December 2006
Metal Industry News

Russian Producer Evraz to Acquire Oregon Steel 
Russia’s Evraz Group S.A. has agreed to acquire Oregon Steel Mills for approximately $2.3 billion.

Under the terms of the agreement, a newly formed Evraz subsidiary will make a cash tender offer for all shares of Oregon Steel common stock and then merge with Oregon Steel. Oregon’s board of directors has unanimously recommended that shareholders accept the offer.

“We believe that this offer represents an attractive opportunity for Oregon Steel’s shareholders to realize the value of their investment in the company,” says Jim Declusin, Oregon Steel Mills president and chief executive officer. “We are pleased to join with Evraz and become part of a leading global steelmaker with complementary strengths and markets.”

Upon completion of the transaction, subject to regulatory approval, Oregon Steel will become a subsidiary of Evraz.

“In the current steel environment, it is important to gain scale and expand market presence through consolidation. This combination will provide us with the critical elements, including a secure source of slabs and additional financial resources, needed to compete in new and growing markets. We believe that this transaction will create new opportunities to share technology, research and development and enhance our combined leading positions in products such as rail,” Declusin says. 

“We are pleased to announce another transaction in line with our long-term strategy to develop higher value downstream markets complementary to Evraz slab production. This transaction will provide compelling benefits to both Evraz and Oregon Steel,” adds Alexander Frolov, chairman of Evraz. “The acquisition of Oregon Steel represents a solid platform for Evraz as a footprint in North America, one of the most important markets globally.”

Evraz believes that the combination will allow both companies to realize operating synergies based on steady supplies of high quality slabs from Evraz steel mills. Furthermore, Evraz anticipates Oregon Steel’s highly efficient pipe operations will give it access to the expanding North American oil and gas markets. The combined company will produce over 16.8 million tons of crude steel and will have over 17.4 million tons of steel shipments in 2006.

Oregon Steel will maintain its head office in Portland, Ore., and does not expect any material changes to its personnel following the completion of the transaction.

Phelps Dodge Merger with Freeport McMoRan
to Create Copper Giant
Phelps Dodge Corp. is making another effort to become part of the world’s largest publicly traded copper company. Phoenix, Ariz.-based Phelps Dodge has agreed to a merger with Freeport-McMoRan Copper & Gold Inc.

In June, Phelps Dodge, Inco and Falconbridge agreed to a three-way merger, though that deal fell through when it was rejected by Falconbridge shareholders. Inco and Phelps Dodge terminated their agreement in September.

Under terms of the latest agreement, FCX will acquire Phelps Dodge for approximately $25.9 billion in cash and stock. The combined company will be a new industry leader with large, geographically diverse assets and significant reserves of copper, gold and molybdenum, officials say.

“This transaction provides Phelps Dodge shareholders a significant premium for their shares and gives them the opportunity to participate in the upside potential of a geographically diversified industry leader possessing the scale and asset quality to successfully compete on the global stage,” says J. Steven Whisler, chairman and chief executive officer of Phelps Dodge.

The combined company will be the largest North American-based mining company, Whisler adds. FCX currently operates the Grasberg mine, located in Papua, Indonesia, which is the world’s largest copper and gold mine in terms of reserves. Phelps Dodge has mines in operation or under development in North and South America, and Africa, including the Tenke Fungurume development project in the Democratic Republic of the Congo. 

“This transaction combines two leading mining companies to form a strong industry leader at a time when we see significant long-term opportunities in our industry,” says FCX Chairman James R. Moffett. “FCX has been built through our exploration and development capabilities, and we will focus on aggressively pursuing opportunities in the extensive Phelps Dodge asset portfolio.”

U.S. Steel to Slow Production in 4Q
United States Steel Corp. enjoyed a third-quarter that improved on the previous three months and the same period of 2005, though that earnings edge is unlikely to last through the fourth quarter. A slowdown in the economy coupled with inventory builds at the service center level has the Pittsburgh-based company slowing production in the fourth quarter.

