billion smelter would be expected in late 2008. Additionally,
production has begun at Alcoa’s expanded Alumar smelter in
Sao Luis, Maranhao, Brazil. The expansion adds 63,000 tons per year
of aluminum, bringing capacity to 433,000 tons per year. The
expansion of the Alumar smelter took place in two stages: 48 of
the new pots were put into operation in November 2005 and the start-up
of the remaining 52 pots began in March and was expected to be completed
by April 1. Pittsburgh-based
Alcoa also increased its stake in the Estreito hydropower project
in Northern Brazil from 19.08 percent to 25.49 percent by purchasing
shares from BHP Billiton. Novamerican
Profits Net
income for the first quarter of 2006 decreased by $1.3 million,
or 12.4 percent, to $8.8 million, vs. $10.1 million for the first
quarter of 2005. Sales for the first quarter of 2006 decreased by
$10.7 million, or 5.2 percent, to $195.7 million from $206.4 million
for the first quarter of 2005. Tons
sold and processed in the first quarter of 2006 increased by 0.8
percent, to 452,306 tons from 448,688 in the first quarter of 2005.
While tons sold for the three months ended Feb. 25, 2006, increased
by 4.9 percent, tons processed decreased by 2.7 percent, compared
with the same period in 2005. Steel
Technologies Sells The
Custom Steel facility in Kennett, Mo., produces fabricated parts
that primarily support ARI’s nearby railcar manufacturing operations.
“We are committed to working with ARI through a transition period to help ensure a smooth changeover for the employees of the Kennett facility,” says Bradford T. Ray, chairman and CEO of Steel Technologies. “As our only fabrication facility, the Kennett operation has a stronger strategic fit long term as part of ARI, while Steel Technologies will remain highly focused on growth opportunities in our core steel-processing segment.” Briefs Tarpon
Industries Inc., Marysville, Md., has terminated its agreement to
acquire Midwest Tube Mills Inc. The agreement to acquire Midwest
had been signed in August 2005. Roll
Coater Inc., Indianapolis, a full-service coil coater, has completed
the integration of its freight and logistics services with Pittsburgh
Logistics Systems Inc. of Rochester, Pa. PLS is managing the coordination
of inbound and outbound truck, rail and barge shipments for Roll
Coater and its customers. Northwest
Pipe Co. was named as pipe supplier to Black and Veatch Construction
Inc., to supply approximately $15 million of welded steel pipe for
the Perris Valley Pipeline Project in California. Northwest Pipe
will supply approximately 35,000 feet of 96-inch and 108-inch diameter
steel pipe, beginning in the second quarter of 2006. OmniSource
Corp., Ft. Wayne, Ind., and Meretec Corp., East Chicago, Ind., have
agreed to commercialize Meretec’s advanced de-zincing technology
throughout the United States. Meretec holds an international patent
for technology that removes and reclaims zinc from galvanized and
zinc-coated steel scrap. Century
Aluminum Co., Monterey, Calif., announced that its Icelandic subsidiary,
Nordural ehf, will accelerate expansion of its Grundartangi aluminum
plant from 220,000 metric tons per year to 260,000. Construction
of the expansion is expected to be completed by the fourth quarter. Quality
Bar, Struthers, Ohio, is now stocking finished sizes of TG and TGP
4140 heat-treated bar. Sizes include: 3/4-inch, 1-inch, 1 1/8-inch,
1 1/4-inch, 1 3/8-inch, 1 1/2-inch, 1 3/4-inch, 2-inch, 2 1/2-inch,
2 3/4-inch, 3-inch, 3 1/2-inch, 4-inch, 5-inch and 6-inch. Quality
Bar is a turned, ground and polished cold bar producer stocking
over 3,000,000 pounds of finished goods. Steelscape
Inc., a subsidiary of Mexico’s IMSA Acero, has purchased process
equipment from Siemens Group Industrial Solutions and Services for
its new metallic coating line in Shreveport, La. The new line, which
will produce an additional 260,000 tons of hot-dipped galvanized/galvalume
product, is scheduled for completion in November. MSC
Industrial Direct Co. Inc., Melville, N.Y., has agreed to acquire
J & L Industrial Supply, a subsidiary of Kennametal Inc., for
$349.5 million. The acquisition is expected to close during the
second quarter. Headquartered in Southfield, Mich., with operations
in the United States and the United Kingdom, J & L is a national
specialty metal-cutting and finishing distributor with fiscal year
2005 sales of $257.5 million. Trumpf Inc., Farmington, Conn., has named Hart Machine Tool as the exclusive Trumpf distributor for machine tools in Georgia. Hart also represents Trumpf’s line of fabricating machinery in Alabama, Mississippi, Tennessee and the Florida Panhandle. People Beryl
Cook has joined Chicago Extruded Metals Co. as controller. Additionally,
Gerry Phelan was hired as a sales representative for CXM. Moscow’s
Rusal, the world’s third largest aluminum producer, has appointed
Steven Hodgson, currently managing director of the company’s
Alumina Division, to head its representative office in Australia.
Pavel Ovchinnikov, currently head of the Achinsk Alumina Complex,
will replace him. Maverick
Tube Corp., St. Louis, appointed Brion Talley as its vice president-steel
sourcing. Talley had been vice president-steel division with JFE
Shoji Trade America, Long Beach, Calif. Altmetals Co., Wixom, Mich., has appointed Sandie Crispin to the newly created position of customer service associate. She has 15 years customer service and automotive experience. |
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