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11-2010 Producer Profile: ThyssenKrupp Steel USA
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Undeterred by the Downturn,
Thyssen Tackles the U.S. Market

By Dan Markham, Senior Editor

Conceived during the boom time, constructed during the recession, ThyssenKrupp’s new Alabama mill is in the process of bringing 4.3 million tons of additional carbon steel capacity to the market.

Much has changed in the global economy, and the steel market, since 2007 when ThyssenKrupp announced its intention to construct a 4.3-million-ton carbon steel mill in the United States. What hasn’t changed is the company’s plan. The German steelmaker has not deviated from the original blueprint or construction schedule for its new facility, which began operations earlier this summer.

ThyssenKrupp Steel USA President and CEO Chris Lackinger says the company had to optimize its spending during the construction process as a concession to the recession, but otherwise the company’s timeline for the $4.2 billion project in Calvert, Ala., has not changed. “It’s been straight forward, with only minor adjustments,” he says.

ThyssenKrupp USA produced its first coil in late July. So far, its hot-strip mill and cold-rolling mill are operational. Once complete, the plant will also include a pickling line coupled to the cold-rolling mill, a standalone continuous pickling line, a continuous annealing line and four hot-dipped galvanizing lines. The company estimates the facility will eventually turn out approximately 1 million tons of hot-rolled; 1.1 million tons of hot-rolled, pickled and oiled; 700,000 tons of cold-rolled annealed; and 1.5 million tons of hot-dipped galvanized. The company expects to have all its lines and core processes up and running by May 2011.

Built from the ground up, the new mill takes advantage of the most recent advancements in steel production technology, says Lackinger, pointing to the facility’s flat-sizing press and finishing mill with automatic gauge control for a greater range of band thicknesses. “We have a long history of steelmaking experience. In all the mills and all the lines, we have integrated all of our know-how,” he adds.

The mill’s design also includes the latest controls and technologies to reduce the plant’s environmental impact, including a $60 million investment in a closed-loop acid-regeneration facility. Moreover, “from an energy efficiency perspective, this mill will be among the most efficient in the world,” says Bob Holt, vice president of sales and marketing.

Altogether, the carbon steel mill will have more than seven million square feet under roof on 1,400 acres of the 3,600-acre site. But that’s only part of the equation. The carbon mill shares the site with ThyssenKrupp Stainless USA, a one-million-ton stainless mill built at the same time. The two mills give the German steel giant a new foothold in North America. Working in concert with ThyssenKrupp’s new integrated mill in Rio de Janeiro, the company can now serve the Western Hemisphere from locations in the region rather than primarily shipping material from Europe.

The Brazilian operation, ThyssenKrupp Siderurgica do Atlantico, is a 5.0-million-ton slab-making operation with two blast furnaces, two BOF converters, two continuous casters, a coke plant, power plant and captive port.

Both carbon and stainless slabs from CSA are shipped north through the Gulf of Mexico to Mobile, then barged upriver to Calvert for processing.

The two Calvert operations function independently, though some obvious synergies are at work. Most notable is the hot-strip mill, which will be shared by both operations to roll slabs into coils.

“The stainless slabs have to be hot-rolled in the same way,” says Lackinger. “From an operational standpoint, that makes a new stainless mill much more attractive.”

The joint mill approach offers logistical advantages as well. Both sides of the operation will benefit from the new infrastructure, plus the rail and barge access through the campus.

The Tombigbee River, which connects the facility to Mobile and the Gulf of Mexico, sits a short distance from the company’s slab yard. Three 40-ton magnetic cranes handle both carbon and stainless slabs from three river berths. The company has the ability to expand up to nine berths and to increase its barge fleet from the existing 30 to 90 in the future.

Both the carbon and stainless sides of the operation have taken advantage of programs available through the state of Alabama. The Alabama Industrial Development Training program, for example, helped the carbon company sort through 55,000 applicants to pick the best candidates for a workforce that will eventually number about 1,800.

“Many states provide this type of service, but Alabama’s is one of the best,” says Scott Posey, director of communications, who has been working on-site throughout the construction process.

ThyssenKrupp’s carbon operation will support a number of different markets through its U.S. facility, including automotive, pipe and tube, construction, appliance and HVAC, OEMs and service centers. Automotive and service center customers are expected to make up more than half of all sales.

ThyssenKrupp has no plans to partner with any distributors either on campus or nearby, preferring to make it clear that there are no favorites when it comes to the sale of its material. “There have been a lot of people who have done something jointly, but we have not encouraged that at this time,” says Holt. “We want to go to market and make steel available to all of our customers.”

How does a greenfield operation build a customer base in a new market? ThyssenKrupp officials say it required an early start. The company formed a sales team in 2008, a full two years before the first material was ready to roll off the line.

“We’ve been calling on customers since 2008, talking about the operation itself, what we have to offer and just educating them about ThyssenKrupp,” Holt says. “On top of that, we try to invite everybody down here who will ultimately be a customer.”

The company expects to do much of its business in the southeastern U.S., where manufacturing is growing, but will seek opportunities all over the country, and in Mexico and other export markets.

“Do I think the Southeast can absorb all four million tons?” Holt asks. “No. But Mexico is a target part of our market area. And we also have the ability to ship product north for specific applications. We can do it by river or by rail. We will focus on the Southeast, but we will not be constrained by those geographic boundaries,” he adds.

While the opening of the Calvert facility is a cause for celebration for the ThyssenKrupp organization, it’s been greeted with less enthusiasm by others in the steel industry. Analysts and competitors, alike, have questioned whether the additional capacity will lead to an oversupply situation that affects prices. The growing criticism of late has taken ThyssenKrupp officials by surprise. Holt says the mill was first being discussed in 2006 and the go-ahead was given a year later at a time when real demand for steel in the U.S. outpaced capacity. By the time the economy cratered, ThyssenKrupp was already committed to the project. “Our expectation was that additional capacity, with the market strength at the time, would be absorbed through fewer imports,” Holt says.

Despite the capacity concerns, ThyssenKrupp remains undeterred and will differentiate itself in the market through its focus on a higher quality mix of steel, Holt says. “I’m not too concerned with the criticism. I believe in this particular market there’s a strong demand for [high-quality steel]. We’re not going to jump into that four million tons right away. We’ll get more and more entrenched over time. I think we’ll be absorbed.”

  
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