On a Roll...At Last
By Tim Triplett, Editor-in-Chief
The German steel giant’s investment in America’s South is finally starting to pay dividends, as the company takes its first orders for cold-rolled stainless.
ThyssenKrupp’s new stainless mill in Calvert, Ala., has begun delivering cold-rolled product to customers, a major milestone for the ambitious construction project begun in 2007. Delayed but not derailed by the second-worst recession in American history, the launch of ThyssenKrupp Stainless USA promises to alter the competitive landscape of stainless steel sales in the NAFTA region.
The mill site remains a whirlwind of dusty activity as work continues on both the stainless side and the carbon side of the project. ThyssenKrupp Stainless USA will share the new mill with ThyssenKrupp Steel USA, which will soon begin delivering carbon steel products to the North American market (look for the related story in next month’s issue of Metal Center News). The stainless side of the mill represents a $1.4 billion investment for the company.
The project’s roots date back to November 2005 when ThyssenKrupp made a $4.1 billion bid for Canada’s Dofasco. It was eventually outbid by Arcelor and had to rethink its plans for serving North America.
Deciding on a new greenfield mill, the company went through an exhaustive search process, considering 67 different sites before settling on the Calvert location, north of Mobile. Situated on 3,700 acres along the Tombigbee River, the carbon and stainless mill will have nearly seven million square feet of building space under roof. State and local officials welcomed the project with open arms, and substantial incentives, to bring the 2,700 new jobs to Southern Alabama.
One incentive was the Alabama State Port Authority’s decision to build the new, $100 million Pinto Island Terminal in the Port of Mobile. The port is equipped with electromagnetic cranes to offload steel slabs onto barges for the eight-hour trip upriver to ThyssenKrupp’s new mill. “The new terminal really swung the project Alabama’s way,” says Katie Benchina, marketing manager for ThyssenKrupp Stainless USA.
Co-locating the mill brings efficiencies and cost-savings to both the carbon and stainless divisions. Notably, they eventually will share a hot-strip mill to roll slabs into coils. They also will split such costs as utilities and wastewater treatment.
Ultimately, in 2012 at the earliest, ThyssenKrupp Stainless plans to add a melt shop and produce its own slabs. In the meantime, it will source hot band black from sister mills in Europe and cold-roll up to 100,000 metric tons per year.
The Brazilian mill, also brand new, produced its first slabs just this summer. Three million of its five million metric tons of capacity are earmarked for Calvert, while the other two million will go to ThyssenKrupp’s plants in Germany to be processed for customers in Europe.
By this time next year, ThyssenKrupp Stainless USA officials hope to launch their new 74-inch cold-rolling mill, which they consider a game-changer. “We will be the only North American producer of 72-wide cold-rolled and continuous mill plate, and we see many benefits,” says Ulrich Albrecht-Frueh, president and CEO of ThyssenKrupp Stainless USA.
Currently, demand for the wide coils is served entirely by imports, he notes, “so we can offer a shorter lead time and gain momentum in converting manufacturers to 72-inch-wide material.” Use of the wider coils offers major process improvement for customers such as tank fabricators, who can make tanks with fewer welds, or tubers who can make wider-diameter pipe and tube.
Indeed, Albrecht-Frueh predicts that availability of 72-inch-wide stainless in the U.S. will create its own demand because of the economies inherent in using wider sheets. “Just knowing we are coming with 72, service centers are already buying laser cutting machines with 72-inch-wide capabilities because their efficiency is much greater,” he says.
Prior to construction of its new mills in Brazil and Alabama, ThyssenKrupp served the North American market primarily from its Mexinox division. As a rerolling mill, Mexinox is dependent on sourcing black band from ThyssenKrupp Nirosta in Germany and ThyssenKrupp AST in Italy. “That supply chain is long, two to three months for production and another month on the water from Europe to Mexico before it can ship to the U.S.,” Benchina says. Once the new melt shop is up and running in Calvert, it will be able to supply the U.S. market with various finished products, as well as black band for Mexinox. “That will shorten the lead time and enable Mexinox to be nimbler in meeting its customer requirements,” she adds.
The company’s new production capabilities will shift its product mix, explain Albrecht-Frueh and Benchina. Mexinox will continue to focus primarily on its core product offering of type 430 ferritic stainless and bright annealed product, while ThyssenKrupp Stainless USA’s primary focus will be on the higher-end, more corrosion-resistant, 300 series austenitic grades. Calvert will also produce coil mill plate, now only available from Europe.
“Looking at the overall NAFTA picture, our product range will change. We will add some products we were not able to deliver due to the past constraints, but we will also build on the value recognition that Mexinox has in the market” says Albrecht-Frueh, noting that the Mexican mill’s market share actually increased during the downturn. “In a crisis, you find out what a brand is really worth,” he adds.
ThyssenKrupp’s competition in the stainless market includes North American Stainless, AK Steel, Allegheny Ludlum and imports, which hold about a 30 percent share of the North American market. ThyssenKrupp’s new mill gives it new leverage against the growing import penetration, Benchina says. “Service centers are challenged to keep their inventories lean. They don’t want to bear any risk, especially with the fluctuating price of nickel, so they are more likely to choose a domestic source rather than waiting three or four months to get material from overseas. Our premise is that if customers have available choices in the domestic market, they will choose those first because it is less risky.”
ThyssenKrupp Stainless hopes to make inroads into automotive plants in the South, which would be a new market for the company. It also seeks deeper penetration of the tubing market, which tends to use heavier gauge austenitic grades, which were not available from Mexinox. “This is a very interesting market, especially in the South, where the energy and chemical industries have invested heavily in states from Texas to Florida. Here we are in just the right position to deliver to all these tube manufacturers in a very fast and efficient way,” Albrecht-Frueh says.
But the company’s biggest customer segment is service centers. “Our service centers are very important to us,” says Benchina. While the mill has slitting and cut-to-length capabilities, “we are not designed as a service center. We are happy to get a coil ready and out the door and let the service center take care of the rest,” Albrecht-Frueh says.
The company’s sales effort should gain momentum a year from now when its 74-wide cold-rolling mill and a new hot-annealing and pickling line come on stream, Benchina explains. “At that point, we will be able to go heavier on the cold-rolled side up to 0.187 inch and will be adding more grades. We will be doing the lower-nickel austenitic grades and also introducing type 409 into our product portfolio. The final step is the melt shop and the third cold-rolling mill for 54-inch-wide product. At that point, we will be fully integrated, supplying Mexinox with its hot band, as well as supplying ourselves.”
When completed, the integrated mill will include a stainless melt shop with one million metric tons of capacity; cold-rolling mills for 54-, 64- and 74-inch coils; a hot-annealing and pickling line; a cold annealing and pickling line; skin pass mill; and finishing and polishing equipment.
In response to critics who question whether the market needs additional stainless capacity, Albrecht-Frueh maintains that his company has been responsible in its approach. “First, when we saw this drop in 2008-09, we delayed the whole startup by one year. Second, we delayed the melt shop by at least two years. Third, we are going to ramp up based on forecasts of how the market is going to come back.”
“Also keep in mind that as our capacity grows in the U.S., our imports from Europe will decrease,” adds Benchina. “Our model is to service from a regional perspective.”
Albrecht-Frueh credits the can-do corporate culture and two-way commitment with employees for much of the company’s success so far. Rather than laying off trained mill workers when the economy nosedived, causing a year-long delay in the project, the company shifted them to construction-related tasks. “Building this mill is a huge project. If many of us had known what was coming, we might have stayed home,” he added.