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Giant Roars to Full Blast

After hibernating the recession, Alabama’s sleeping giant — a $4 billion industrial recruit trumpeted in 2007 — has slowly roared to life.

Before taking charge of the Alabama plant in December 2011, Christian Dohr was president and CEO of a ThyssenKrupp division in Michigan that tailored welded steel blanks for the auto industry.

Before taking charge of the Alabama plant in December 2011, Christian Dohr was president and CEO of a ThyssenKrupp division in Michigan that tailored welded steel blanks for the auto industry.

Christian Dohr was CEO of ThyssenKrupp Steel USA — the massive steel mill in north Mobile County — when we did this interview on Feb. 17. Three weeks later, he was out of that job, replaced by new owners.

Acquisition of the carbon rolling mill by a joint venture of the world’s two largest steel companies — ArcelorMittal Group and Nippon Steel & Sumitomo Metal Corp. — was made final Feb. 26, after clearing antitrust review, and the new owners quickly announced a new plant manager, Chris Richards, president of the plant, which has been renamed AM/NS Calvert.

Before handing over the keys to the world’s most modern rolling mill, ThyssenKrupp’s Dohr — who has returned to other duties within the ThyssenKrupp Group — brought the plant up to full speed and gave us an inside look at how it is performing.

Announced in 2007 at an estimated price tag of just under $4 billion and employment estimated at 3,000, the sprawling two-mill complex — the carbon steel rolling mill Dohr ran and an adjacent stainless steel mill — was the largest industrial recruitment in Alabama history and one of the largest in the U.S. in the last 50 years.

The Alabama mills, combined with a mill in Brazil that supplies slabs to the carbon steel mill, proved a huge drain on ThyssenKrupp AG, the German parent company, which has since gone through a strategic restructuring — abandoning a steel making enterprise that dates to 1811. Cost of the two mills reached more than $5 billion before they were completed in 2010, just in time for the depths of the recession.

The stainless steel mill was sold in 2012, for $3.6 billion, to Finnish-based Outokumpu Oyj, the world’s largest stainless steel producer. It began ramping to full production last year and currently employs more than 935 workers.

The carbon steel mill, after 18 months of bid shopping, found a buyer, for $1.55 billion. When the change in ownership came, Dohr, whom ThyssenKrupp put in charge of the plant in December 2011, had been ramping up to full capacity, with employment at 1,700 workers.

Dohr says 15 percent of the plant’s total sales are automotive — a figure that he expects to reach 40 percent in the next three years.

Nobody expected the times would be so bad when we started in 2010. And I’m not sure we are through the aftermath of the recession. We’ve spent the last two years improving our processes and launching new products and ramping up new lines. At the same time, we have attracted more customers. It took longer to attract customers because the steel demand was depressed in the meantime.

You always read about capacity utilization in the steel industry. Now the industry average is 78 percent and prices for steel have recovered by at least 60 percent in the last six months, so it’s hard to talk about an oversupply.

We have shipped 3.3 million tons this year, in addition to also doing some cold rolling for our stainless neighbor — 0.6 million tons — and that puts the strip mill at a total of 4 million tons. It was built for 5 million tons. Last year we did 2.5 million tons, so you see the increase. We are continuing to hire. We have 1,700 team members, so the initial investment
by Alabama is continuing to pay off.

When we started, we were doing business with service centers only, and that is business we always want to have, but it is typically a spot, month-by-month business, and for a mill this size, you need stability from contract business. Today our order book is almost 50-50 contract business. That provides stability for operations and financial stability.

If you have a strong economy, people are desperate for a new supplier, but if it’s a weak economy, you have to be patient and make your way through these different customer segments, and they want to verify that you can deliver. For the automotive segment, you also have to go through a qualification. It can take up to a year to become a supplier.

Automotive this year is around 15 percent of our business; energy — pipe and tube — is about 10 percent; appliances, 20 percent, and the remainder, 55 percent, is service centers. Our target for automotive is 40 percent in three years from now, and that’s the main growth and overall volume growth. For the rest, we’re already there.

What I am happy about is we have almost everybody in automotive as our customers. The Big Three; the Asians, including the big three Japanese companies — Nissan, Toyota, Honda — and the Europeans. The 15 percent (in automotive) will increase, but it will increase with all of those customers. Everybody has done a tremendous job putting us in this starting position, where we are qualified with everybody.

We have come close to break-even. We have a much better company performance in the product mix, in quality and on-time delivery. And we also have a stronger market out there. We have performance, customer mix and market price.

This mill is high tech equipment, and we want to use this high tech equipment for high demand products. It has capabilities that no other mill has in the U.S. — the forces we can apply, the rolling forces in the hot strip mill, and the cooling rate. When you roll the slab into material, the higher the force, the more you can achieve — with finer grained structures that increase strength and ductility at the same time. Our playing field from the materials side is much wider than for an older mill. This mill really stands out.

With the new CAFE (Corporate Average Fuel Economy) rules, what is needed in automotive is high strength and formability steel, and for that we have the right equipment. We started with regular steel grades but made our way into dual-phase steel, which is high strength, and trip steels, which are also high strength but with some formability for the manufacturing and potential crash resistance of a car. When you look at energy markets, they need further development of narrow tolerances in thickness. Our energy market for pipelines is X70 steel, which is high-strength and high-ductility steel. You don’t want it brittle but you want it strong. There is a very specific chemistry and rolling process, and we have specialized in that and have several customers buying that on a regular basis. This is how you can leverage the potential of this equipment, going after the high-demand markets. That has been our plan from the beginning.

Our home market is the Southern states of the U.S. but also Mexico. The majority is in the vicinity — Texas, Louisiana, Florida, Alabama, some in Kentucky and Tennessee. We have some shipments to Mexico, but it is not so big today.

The slab comes from Brazil, the majority, and some from Russia. The mill in Brazil is no longer for sale. It’s going to remain a TK business. And the supply of slabs for the high-demand market is all being provided by Brazil. All of our energy and auto products are made from slabs out of Brazil, because that is the newest shop that exists. 

We look at an increasing demand in the U.S. for steel. It’s very much a GDP-dependent industry. That’s the forecast for the U.S., increasing demand, so I think this acquisition is part of the new owners’ growth plan for this market. We are an asset in the right location with the best equipment.

The decision to sell was based on long-term strategic considerations. The exchange rate between the currency in Brazil, the real, and U.S. dollars: That’s where TK said the risk was too high. The external factors were a higher risk than the internal factors. So this has been a loss for ThyssenKrupp, but a gain for the U.S. and a gain for Alabama. And the mill, I am convinced, is destined to become the newest plant that the new owners will have.

Chris McFadyen is the editorial director of Business Alabama.

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