Steel Dynamics Announces New Planned Factory, Trump Praises Move

Zachary Stieber
By Zachary Stieber
November 28, 2018Business News
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Steel Dynamics Announces New Planned Factory, Trump Praises Move
A steel mill in Braddock, Penn., on March 10, 2018. (Drew Angerer/Getty Images)

Steel Dynamics announced this week that it plans to build a new modern factory in the United States, garnering praise from President Donald Trump.

Trump, who has made bringing businesses back to and helping businesses expand in the United States, issued praise on Nov. 28, saying on Twitter: “Steel Dynamics announced that it will build a brand new 3 million ton steel mill in the Southwest that will create 600 good-paying U.S. JOBS.”

“Steel JOBS are coming back to America, just like I predicted. Congratulations to Steel Dynamics!” he added.

In a press release on Nov. 26, the company said its board of directors had authorized the construction of a new flat roll steel mill.

The facility was projected to produce 3 million tons a year of a range of steel products.

Steel Dynamics said it would cost around $1.7 billion to build the facility and that it would provide 600 “well-paying positions.”

No specific site was announced yet, but the company said it expects to build in the southwestern United States so it can serve both America and Mexico. It expects to begin construction in 2020 and start operations the year after.

“We believe our unique operating culture, coupled with our considerable experience in successfully constructing and operating cost-effective and highly profitable steel mills, positions us well to execute this greenfield opportunity and to deliver strong long-term value creation,” said Mark Millett, Steel Dynamics President and CEO, in a statement.

“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.”

Overhead crane placing steel slab in storage
An overhead crane places a steel slab for storage at the Novolipetsk Steel PAO steel mill in Farrell, Penn., on Mar. 9, 2018. (aron Josefczyk/Reuters)

Stocks Shift After Announcement

Stocks of steel companies were lower on Tuesday following the announcement.

According to stock blog Seeking Alpha, KeyBanc analyst expected shares of U.S. carbon sheet-based companies to post losses due to the prospect of a higher U.S. steel supply.

“Steel Dynamic investors may be a bit disappointed via potential for less bandwidth to pursue full-out share buyback momentum ($729 million left at September’s end),” said KeyBanc analyst Philip Gibbs.

Longbow Research, though, said it still thinks investors should buy U.S. steel stocks, believing the shares are significantly undervalued.

Trump at steel mill
President Donald Trump tours U.S. Steel’s Granite City Works steel mill in Granite City, Ill., on July 26, 2018. (Saul Loeb/AFP/Getty Images)

Tariffs

The Steel Dynamics announcement followed a United States Steel Corp. announcement in August of a $750 million upgrade at its plant in Gary, Indiana.

U.S. Steel’s president and CEO, David B. Burritt, indirectly credited the investment to Trump and said the move could not have happened without the “favorable trade policies” enacted by “the strong Section 232 national security action on steel imports.”

Over the past few years, steel imports have steadily increased, comprising nearly 33 percent of the U.S. steel market last year. The majority of U.S. steel producers have been taking losses since 2009, losing their ability to invest in new technologies and labor.

Steel Dynamics has had a great year, recording a record $531 million in operating income in the three months through September, reported the Washington Examiner, after the Trump administration imposed 25 percent tariffs on steel imports in May.

Besides helping U.S.-based companies, the tariffs have brought cash to the federal government. “A lot of money is coming into our coffers,” Trump said on Sept. 27.

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