NEW YORK John Correntis proposed $1.1-billion steel mill in Arkansas has moved one step closer to fruition after the state Senate passed legislation approving funding for the Big River Steel LLC project and a House committee verbally agreed to push forward its own version of the bill.
The Arkansas Senate in a 26-to-6 vote on April 2 favored issuing general obligation bonds of $125 million to help fund the proposed 1.7-million-ton-per-year mill. In an April 3 House committee hearing on agriculture, forestry and economic development, House members approved a similar bill, moving it closer to being heard on the chamber floor. If the House also approves the bill, it will go the governor to be signed into law.
In what is being called one of Arkansas largest economic projects to date, the state loan for Big River Steels proposed Osceola, Ark., facility is contingent on the company investing $300 million of its own money and creating 525 jobs with an average wage of $75,000.
The state vote follows the Mississippi County Quorum Courts unanimous approving of a conditional $14.5-million grant for the mills infrastructure-related projects (amm.com, March 27).
But while local legislators appear to be backing the proposed flat-rolled mini-mill project, others continue to oppose the new mill, among them Charlotte, N.C.-based Nucor Corp. (amm.com, March 18). Although Correnti maintains the mill aims to produce value-added products and displace imports rather than compete domestically in the commodity-grade market (amm.com, Feb. 11), Nucor has argued that an already oversupplied sheet sector cant handle any more capacity.
"Nucor does not enjoy being in the role weve been forced to take in this debate. However, when no one else is willing to speak ... we had to," Samuel Commella, Nucor Steel Arkansas vice president and general manager, testified at the House committee meeting. "The sheet market has about five to seven years of excess capacity, even if another mill is not built. Despite severe overcapacity, steel companies owned by China continue to build new sheet mills for political and not business reasons."
The majority of imported steel is "dumped," Commella said, adding that looking at the market fundamentals, building a new mill will only mean further squeezed margins in a market that faces some 20 million tons of unused sheet capacity.
IHS Global Insight Inc., Lexington, Mass., wrote last month in an economic analysis of Correntis proposed mill that the U.S. sheet market could likely absorb the capacityas long as no other additional tons come online (amm.com, March 26).
Nonetheless, Nucor said it is a concern. "The bottom line here is supply and demand. If the supply goes up, the prices go down. Its that simple. As a result of all of this, our costs will go up and the cost which we sell our products for will go down," Commella said at the hearing, adding that the sheet mill industry isnt expected to grow significantly by the time Big River is set to operate. "Itll be a dog fight."
Correnti, who also testified, said similar push back was seen when he partnered with Russian steelmaker OAO Severstal to construct SeverCorr LLC, now Severstal North America Inc.s Columbus, Miss., mini-mill. Osceola was also a choice for SeverCorrs mill, he said, but it was later moved to Mississippi after meeting opposition.
"Ive seen this movie before from Nucor. I saw it back in 2002 when we tried to put SeverCorr in Osceola," according to Correnti, who resigned as vice chairman, president, chief executive officer and director of Nucor in 1999.
Correnti, whose mill aims to serve the automotive, oil and gas, and electrical energy industries, maintains it is foreign steel, not Nucors share, that hes looking to displace.
"Every day, I see barges being unloaded in Blytheville, Ark., and we see barges being unloaded from the Port of Little Rock with steel in it," he said. "The United States imports 20 (million) to 25 million tons of steel every year. Its done because of economic and quality decisions."
Big River Steel would have the "highest paying steelworkers in the world" and the "lowest labor cost to produce a ton of steel for anyone in the world," Correnti added.
A number of companies have already expressed interest in relocating to Arkansas, provided the millwhich will have 3,500 acres and access to the Mississippi Riveris constructed, Osceola Mayor Dickie Kennemore said during the hearing.
Construction of the mill would likely take two years, and after a testing phase the company would start selling steel around mid-2016, participants at the hearing said.
"John has proposed ... running the mill like the Walmart theory," Kennemore said. "You sell a lot of goods and your margins arent a lot, but you sell a lot of goods. That little margin makes you a lot of money ... and it will benefit us all."