Following a company policy to produce steel at a rate the market can handle, U.S. Steel has already begun curtailing production, reports John Surma, chairman and chief executive officer. U.S. Steel will likely have three or four blast furnaces offline for all or part of the remainder of 2007, including two smaller furnaces at its Gary Works operation.

“Ultimately, the market will dictate how many blast furnaces we operate,” Surma says.

The company had already planned for some outages during the period, backloading its schedule to take advantage of the typical fourth-quarter slowdown. But the conditions in the market have left it in no great rush to return some of the idled furnaces to production.

“My sense is for the fourth quarter we will be at a somewhat lower percentage of capability than we might originally have thought,” Surma says.

U.S. Steel reported third-quarter 2006 net income of $417 million compared to second-quarter 2006 net income of $404 million and third-quarter 2005 net income of $93 million. Sales of $4.1 billion were flat compared to the second quarter, but jumped 28.8 percent from the third quarter of 2005.

“Earnings for each of our business segments (flat-rolled, European and tubular) improved from the second quarter, reflecting a very strong operating performance and favorable steel market conditions,” Surma says.

Much of the anticipated fourth-quarter softness is in U.S. Steel’s flat-rolled segment.

“It may end up with operating capability and shipments looking more like last year’s third quarter than this year’s. We’re guiding to somewhat softer prices,” Surma says. “The order book is not robust, and that’s the reason we’re making less steel. Those we ship to are interested in controlling their inventories, and we don’t see any reason to disagree with that.”

Tubular shipments are also expected to see a decline in the fourth quarter.

Surma is optimistic that any softening will be short-lived. He indicated that imports may be on the wane and the industry may be well into the inventory consuming process.

Also in the quarter, U.S. Steel repurchased 4.7 million shares of the company’s common stock, taking the total repurchases to 12.4 million shares for $650 million since the program was authorized in July 2005. In contrast, the company has not been active in acquisitions of other producers during the year. Surma says the company is always looking for opportunities, but those that can be merged effectively.

“We think there could still be opportunities for us to expand our footprint through acquisition, not for the sake of being higher on the lead table. We don’t get any satisfaction out of that and neither do our shareholders. If we could find something because of its particular synergistic aspects that would add value at the bottom line, that’s probably a decent thing to do,” he says.

Nucor Subsidiary Verco
Completes Acquisition
Verco Decking Inc., a wholly owned subsidiary of Nucor Corp., Charlotte, N.C., has completed the purchase of Verco Manufacturing Co. for a cash purchase price of approximately $180 million.

Verco produces steel floor and roof decking at three locations in the western United States: Phoenix, Ariz., and Fontana and Antioch, Calif. Nucor’s Vulcraft Group is the largest U.S. manufacturer of steel deck. With the addition of the Verco facilities, Nucor’s total annual deck capacity will exceed 500,000 tons.

“Verco is an excellent addition and complement to our existing Vulcraft group. We are looking forward to expanding our reach to the western U.S. deck market,” says Daniel R. DiMicco, Nucor chairman, president and CEO.

Arcelor Mittal, Noble to
Combine Laser Businesses
Arcelor Mittal and Noble International Ltd., have agreed to combine their laser-welded tailored blanks businesses. Arcelor Mittal is to become the largest stockholder of Noble following the closing of the transaction, expected in spring of 2007.

Noble claims to be North America’s largest laser welder with laser-welded flat blanks and laser-welded tubular products solutions for the automotive industry. The company operates 12 production facilities in the United States, Canada, Mexico and Australia.

SDI Subsidiary Pulls Out of Iron Nugget Plant
Ferrous Resources LLC, a wholly owned subsidiary of Steel Dynamics Inc., Fort Wayne, Ind., has canceled its participation in the development and construction of a commercial iron nugget plant at Hoyt Lakes, Minn.

