August 2006
Metal Industry News

Arcelor-Mittal Merger’s a Done Deal
The merger of the world’s two largest steel companies, Arcelor and Mittal, took months to agree upon but only weeks to complete. In July, the companies reported that nearly 92 percent of Arcelor shares were tendered by the initial deadline in Mittal Steel’s offer.

“I am delighted at this result, which is a resounding endorsement of the strategic logic and value of the merger of Mittal Steel and Arcelor, a truly industry transforming deal,” said Lakshmi N. Mittal, chairman and CEO of Mittal Steel. “We are very excited about our future as one company and believe this strong vote of confidence from shareholders paves the way for a speedy integration process, allowing us to realize the full benefits of working together as the undisputed world steel leader.”

The companies had already begun working together by the start of August, holding joint press and analysts conferences to discuss second-quarter results and the status of the integration.

Among noteworthy developments was the ongoing dispute over the status of Dofasco, the Canadian steelmaker purchased by Arcelor during Mittal’s pursuit. Under terms of a consent decree signed by Mittal, Dofasco was to be sold to ThyssenKrupp if Mittal and Arcelor merged. But in April, Arcelor transferred its shares in Dofasco to independent Dutch foundation Strategic Steel Stichting. Only the foundation has the authority to sell Dofasco.

“We have to comply with the consent decree, which is to dispose of Dofasco,” said Aditya Mittal, chief financial officer for Mittal. “To the extent that we cannot comply with the decree, in this case because of the Stichting that’s in place, we then have to look at alternative assets [to divest].”

Those alternative assets were identified as Mittal’s U.S. steel mills in Weirton, W.Va., and Sparrows Point, Md. If Dofasco can’t be sold, Mittal must divest of one of those two facilities, likely by year’s end.

“We believe we can find a strategic industrial and financial solution, both for the employees of one of these companies as well as for the general steel industry in North America and our shareholders,” Aditya Mittal said.

Arcelor Senior Executive Vice President Gonzalo Urguijo reported that his company had paid the $140 million breakup fee to Severstal as a result of the late-June rejection by Arcelor of the proposed merger of the two companies.

Additionally, Arcelor-Mittal officials said that a new management team would be named, comprised of three choices by Mittal and three by Arcelor. (See the second quarter mill report for details.)

Nucor Plans New SBQ Mill in the South
Nucor Corp., Charlotte, N.C., plans to build a new special bar quality mill in the Southern U.S., which will add an estimated 850,000 tons of capacity to the SBQ market.

The facility will produce carbon and alloy rounds and round cornered squares from 3 inches to 9 inches for the automotive, heavy equipment and service center markets.

Nucor is currently considering several locations. Construction is expected to begin after satisfactory resolution of site location, regulatory approvals, tax matters and various contracts.

“This is a great opportunity to position Nucor as a market leader in special bar quality products. We have consistently said over the last six years that we would not build a greenfield steel mill unless we could take advantage of a unique market niche and/or a significantly better cost structure compared to the competition. This project definitely fits that strategy,” says Daniel R. DiMicco, Nucor chairman, president and CEO.

“I’m very excited about this project because it complements our Nebraska SBQ mill and gives us one of the most diverse SBQ product offerings from 7/32- inch to 9-inch rounds, all with a minimum of 5:1 reduction ratio. It really puts an emphasis on quality with bloom casting and vacuum degassing,” says D. Michael Parrish, executive vice president.

CXM Goes Shopping Down Under
The shutdown of an Australian copper facility has proven beneficial to Chicago Extruded Metals Co. The Cicero, Ill.-based company has purchased four pieces of equipment from Consolidated Extrusions, which shuttered operations in 2005. Installation of the equipment began in May and was completed in late July.

Chicago Extruded Metals and Consolidated Extrusions had a previous business relationship, when CXM President Patrick Balson took a mill tour in 2005. He was later informed of the facility’s closing and returned to sort through the company’s equipment to find the most desirable pieces to purchase.

