Steel suppliers plan big projects

Amid resilient auto sales, anxiety over future trade friction and a stream of improved profits, major steel suppliers have unveiled $9.7 billion in planned plant investments to boost their U.S. capacity.

The bullish spending plans, announced over the past year, have been welcomed by traditional steel states and potential new sites that hope to attract auto industry investment.

Among the plans, Steel Dynamics Inc. said in November it will invest as much as $1.8 billion to build a mill at an undecided U.S. site. ArcelorMittal has informed steelworkers that it plans to spend $3.1 billion on U.S. factories. And U.S. Steel Corp. is eyeing plant investments of $2.5 billion.

The last steel mill brought online in the U.S. was in 2015.

As with other auto suppliers, steel makers are showing that they are not limited to traditional geography as they consider sites for new production capacity.

Steel Dynamics, of Fort Wayne, Ind., said it will build its proposed plant in the southwestern United States. Its strategy is to supply the flat-rolled steel market by being as close as possible to its U.S. customers as well as the growing Mexico market. The company expects to begin production in 2021 and hire about 600 people.

"We are excited to announce this investment, which is a culmination of our intentional focus to cost effectively further serve the customers in this growing flat roll steel consuming region, while increasing our steelmaking capacity and value-added product capability," Steel Dynamics CEO Mark Millett said in a statement.

Numerous factors are pushing the U.S. to become more self-reliant with steel production. One notable policy change is the 25 percent tariff on steel that President Donald Trump imposed last year — a politically charged move that is still being hotly challenged.

The auto market itself continues to attract plant investment. New U.S. light-vehicle sales have leveled off at historically high rates, with rising consumer demand for light trucks and an outlook for low energy prices.

Michael Held, a director in the automotive and industrial practice at the global consulting firm AlixPartners, sees an opportunity for steel content to increase, on average, 10 to 15 percent per vehicle over the next five years.

Steel Dynamics projects it will produce 3 million tons of flat-rolled steel each year at its future southwestern plant. The projection is small compared with the total 2018 U.S. raw steel capacity of 122.1 million tons a year. While American steel capacity has risen from its 2017 level of 121.6 million tons, it remains lower than the 2014 capacity level of 125.4 million tons, according to the American Iron and Steel Institute.

Held believes a backlog of steel demand coupled with the need for foreign mills to serve their home markets are straining the U.S. capacity — irrespective of the tariffs.

There are 10 integrated steel mills and five specialty mills in the U.S., but Held says he expects more expansion as steel makers work to keep up with demand.

"It's not that everyone has to be as big as this Steel Dynamics initiative here," Held told Automotive News. But "it's more likely that we'll expand and not contract steel capacity here."

Only a few months after Steel Dynamics' announcement, Nucor Corp. said in January it planned to invest $1.35 billion to build a U.S. steel mill at an unspecified location in the Midwest.

Nucor, of Charlotte, N.C., said the mill will produce 1.2 million tons of steel plate products annually by 2022. A Nucor press release noted the Midwest is the largest plate-consuming region in the U.S.

Nucor CEO John Ferriola acknowledged in the announcement that Washington policy changes — not just trade policies — had encouraged the company's investment. He welcomed those changes.

"This administration is taking the decisive and meaningful actions that American manufacturers need to compete on a level playing field," Ferriola said in the statement at the time. "Tax reform, continued improvements to our regulatory approach and strong trade enforcement are giving businesses like ours the confidence to make long-term capital investments here in the U.S. that create jobs and ensure our success for decades to come."

Automakers are not heavily concentrated in the western U.S., beyond assembly plants in San Antonio and Arlington, Texas, and Tesla's factory in Fremont, Calif.

Still, Steel Dynamics says Mexico's market for flat-rolled steel is underserved and last month said it would acquire the majority of the equity interest of flat-rolled steel maker United Steel Supply, of Austin, Texas, for $134 million. Steel Dynamics did not respond to multiple requests from Automotive News for comment.

Arizona last year won major investment commitments from Lucid Motors, an electric-car manufacturer, and Nikola Motor Co., a hydrogen-electric semi truck manufacturer. Now the state is pursuing steel plant investment.

A spokeswoman for the Arizona Commerce Authority said the state includes Mexico in the region it pitches to potential investors, calling the investment zone the Arizona-Sonora region. That region includes a plant in Hermosillo, Mexico, that produces the Ford Fusion and Lincoln MKZ.

"Companies chose Arizona knowing the state has access to the products — including steel — that meet their needs," the spokeswoman said in a statement to Automotive News. "With those and other companies soon to be operating in the state, a steel mill — which we don't currently have in Arizona — would be a welcome addition to the automotive supply chain."