This four-year-old Mesabi Nugget joint venture project with four other participants—IronUnits LLC, Kobe Iron Nugget LLC, Ferrometrics Inc. and Iron Range Resources, an agency of the State of Minnesota—built and operated a pilot plant at Silver Bay, Minn.

The plant was built to validate Kobe’s ITmk3 iron nugget technology. The joint venture has been involved in negotiations over the past several years to build a large-scale demonstration plant as the next phase in the commercialization of the technology.

“While we are pleased that our efforts and those of the other participants in this project to date have established the merits of the iron nugget technology and have confirmed that a large scale demonstration plant could be constructed to produce commercial quality iron nuggets in sufficient quantity, we and our joint venture partners have simply not been able to conclude definitive agreements to fully address all of the many operating and financial issues that require resolution prior to our further commitment of time and resources to the project,” says Steel Dynamics Vice President Mark Millett. 

Outokumpu Changing
Tube Lines in Sweden
Outokumpu plans to transfer some production lines and expand its OSTP stainless steel tubular business unit in Sweden to concentrate production of similar type tubes into one location. OSTP has several production units in Sweden, representing some 40 percent of the company’s total tube production capacity. 

OSTP’s Nyby unit will invest 8 million euros in a second LAP line, an integrated production line for welded stainless process tubes. Production is scheduled to start in the third quarter of 2008. The two-heat exchange tube production lines in the Fagersta unit will be transferred to Nyby during 2007.

Additionally, the large-diameter tube production line will be transferred from Nyby to Storfors during 2008.

The changes will increase the annual production capacity of the Nyby unit by some 50 percent to 30,000 tons, and improve logistics and efficiency in OSTP Sweden, company officials say.

Alcoa Expands Capacity
at Morristown Facility
Alcoa will invest more than $6 million to expand core manufacturing capabilities at its Howmet Product and Services’ Morristown, Tenn., operation. Construction for the 16,000-square-foot addition to the plant began last month.

According to Matt Kilgore, manufacturing manager at the Alcoa Howmet facility, the addition will be completed mid-2007 and become fully operational by the end of the year. “We are installing a high-temperature tunnel kiln that will exceed the capacity of our existing kiln by approximately 10 percent. The expansion will also include a full complement of new prebake ovens, computerized numerical control machines and Tempcraft presses.

“Aerospace customers are placing unprecedented demands on our capacity; relieving that constraint on our current kiln is the most effective way to support customers’ growth opportunities,” says Kilgore. “Expanding the facility’s capability to produce alumina core bodies will enable the organization to respond in a timely manner to current and estimated future demand.”

Weirton Likely on Block as Stichting Stays Put
Mittal Steel’s Weirton plant is attracting the attention of several interested suitors in response to the decision by Strategic Steel Stichting not to dissolve the foundation and to hold onto Canadian steelmaker Dofasco.

Strategic Steel Stichting was created as a defensive maneuver against Mittal Steel’s ultimately successful efforts to purchase Arcelor. Its decision to retain the shares will require Mittal to sell one of its assets to appease U.S. antitrust regulators.

Mittal initially identified its mills in Weirton, W.Va., and Sparrows Point, Md., as potential assets to divest, though the company later indicated the preference to sell Weirton.

Among the reported suitors for Weirton include Chicago-based Esmark, which won the race for Wheeling-Pittsburgh Steel Corp. Other industry press reports indicate that Hampshire Steel Group, New York, and Russian steel company Severstal are also interested in acquiring Weirton.

Gerdau Enters Venture with Pacific Coast Steel
Gerdau Ameristeel Corp., Tampa, Fla., has entered into a joint venture with Pacific Coast Steel Inc. and Bay Area Reinforcing to acquire a controlling interest in the joint venture Pacific Coast Steel. PCS and BAR, which are commonly owned, comprise one of the country’s largest reinforcing steel contractors, specializing in the fabrication and installation of reinforcing steel products across a variety of construction projects throughout California and Nevada. 

