STEEL GRIPS online - Thyssenkrupp might consider delaying the start-up of its Alabama, USA mill

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Thyssenkrupp might consider delaying the start-up of its Alabama, USA mill

May 16, 2009

Dr.-Ing. Ekkehard D. Schulz, Dr. Ulrich Middelmann and Dr. Alan Hippe reported on the results of the Thyssenkrupp Supervisory Board meeting on the strategic reorganization of the Group. They provide a brief overview of the status of the projects in Mobile, Alabama, USA, Santa Cruz, Brazil and Duisburg, Germany:

Construction of new plants in Brazil and the USA

The Thyssenkrupp Steel segment continues to work on its transatlantic growth strategy, with the three pillars of Brazil, NAFTA and Europe. The fundamental reasons for these strategic investments have not changed in light of the current economic crisis. Of central importance is the 5 million ton capacity steel mill currently under construction in Santa Cruz in the state of Rio de Janeiro/Brazil which will produce low-cost steel to the highest quality standards.

In November 2008, the supervisory board approved an increase in the investment budget for the project to around EUR 4.5 billion. The value creation of the project in combination with the construction project in Alabama and the expansion program in Europe is still assured even after the budget increase. As at March 31, 2009, the value of contracts concluded stood at EUR 4 billion.

Some 22,000 workers are currently employed on the building site. Structural steel erection and mechanical and electrical installation work is proceeding in parallel in all areas. Due to the current situation on the steel market, it is being considered whether to delay the start-up of the plant. As well as adapting to the current world economic situation, this extension to the construction period would reduce the cost of acceleration measures.

Recruitment of personnel for the future production phase is at an advanced stage; at the end of March 2009, 1,355 employees were working for Thyssenkrupp CSA in Brazil.

In its home European market, Thyssenkrupp Steel intends to strengthen its position by expanding and modernizing its processing and coating facilities in Germany. Around 40% of the slabs produced in Brazil in the future are to be shipped to Germany to be processed into high-quality finished products for demanding customers. The investment projects to facilitate slab handling at Duisburg-Walsum port and increase capacity at four hot-dip coating lines have been completed. A number of modernization measures have been implemented at the hot strip mills in Bochum and Duisburg-Beeckerwerth. Further investments in the hot-rolled area have been scheduled.

Construction of the new joint steelmaking and processing plant of the Steel and Stainless segments began near Mobile in Alabama/USA in fall 2007. Work is being continued as scheduled for the production lines of the carbon steel segment, whereas the construction period for the stainless steel facilities has been extended. The carbon steel segment will operate hot- and cold-rolling as well as coating lines at the plant in Mobile and will process slabs produced in Brazil into high-quality flat products. Total hot-rolling capacity will be over 5 million tons a year. Work on the project is running largely to schedule. Due to the current global economic situation it is being considered whether to delay start-up of the Alabama project, currently scheduled for spring 2010.

The Thyssenkrupp supervisory board approved an increase in the investment budget for carbon steel segment to USD 3.25 billion in November 2008. The value creation of the project remains assured. As at March 31, 2009, contracts worth more than USD 2.8 billion have been concluded.

Around 3,000 workers are currently employed on the site. Concreting work for buildings and machine foundations is continuing for the hot strip mill, cold rolling mill and hot-dip coating lines. Structural steel erection for the shipping buildings for cold-rolled and hot-dip galvanized products has been completed or is at an advanced stage; roofing work has been begun.

Sales and marketing experts at carbon steel segment are systematically continuing their work on a sales strategy for the North American market, also taking into account the risks associated with the general economic situation. Numerous positive contacts with potential key customers have been established; these are being intensified with the involvement of technical experts. Target groups include the auto industry, electrical goods manufacturers, steel service centers, appliance manufacturers and the tube industry, particularly for the energy sector.

Thyssenkrupp's customers in the USA for high-quality stainless steel flat products are currently mainly served from the company's cold rolling mill in Mexico. Due to limited capacities, high logistics costs and dumping duties on US imports from Mexico for many of these products, a decision was made in 2007 to build a modern integrated stainless mill alongside the carbon steel plant in Mobile, Alabama. In November 2008, the Supervisory Board also approved an increase in the investment budget for the stainless plant to USD 1.4 billion.

Work on building the plant was ahead of schedule. However, the stainless steel sector is now to extending the time period for its investments against the background of the current demand weakness on the North American stainless steel market. The start-up of the cold rolling mill will be postponed by roughly a year. In particular, the start-up of the three mill stands and the ramp-up of the cold rolling mill to full capacity will be delayed. Cold-rolled production is now scheduled to begin in the 4th quarter 2010. As a result, it will also be necessary to delay the start of the ramp-up of the steelmaking shop until early 2012. Until then, the starting material for the cold rolling mill in Mexico and the new cold rolling mill in Alabama will continue to be supplied from Europe. The scale of the overall project remains unchanged, based on the belief that stainless demand on the North American market will return to growth in the course of 2010.

Due to the planned delay in the start-up of the steelmaking shop, the project team at Thyssenkrupp Stainless USA is currently renegotiating with suppliers to delay delivery of equipment and revising its planning. The construction of the buildings for the cold rolling mill will be continued and completed. After completion, these buildings will be used to store already supplied machinery and equipment. Actual installation of the equipment will begin later and will be stretched out.

In the shared-infrastructure area, the training center currently under construction will be completed on schedule in September this year. Construction of the marine terminal in Mobile by the Alabama State Port Authority is also making good progress.

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