The most significant purchase was a Schumag cut-to-length cold-finishing line. The line handles bar in diameters from 3 to 8 millimeters, or 1/8th- to 5/16th-inch, in lengths from 6 to 16 feet. It has the ability to chamfer at both ends.

“It gives us added capacity and quality on those diameters,” says Herb Vahldick, technical manager at Chicago Extruded Metals. The Schumag replaces two older, less efficient lines.

A 40-ton draw bench, which handles from 8- to 16-foot cross sections of 2 to 4 inches, was also added. It has a hydraulic push pointer for rectangles and shapes.

“We were looking for higher productivity and flexibility,” he says. “It fits a need between existing draw benches.”

The third piece of equipment is a Maidstone annealing furnace, which can anneal coil or straight pieces up to 16 feet in length. It can run full or soft anneal or run as a stress-relieving furnace. It improves the company’s annealing capacity by 150 percent.

Finally, a Krollmann Roll Pointer was added to produce superior points on the end of rectangles before they are put to the draw bench.

Overall, the additional equipment will not significantly increase capacity, but will provide improvements in efficiency, quality, flexibility and lead times, says Larry Schiffler, director of marketing.

CXM also returned with one other item from Consolidated Extrusions—Bob Looyscheider. A 30-year veteran of the metals business in Australia, Looyscheider relocated to become director of operations in Cicero.

Falconbridge Out of Deal
with Inco, Phelps Dodge
The three-way mining company merger of Phelps Dodge Corp., Inco Ltd. and Falconbridge Ltd. lost one of its partners last month when Inco received less than 50.01 percent of the common shares of Falconbridge.

Following the failure, Inco opted not to extend its offer for Toronto-based Falconbridge, which was also being pursued by Xstrata plc. Inco will receive a payment of $150 million from Falconbridge, plus an additional $300 million if Xstrata’s bid is successful.

Despite the dissolution, Phoenix, Ariz.-based Phelps Dodge and Inco, Toronto, remained committed to merging.

“We are disappointed that less than 50.01 percent of Falconbridge shareholders chose to tender their shares in support of Inco’s offer and participate in the new Phelps Dodge Inco,” says J. Steven Whisler, chairman and CEO of Phelps Dodge. “However, we are excited about our agreed combination with Inco, which will create both the world’s leading base metals company and a must-own stock for investors who want exposure to our leading positions in copper and nickel.

Another consequence of the Inco-Falconbridge failure is a halt of the sale of Falconbridge’s Nikkelverk refinery to LionOre Mining International Ltd. The sale was contingent on the successful acquisition of Falconbridge by Inco.

Kaiser Emerges from Chapter 11,
Expands Heat-Treat Plate Capacity
Kaiser Aluminum Corp., Foothill Ranch, Calif., emerged from Chapter 11 bankruptcy in early July.

“The new Kaiser Aluminum emerges with fabricated aluminum products as the core business and is a vastly different company from the one that filed for reorganization in early 2002,” says Jack Hockema, chairman, president and CEO. “Non-strategic commodity businesses were divested, and we have addressed all of the material debt, legacy and asbestos-related liabilities that confronted the company prior to bankruptcy.”

Kaiser Aluminum immediately began the distribution of shares of common stock. Shares commenced trading July 7 on NASDAQ under the ticker symbol KALU.

Kaiser also announced an additional expansion of capacity at its Trentwood, Wash., rolling mill to address the significant growth in demand for heat-treat plate used in aerospace, defense and general engineering applications. The $30 million follow-on investment, when combined with a previously announced $75 million expansion, is expected to effectively double Kaiser’s plate capacity.

The primary element of this further expansion is an additional horizontal heat-treat furnace. The furnace is expected to begin production in early 2008 and will complement the pair of previously announced furnace expansions.

NS Group Broadens
Tube-Making Capabilities
NS Group, Newport, Ky., announced capital projects totaling $98.0 million to expand its seamless tube-making and heat-treating capacity. The projects will also broaden the company’s product size range to include 5 1/2-inch outside diameter seamless tubular products.

NS Group’s total seamless tubular capacity will increase from the current level of approximately 266,000 tons to 319,000 tons per year. In addition, the project will include new quench and temper equipment at the facility in Baytown, Texas, which will increase the company’s total heat-treat capacity by 29 percent, from 280,000 to 360,000 tons per year.

