Anshan takes 14% share in US project

Steel Development and its joint venture partners plan to build a technologically advanced and environmentally friendly steel mill in the United States that will produce reinforcing bar and other bar products.

Steel Development is a US-based steel company led by John Correnti as chairman and CEO and a highly experienced management team that has been involved with building and operating many of the most successful and profitable steel mills in the world over the past 25 years.

Under the terms of the Joint Venture Agreement, Ansteel will invest in and become a 14% partner of Steel Development. Ansteel will also become a member of Steel Development’s Board of Directors and will supply certain components of Steel Development’s technology and equipment package.

Ansteel is looking to capitalise on the opportunity to enter into an overseas joint venture with a company that is focused on using advanced technology in an environmentally friendly and highly profitable manner.

Ansteel’s and Steel Development’s strategic plans are to build and operate four mills to produce reinforcing bar and other bar products used in infrastructure applications and one mill that will be capable of producing the highly sought after electrical and silicon grades of steel used in energy applications (eg, wind turbines, electrical power generation and energy efficient cars).

Environmental and other necessary permits for Steel Development’s first bar mill are already in place. Early construction activity on the mill, which is located in Amory, Mississippi, USA, has already been completed.

With spending on infrastructure projects in the United States rapidly increasing, Steel Development’s first bar mill provides an immediate opportunity for Ansteel to invest in a mill that is focused on supplying a sector of the economy that is expected to continue growing over the coming years as an increasing emphasis is placed on road, bridge and rail construction projects.

The technology for the Amory mill is being provided by a consortium of technology providers, including Danieli, Tenova Core, Ansteel and Marubeni Corporation. Quad Engineering, Inc is the lead engineer for the Amory mill.

The technology is designed to maximise production yields and substantially reduce operating costs and energy needs while allowing for continuous operation twenty four hours a day. In this regard, the Amory mill is expected to be among the world leaders in terms of bar production technology.

With a long-term raw material supply agreement and multi-year sale agreements in place, Steel Development is expected to quickly gain a meaningful presence in the United States’ bar market. The United States’ market has for a number of years been short of domestic rebar supply.

Anshan Iron & Steel is owned by the Chinese government and its investment in the project has been strongly criticised by US steel organisations, members of Congress and producers who see it as a ‘back door’ into the US market by a Chinese company. (See September STI p49).

However, the American Chamber of Commerce in China welcomed the deal, saying ‘Chinese direct investment in the US has a positive effect on American companies, particularly start-ups like Steel Development, and helps create jobs at home.’

The move by Anshan, as well as investment earlier this year from the Tianjin Pipe Group to build a pipe mill in Texas, could help the Chinese companies avoid some of the trade disputes by producing steel locally to sell into the US market.

Increasing numbers of Chinese steel companies are going abroad, and Wuhan Iron and Steel recently signed a deal to invest in a steel mill in Brazil.

In 2005, intense political opposition forced Cnooc, China’s offshore oil company, to withdraw its $18bn bid for Unocal.