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Announcement indicates growing market for steel in the South

Plans by the giant German business conglomerate ThyssenKrupp AG to build a $3.7-billion steel mill 25 miles north of Mobile isn’t causing heartburn for the new $880-million SeverCorr steel mill in Columbus. In fact, SeverCorr says that the decision by ThyssenKrupp AG shows that the Southern U.S. has a growing steel market that is under-supplied by regional producers.

“I think the ThyssenKrupp announcement probably reaffirms the decision we made a year and a half ago with an idea that started back in 2003 that the Southern U.S. steel market is a growing market,” said Mike Wagner, chief commercial officer for SeverCorr. “As the automobile industry grows and other manufacturing of appliances and office furniture grows here in the South, customers like having suppliers nearby. We certainly are leading that concept with our facility, and ThyssenKrupp is doing the same thing.”

When complete in the third quarter of this year, SeverCorr will have the capacity to produce 1.5 million tons of steel a year for use in the automotive, building, agricultural, pipe and tube and appliance industries. It will be approximately three years before ThyssenKrupp AG facility is online.

“So we will have a few years head start on them to develop our products and customers, and to supply the products into the customer base,” Wagner said.

The two plants will compete in selling carbon steel. But ThyssenKrupp AG also plans to produce stainless steel, which is not produced by SeverCorr.

Wagner said he hopes the ThyssenKrupp AG project will help provide employment to people on the Coast, particularly those who may have lost their jobs with Hurricane Katrina.

“This may be an opportunity for them to find employment over there,” Wagner said. “Hopefully that is the positive for the State of Mississippi. We have been able to hire some people from the Katrina area here in our facility.”

The recent announcement of a Toyota manufacturing plant being sited near Tupelo is the latest indication of a growing steel market in the South.

“We would hope to become a supplier there,” Wagner said. “That is very close to home, a real example of the growth of steel consumption. Then you are seeing Isuzu build a facility in Birmingham (Ala.). Some of the existing auto manufacturing facilities are increasing in capacity. Kia has announced a new facility in West Point, Ga. The Southern U.S. market for steel continues to grow and outpace the rest of the U.S. market because of all the manufacturing that is coming down here.”

In late April, SeverCorr announced plans to accelerate expansion of the plant with plans for the installation of a second production line that will more than double the mill’s capacity. That increases annual production to 3.4 million tons of steel. The company said although the intention to expand the plant has always been part of the overall strategy for the facility, that growth was originally scheduled to begin two to three years following the completion of the first phase of construction. However, strategic partners in the organization decided it was appropriate for the expansion to begin sooner.

“Our investors, partners and government officials are very supportive about the building of America’s next-generation steel mill,” said John Correnti, chief executive officer of SeverCorr. “Their belief in SeverCorr and belief in this project are driving the acceleration of the expansion and we are grateful to have their partnership.”

Manufacturing turnaround?

Jay Moon, president and CEO of the Mississippi Manufacturers Association, said the new steel mills are evidence of a major turnaround in U.S. manufacturing.

“Years ago, the U.S steel industry began to move offshore,” Moon said. “A lot of that located in the Rust Belt states in the U.S. moved offshore. Now we are beginning to see plants like SeverCorr and now ThyssenKrupp coming into the South. In Mississippi, we have not just SeverCorr, but Nucor Steel in Jackson, which is a wonderful steel-making company. So what we are seeing is this resurgence of domestic steel producers locating in the Deep South.”

In addition to direct benefits from jobs created, Moon also sees an advantage to manufacturers in the area who might be consumers of the steel.

“There is a real dual benefit there to come out of that plant,” Moon said. “I think the very fact you have a SeverCorr and now a ThyssenKrupp indicates an expanding need for domestic steel. SeverCorr and ThyssenKrupp won’t just sell in Mississippi and Alabama. There is expanding demand in the South for high-quality steel, and they are making these kinds of substantial investments in order to meet that demand.”

Moon said there has been a lot of concern in recent years because of increased steel consumption by China that affected its price and availability in the U.S. But the U.S. remains the biggest market for steel in the world, and the new steel mill will help meet that demand.

“This brings the supply of steel closer to the marketplace consuming the steel,” Moon said. “I think this will bode well for the U.S. market that uses steel for a wide variety of uses. It should be cheaper because you have less transportation costs. Companies will tend to look at Mississippi and Southwest Alabama as an opportunity to locate there in order to have close proximity to the steel manufacturing. As you know, steel is a very heavy object. The less you have to move it around to turn it into a commercially viable product, the less cost you have. Companies will locate close to these facilities to be able to access raw material to turn it into product. I think it offers real downstream possibilities for development of new companies.”

Auto center of the Deep South?

Moon said Mississippi and Alabama are becoming the automotive center of the Deep South.

“I think Tennessee has some good representation, as well,” Moon said. “But we are really starting to see Mississippi and Alabama moving very aggressively in that area. That whole industry is moving South, and we are poised to take advantage of it. When we have companies like SeverCorr and ThyssenKrupp, that adds to that capacity to provide the products these companies rely upon.”

Moon said it is hard to get a concept of how large the ThyssenKrupp facility will be.

“It is an incredible facility,” he said. “It is very, very big. You don’t very often see plants that are capitalized to that extent. It is a huge plant with a very large number of employees. It is huge in every respect. I think it is significant for a lot of reasons.”

Contact MBJ contributing writer Becky Gillette at bgillette@bellsouth.net.

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