“Our tube mill has been running at capacity since January 2004. These projects, while designed to increase our seamless tubular capacity by 20 percent, will also allow us to better serve our customers with an additional popular size that is frequently used in today’s more challenging drilling environments,” says President and CEO Rene J. Robichaud.

Outokumpu Offers Polished Stainless Hex’s
Outokumpu Stainless is offering stainless steel drawn hexagons with a polished surface directly from its production units. The bars are now available in a variety of sizes and grades.

Drawn and polished hex bar is used in fittings for a variety of industries including food processing, transportation, automotive, chemicals, appliances and computers, among others.

“There is a large market for polished stainless hexagons,” says Mike Eberth, Outokumpu national sales manager, Long Products.

At Outokumpu’s bar mill in Richburg, S.C., drawn hexagons from 7/16 inch to 1 inch can be polished in line. A capital investment at the mill will allow expanded production of hex down to 3/16 inch by the third quarter, the company says.

Ormet, USW OK Pact
The United Steelworkers union has reached tentative agreements with Ormet Corp. on contracts for workers in the Hannibal, Ohio, and Burnside, La., aluminum plants.

About 1,500 members of USW Locals 5724 and 5760 have been on strike for 19 months at the company’s Hannibal aluminum facilities, and nearly 200 members of USW Local 14465 at the Burnside refinery have been working under the terms of an agreement that expired in September 2005.

Once ratified, the contracts will expire at the end of 2009. Upon ratification, the strike in Ohio would end, but Ormet would still need a power deal for electricity similar to the other industrial users in the Ohio Valley before the reduction plant in Hannibal can be restarted.

Timken Adds Line to Heat-Treat Bar
The Timken Co., Canton, Ohio, will invest approximately $5 million in a new induction heat-treat line at its steel plant in Canton, Ohio, to increase its capacity to produce heat-treated steel bars and tubing.

The new line will harden (quench and temper) bars and tubes up to 7 inches in diameter. It also will be capable of other heat treatments, such as normalizing and stress relieving.

As a result of the investment, overall plant capacity will increase across size ranges up to 11 inches in diameter.

Installation of this new line is expected to begin in January 2007 with completion by the end of March 2007.

Additionally, the company sold Timken Precision Components-Europe to a group of investors made up of the unit’s current management team members. The business serves customers in Europe’s automotive sector and bearing industry and had 2005 sales of $28.8 million.

Aleris Acquires Corus Business
Aleris International Inc., Beachwood, Ohio, has completed the purchase of the downstream aluminum business of Corus Group plc. The acquisition includes the Corus aluminum rolling and extrusion businesses, but not its aluminum smelters.

Aleris will make several personnel changes as a result of its acquisition of Corus Aluminum. Sean M. Stack, currently senior vice president, treasurer and corporate development officer of Aleris International will become executive vice president of Aleris and president-Europe.

Corus Aluminum’s Canadian operations will report to John Wasz, Aleris executive vice president and president of Aleris Rolled Products, North America. Alfred Haszler, currently managing director of Corus Aluminum Rolled Products, will become senior vice president of Aleris and president of Aleris Rolled and Extruded Products-Europe.

Alcoa Buys Out Mitsui, YKK
Alcoa Inc., Pittsburgh, has reached agreement to acquire the minority interests in its Intalco and Eastalco aluminum smelters in Ferndale, Wash., and Frederick, Md. Affiliates of Mitsui & Co. Ltd. and YKK Corp. will sell their combined 39 percent stake in the two smelters, which will result in Alcoa having sole ownership of the two facilities.

The Intalco smelter, a 278,000 metric ton per year facility, is operating at approximately one-third its capacity. The 195,000 metric ton Eastalco smelter was temporarily idled in December 2005 because it could not secure a competitively priced long-term power arrangement.

Mittal Expands R&D Lab
Mittal Steel has broken ground for a major expansion of its research and development laboratories in East Chicago, Ind.