PCS and BAR operate four rebar fabrication facilities in California, including San Diego, San Bernardino, Fairfield, and Napa, with a combined capacity in excess of 200,000 tons per year.

Gerdau Ameristeel expects to purchase the interest in Pacific Coast Steel for approximately $104 million, with the deal closing in the fourth quarter.

Swiss Steel Becoming
Schmolz+Bickenbach
Swiss Steel International NA, Carol Stream, Ill., will become Schmolz+Bickenbach USA, Inc. and Schmolz+Bickenbach Canada, Inc., effective Jan. 1, as part of a global corporate branding by the parent company.

“There is no change of ownership. This is simply a desire to unify the global corporate identity of the companies involved in production, processing and distribution as a result of recent acquisitions by the Schmolz+Bickenbach Group in other parts of the world,” says Tony Elfstrom, president and CEO of Schmolz+Bickenbach USA and Canada.

“We will continue to focus on supplying the highest quality tooling materials, heat treatment and value-added services to our valued North American customers.” 

Timken to Open Aerospace
Products Center in China
The Timken Co., Canton, Ohio, plans to open an aerospace precision products center in Chengdu, China, to serve the Chinese and global aerospace markets. The facility will ultimately include sales, engineering support and customer service capabilities for a range of aerospace bearings and precision products.

Timken selected Chengdu as the location for its sixth plant in China in part because it is a major Chinese aerospace center with a good technical infrastructure and educated workforce.

“This investment is directly tied to Timken’s strategic initiatives to expand our presence in industrial markets in Asia, as well as to build an increasingly diverse portfolio of aerospace precision components and services worldwide,” says Michael C. Arnold, president of Timken’s Industrial Group. “The addition of new capabilities and technology to this booming market will help us to serve the aerospace industry in China and around the world.”

Briefs
Members of United Steelworkers Local 169 ratified a four-year contract with AK Steel for hourly employees at the company’s Mansfield, Ohio, plant. The new agreement, which covers almost 300 employees, takes effect Jan. 1, 2007, and runs through March 31, 2011. It replaces an agreement that would have expired Feb. 10, 2007. Also, AK Steel announced a $135 per ton surcharge on shipments of electrical steel products.

Trumpf has broken ground on a new laser-building facility on the campus of its Farmington, Conn., headquarters. The facility will add 83,000 square feet to the existing campus, with a production hall designed for manufacturing different types of CO2 and solid-state laser resonators, plus a laser research lab and laser development departments.

Northwest Pipe Co., Portland, Ore., was chosen to supply approximately 43,000 feet of 84-inch diameter steel pipe, valued at approximately $15 million to Bar Constructors, Lancaster, Texas. The pipe, for the East Fork Raw Water Supply Pipeline, is expected to be manufactured in the company’s Saginaw, Texas, and Parkersburg, W.Va., divisions with delivery scheduled to begin in the second quarter of 2007.

Alcan, Montreal, and Madagascar Sarl, a Malagasy company holding exploration rights in Madagascar’s southeastern Manantenina District, will study the development of a bauxite mine and alumina refinery. The refinery would have an initial capacity of 1.0 to 1.5 million tons of alumina per year.

Cleveland-Cliffs Inc has entered into two multi-year iron ore pellet supply agreements with North American steel producers AK Steel and Republic Engineered Products Inc. Cleveland-Cliffs will supply between 0.9 million and 1.4 million tons of pellets annually to AK Steel through 2013. Cleveland-Cliffs’ five-year agreement with Republic calls for between 0.4 and 0.8 million tons of pellets annually.

Hydro Aluminum is upgrading the production processes at its Ellenville, N.Y., facility with the purchase of an enhanced air-cooling system from Granco Clark, Belding, Mich. The upgrade includes a high-velocity cooling system under the runout conveyor and an array of cooling fans under the cooling table.

Moscow-based Rusal has announced the opening of a new foil mill, Rusal Armenal in Armenia, after extensive modernization. The company’s total investment in the project exceeds $70 million. The modernization program included the installation of supercasters, continuous casting and rolling units. Rusal Armenal will produce 25,000 tons of foil per year, of which 18,000 tons will be a thin 6-9 micron foil.

