Aluminum alloy coils await shipment at Arconic’s Davenport, Iowa, rolling mill.

While industry oracles and observers rarely have clear sight, metals producers possess the vision to bet on the future

BY corinna petry

hroughout North America and worldwide, economic and demand trends in 2020 may prove unpredictable (as usual), but there remains sufficient confidence among the producers of steel and aluminum to engage in mergers and put money into long-term growth projects. Modern Metals has tapped into discussions by CEOs from mining to finished flat-rolled and long products.

Let’s first look at announced mergers.

1. Cleveland-Cliffs Inc. and AK Steel Holding Corp. have agreed to a transaction under which Cliffs will acquire all shares of AK Steel common stock. The deal will combine Cliffs, North America’s largest producer of iron ore pellets, with AK Steel, which produces flat-rolled carbon, stainless and electrical steel products, to create a vertically integrated producer of iron and steel products.

Lourenço Gonçalves, chairman, president and CEO of Cliffs, said the combined company will be well-positioned to serve both the blast furnace and electric arc furnace segments, with a balance sheet and self-sufficiency in pellets providing flexibility to pursue further growth opportunities. One such potentiality would be to employ the blast furnace in Ashland, Kentucky, to produce merchant pig iron.

2. U.S. Steel Corp., an integrated producer, is acquiring a majority interest in Big River SteelBig River Steel, a minimill, and intends to own all of it in the near future. During an earnings conference call, U.S. Steel President and CEO Dave Burritt said, “Our investment in Big River helps us to get to where we were going faster. [It] moves us down the cost curve [and] should help provide long-term financial stability in any market dynamic. This mill broadens our offerings in existing end markets and expands our presence in other attractive markets.”

U.S. Steel has “a lot to offer Big River in terms of commercial capability, qualifying and running trials faster, and valuable R&D and intellectual property,” he added.

3. Novelis Inc., a division of India’s Hindalco Industries Ltd., is working to acquire Aleris Corp., which has 13 aluminum rolling operations across North America, Asia and Europe, for $2.6 billion.

For Novelis, Aleris and their customers, the combination will establish a more diverse product portfolio, including aerospace, beverage can, automotive, building and construction, commercial transportation and specialty products.

The transaction will integrate complementary assets in Asia to include recycling, casting, rolling and finishing capabilities and allow Novelis to more efficiently serve the growing Asia market. It will broaden Novelis’ automotive business to meet growing demand and diversify its global footprint and customer base.

Steel, scrap investments

U.S. Steel completed the financing needed to build an electric arc furnace at its Tubular division. At Mon Valley Works, an Endless Casting and Rolling project combines “our lowest cost liquid steel at Mon Valley—achieved through fully integrated mining and coke making—with best-in-class minimill technology not available today in the United States,” Burritt says.

He also cited a series of projects at the Gary Works hot-strip mill meant to expand the line’s competitive advantages, particularly in heavy-gauge products. “This project is part of our Asset Revitalization Program and is about 30 percent through the expected $500 million investment.”

U.S. Steel forecast its 2020 capital spending at $950 million. “Big River is our No. 1 priority, and we will finish the tubular EAF in the second half of 2020.”

…the ability to produce single-piece hot-stamped door rings and large subassemblies.

Nucor Steel Gallatin coated its first coils in late September. With 500,000 tons of annual capacity, Gallatin’s 72-inch galvanizing line is the widest hot-rolled galvanizing facility in North America,
Topalian said.

Nucor commissioned a new in-line rebar rolling mill in Marion, Ohio, and expects to install quench and temper equipment to reduce alloy costs early in 2020. For other Nucor projects, see table (above).

“These projects target defined market opportunities where we are confident that we will compete and win highly profitable market share,” Topalian told shareholders.

Schnitzer Steel Industries Inc., Portland, Oregon, is rolling out an automated system that should eliminate its production of lower-value mixed nonferrous products such as Zorba (a mix of copper and aluminum that comes from shredded cars). The new equipment will be installed in at least five major recycling plants.

According to Schnitzer CFO Richard Peach, “The technology will allow us to convert Zorba to higher value, furnace-ready products such as twitch, copper, brass, zinc, stainless steel and other metals. By early 2021, we expect to be in a position to eliminate Zorba from our product set by converting to more valuable products.”

The company will also roll out advanced metal recovery equipment in four of its major export facilities. “These installations will replace and upgrade our downstream process during fiscal 2020 and 2021,” Peach said.

Aluminum projects

Alcoa Corp. expects to compete a restart of its Bécancour, Quebec, facility during the second quarter. The company also continues to work with Rio Tinto on developing a process that generates oxygen rather than carbon dioxide during smelting. “It will take time to prove it out. But it is another step to capture a niche market today [and] perhaps a much more global market tomorrow,” President and CEO Roy Harvey told shareholders in mid-October.

Arconic Inc. should complete its conversion of packaging products capacity to industrial rolled products by the fourth quarter of this year, Chairman and CEO John Plant said in early November. “The plan has been to transition from North American packaging and marginal business to industrial products, which is supported by the China common alloy trade case. We expect [the duties on Chinese imports] to last at least five years.”

At both Kaiser Aluminum Corp. and Century Aluminum Co., a StarTrek scenario comes to mind: “Scotty, we need more power!”

The Bayonne Bridge, a steel archway over 1 mile long, was raised to accommodate Panamax sized freight carriers.

As Kaiser Chairman and CEO Jack Hockema notes, “Our Trentwood facility has been operating near capacity for more than a decade, while growing demand for our aerospace and general engineering plate has absorbed six phases of capacity expansion.” Kaiser’s order book is “exceptionally strong and resulted in the need to relocate some general engineering plate capacity to meet the strong aerospace demand.”

This means serial modernizations of Trentwood may continue during 2020 and beyond. “The oversubscribed capacity has increased interest among investors regarding our plans for expansion,” Hockema says. “Our team developed a future state vision that can be implemented in phases to accommodate customer needs decades into the future.”

In 2019, the city of Goose Creek approved the creation of its own utility company meant to provide electricity to Century’s Mount Holly, South Carolina, operation. The plant has been running at half capacity for four years due to unfavorable power rates, says President and CEO Michael Bless. “Service from the city utility would be 100 percent at the wholesale price. That would enable the restart of the second potline and a return to full production capacity,” he says.

Century also continues to work on capacity restarts at Hawesville, Kentucky. The facility has five potlines; each produces 50,000 tons when at capacity. In 2015, Century curtailed three potlines. The remaining two continued to run well past their five-year service life. This month, Hawesville hopes to bring back two rebuilt potlines and reach 80 percent of capacity.

a range of products will require an increased focus on materials that are sustainably produced.

Sure, some headwinds might persist in the new year. Nucor Chairman and CEO John Ferriola cites “the 2020 election and current trade issues, such as the unresolved status of the USMCA agreement for North America,” which he says create uncertainty.

“While it’s difficult to predict steel markets far into the future, we have great confidence in Nucor’s business fundamentals and our long-term strategy.”

Alcoa’s Harvey comments, “The long-term outlook for aluminum demand remains strong. A range of products will require more aluminum but with an increased focus on materials that are sustainably and responsibly produced.” The market for low-carbon metals will “take time to develop, yet more and more customers are interested in [them].”