“This multi-million dollar expansion will significantly enhance our R&D operations not only in the United States but all over the world, and will further improve our ability to provide advanced engineering solutions to meet the evolving needs of our most demanding customers,” says Louis L. Schorsch, president and CEO of Mittal Steel USA.

The project will be undertaken in two phases. Phase I will add 22,000 square feet to the laboratories of Building A. Construction is being accelerated, and occupancy is expected within a year of groundbreaking. The $4.2 million first phase will accommodate equipment moved from Bethlehem, Pa., to consolidate the company’s research activities after the acquisition of International Steel Group.

The second phase will add 20,000 square feet to Building B.

Briefs
PTCAlliance Corp., Wexford, Pa., manufacturer of welded and cold-drawn mechanical steel tubing and tubular shapes, has emerged from Chapter 11 bankruptcy protection. A U.S. Bankruptcy Court judge ruled the company had met all of the items of its reorganization plan, filed May 10. PTCAlliance’s senior lenders have exchanged their pre-petition debt for all of the equity in the reorganized company. In addition, they have agreed to provide PTCAlliance with a $70 million exit financing credit facility to fund the company’s continuing operations.

Metalico Inc., Cranford, N.J., has agreed to purchase the operating assets of Niles Iron & Metal Co. Inc., a major scrap metal recycling concern in northeastern Ohio. Niles Iron & Metal sold roughly 226,496 tons of scrap in 2005, producing revenues of $65.6 million.

Commercial Metals Co., Irving, Texas, acquired the operating assets of Cherokee Supply. Established in 1998 with facilities in Tulsa, Okla., and Little Rock, Ark., Cherokee Supply specializes in highway and commercial construction-related products. The two stores will become part of CMC Construction Services and will operate under the name of CMC Cherokee. Tom and Charlie Brown, who owned Cherokee Supply with sister Kasey, will continue to manage the businesses in Tulsa and Little Rock.

Mittal Steel USA and Koppers have agreed to a three-year contract in which Koppers will sell 100 percent of its furnace coke production to Mittal. The current three-year contract with Mittal expires on Dec. 31. The initial term of the new contract is Jan. 1, 2007, through Dec. 31, 2009. Koppers, Pittsburgh, produces furnace coke at its facility in Monessen, Pa., which has an annual capacity of approximately 360,000 net tons.

Northwest Pipe Co., Portland, Ore., will supply approximately $23 million of welded steel pipe for the Eagle Mountain Connection Project in north central Texas. Northwest will supply 48,300 feet of 84-inch-diameter steel pipe, expected to be manufactured at its Saginaw, Texas, and Denver divisions with delivery scheduled to begin in the fourth quarter of 2006.

ATI Allegheny Ludlum, Pittsburgh, is increasing selling prices of cold-rolled and hot-rolled stainless sheet and strip products, including tubular quality, continuous mill plate and precision rolled strip products, by 6 percent. The price increases went into effect with shipments beginning Aug. 7. Also, the ATI Allegheny Ludlum Specialty Plate business unit is increasing selling prices by 5 percent for 300 series alloys and 10 percent for 400 series alloys of stainless plate-mill plate products.

Universal Stainless & Alloy Products Inc., Bridgeville, Pa., announced a 4 percent base price increase on all tool steel plate products. This price increase went into effect July 24.

People
Republic Engineered Products Inc., Fairlawn, Ohio, has appointed Jaime Vigil as president and chief executive officer. He replaces Joseph F. Lapinsky at the producer of special bar quality steel. Vigil previously served as CEO of Pytsa Industrial S.A. de C.V.

Carpenter Technology Corp., Wyomissing, Pa., has hired M. David Kornblatt as senior vice president-finance and chief financial officer. Kornblatt had been vice president and CFO at York International before its acquisition by Johnson Controls.

Paul Krause has joined Bystronic Inc. as the new regional sales manager for Ohio, western New York, western Pennsylvania, Indiana, eastern Michigan, Kentucky, West Virginia and Ontario. Krause has more than 15 years of experience in machine tools, steel service centers and the metal fabrication industry.

 
 

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