Morgan Construction Co., Worcester, Mass., has been awarded a contract to build two mills for Jindal Steel and Power Ltd. in Orissa, India. The 600,000-ton capacity rod mill is expected to be completed by December 2008. The one-million-ton capacity bar mill is expected to be commissioned in March 2009.

ThyssenKrupp Steel AG has signed a long-term contract with Companhia Vale do Rio Doce for iron ore and pellets to ThyssenKrupp CSA Companhia Siderurgica. CSA, a joint venture between ThyssenKrupp and CVRD, is constructing a steel slab plant in the state of Rio de Janeiro, Brazil, with a nominal capacity of five million tons per year. The start-up of its operation is expected in the first half of 2009.

Outokumpu has announced plans to open a sales office, Outokumpu India Private Ltd., in New Delhi, India. The office, to be headed by Yatinder Pal Singh Suri, offers the full range of Outokumpu products and services including technical customer service to the Indian market.

The L.S. Starrett Co., Athol, Mass., has opened a new saw service center in Bensonville, Ill. The center will provide welded band saw blades and support in the Midwest region.

All of the operations at Republic Engineered Products have achieved ISO/TS 16949:2002 quality specification.

Corrections
The phone number given for Majestic Steel in the Trade Show in Print in MCN’s October issue was incorrect. The toll-free number is 800-321-5590.

The advertisers index page in MCN’s Fall 2006 Cutting Edge supplement included incorrect information for DoALL Sawing Products. The company, which does not offer a full range of industrial supplies, can be contacted at the following:

DoALL Sawing Products
2375 Touhy Ave.
Elk Grove Village, IL 60007
(888) DOALLSAW
info@doallsawing.com
www.doallsawing.com

People
The board of directors of Arcelor Mittal has unanimously appointed Lakshmi N. Mittal as the new chief executive officer. Mittal will continue as president of the board. Mittal replaces Roland Junck, who stepped down as chief executive but will remain a member of the company’s group management board.

Lawrence Cannon was chosen to replace the retiring Christopher Pickwood as executive vice president and chief financial officer of Novamerican Steel, Montreal. Cannon had been CFO of BCA Publications Ltd. Pickwood was with the company for 24 years.

Joseph R. Lucot has been named vice president-corporate controller by Alcoa. Lucot, who had served as chief financial officer for Alcoa’s Global Rolled Products, succeeds Charles D. McLane, who was appointed CFO. Newly elected vice presidents of Alcoa are: Kevin J. Anton, president, Alcoa Materials Management; Olivier Jarrault, who leads the Fastening Systems business; Raymond B. Mitchell, who serves as president of Alcoa Investment Cast and Forged Products; and Wayne G. Osborn, managing director of Alcoa World Alumina Australia.

Pedro Caceres has been named global vice president of operations for Lenox, East Longmeadow, Mass. Caceres will be responsible for all manufacturing processes and support operations for the tool and band saw areas in support of Lenox’s global expansion.

Jet Edge Inc., St. Paul, Minn., a manufacturer of waterjet systems for precision cutting, has appointed David Arthur as its new regional sales manager for the Southeastern U.S. Arthur is responsible for sales of Jet Edge systems in Tennessee, North Carolina, Alabama, Georgia, South Carolina and Florida.

Pittsburgh Logistics Systems Inc. has appointed Louis Williams as vice president, rail strategy. Williams had been president and founder of MarginLinx Consulting, where we he worked on rail and multi-modal solutions. 

Del Tanner, chairman and CEO of Anderson Group Inc., has added the presidency of ESAB North America to his responsibilities. ESAB is a wholly owned subsidiary of AGI.

Walker Magnetics Group Inc., Worcester, Mass., has announced the appointment of Richard Longo to the position of president and chief operating officer for worldwide company operations.  

 
 

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