Scrap Industry News

Nucor Makes Bid For Birmingham

Nucor Corp., Charlotte, N.C., has offered to purchase most of the assets of Birmingham Steel Corp., Birmingham, Ala., for $500 million in cash.

The offer specifically includes the four Birmingham mills in Birmingham, Ala.; Jackson, Miss.; Kankakee, Ill., and Seattle.

In a letter sent in mid-February to Birmingham Steel, Dan DiMicco, Nucor’s vice chairman, president and CEO, said the proposed transaction is not subject to any financing contingencies.

“Nucor is prepared to move quickly to complete the transaction on a negotiated basis. Following its completion, all currently active Birmingham Steel manufacturing facilities will continue to operate on a business-as-usual basis,” wrote DiMicco.

In a follow-up conference call held shortly after the letter was sent, DiMicco commented that “there is no time limit to the offer, but we believe it is in everybody’s best interests to move forward.”

DiMicco also bluntly remarked that former Nucor executive John Correnti, current CEO of Birmingham Steel, would not be coming back to Nucor as part of the deal. “As far as John being part of our organization structure going forward, the answer would be no to that,” DiMicco said during the conference call.

Birmingham Steel’s Cleveland facility, which is under contract to be sold by Birmingham, will not be part of the acquisition. The status of the closed Memphis melt shop has also not been specifically addressed by Nucor, either in its letter or in the conference call, except that it is not among the assets Nucor would specifically want as part of its initial offer.

Nucor’s offer to acquire Birmingham Steel operations follows Nucor’s acquisition of Trico Steel in Decatur, Ala., for $120 million late last year. Also last year, Birmingham Steel sold its Cartersville, Ga., mill to the Brazilian firm Gerdau Steel’s AmeriSteel subsidiary, Tampa, Fla.

DiMicco estimated the combined steel production capacity at the four Birmingham mills at two million tons per year. He said that due to Birmingham’s cash-poor position over the last couple of years, Nucor would likely have to make some capital investments to upgrade the plants.

In terms of how the new facilities would fit in with Nucor’s product mix, DiMicco said, “there is good compatibility between Nucor and Birmingham’s bar mill operations. It would expand our product offerings to our customer base, particularly in rebar, where Birmingham is a much larger player than we are.”

The Nucor CEO also noted that he did not see any further scrap buying economies of scale coming from the deal. “I don’t think we can save significantly beyond what we already are. We’re already buying more than one million tons per year of scrap.”

He added that he does not see any anti-trust barriers to the deal, even though it will give Nucor a significant amount of steelmaking capacity in the southeastern U.S. “Our industry is extremely fragmented, [and] with or without this deal it will remain fragmented. We don’t believe there will be any anti-trust issues.”

Nucor also announced that its Bar Mill Group will spend over $200 million on capital projects over the next three years.

The projects, which are part of the Nucor Bar Group strategic plan, consist of: a modernization of the rolling mill at the Nucor Steel Division in Norfolk, Nebraska; a new melt shop at the Nucor Steel Division in Jewett, Texas; and a new reheat furnace and finishing end at the Nucor Steel Division in Darlington, S.C.

With this new equipment, Nucor’s employees will be able to accelerate ongoing programs to reduce operational costs, increase production yields, and improve overall product quality. “We are very excited about these new projects in the Bar Mill Group,” said Mike Parrish, Nucor executive vice president. “Our people are the key to Nucor’s success and this equipment will help them achieve their goals. These projects will enable us to maintain a low cost position and to stay on track for continual improvement.”

Kaiser Bankruptcy Hits Scrap Segment

Kaiser Aluminum Corp., Houston, has filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware.

Immediately after the filing, the company was able to gain access to $100 million in Debtor-in-Possession (DIP) financing from Bank of America to continue its operations. “The DIP financing, in combination with the company’s current invested cash, should provide sufficient liquidity to meet ongoing operating needs,” the company stated in a news release. “Kaiser’s production and shipment of bauxite, alumina, primary aluminum products, and fabricated aluminum products will continue without interruption,” the statement added.

According to a list of creditors published by the ProfitGuard newsletter, four large banks head up the creditors list, with claims on the company ranging from $12 million to $400 million.

Several metals companies are also owed money by Kaiser, including Glencore AG of Switzerland, Alcan International Limited, Enron Metals & Commodity Ltd., and Los Angeles Scrap Iron & Metal. The Defense Logistics Agency, Fort Belvoir, Va., is also owed $10.8 million by Kaiser.

Many of the company’s foreign subsidiary operations, including partnerships, were not affected by or covered under the filing, including a Kaiser extrusion plant in Canada.

Aluminum Industry Plugs Back In

One of the aluminum smelters in the Pacific Northwest that shut down when electricity costs were at their peak has been scheduled to re-open.

Michigan Avenue Partners, Chicago, plans to start making metal at its Longview, Wash., aluminum smelter in April, providing a spark to a regional industry that shut down amid the power crisis of 2000 and 2001.

A spokesperson for the Chicago investment group told the Spokane Spokesman Review, “Restarting has always been our plan and it’s still our plan.”

Whether this is good news for those in the aluminum industry can depend on one’s point of view. Some observers believe the idled capacity is the one factor that has prevented aluminum prices from dropping lower.

The idling of West Coast capacity shut down as much as 30 to 40 percent of the U.S. aluminum industry.

Power is now plentiful in the region, according to a spokesperson for the Bonneville Power Administration, Portland, but many power generators and customers are bound to long-term contracts that do not allow them to buy and sell on the spot market.

Shipbreaking Revival In Philly

The Philadelphia ship repair yard of Metro Machine Corp. has reportedly won a contract to dismantle and scrap two U.S. Navy warships.

Metro Machine, an employee-owned ship repair firm based in Norfolk, Va., has leased a pair of dry docks in the Philadelphia Shipyard with the intention of winning contracts under a pilot project sponsored by the Navy. The goal of that project has been to steer Naval shipbreaking work toward approved U.S. facilities.

The federal government mulled using overseas yards to scrap warships, but re-considered after reports concerning the inability of foreign facilities to safely work with hazardous materials found on old ships.

Metro’s latest winning bid came just as work on the dismantling of a Navy cruiser was winding down, saving many of the yard’s 175 workers from being laid off.

Metro Philadelphia yard superintendent John Strem told the Philadelphia Inquirer that the new government contract allows the yard to retain the workforce it has trained from breaking three other U.S. Navy ships.

The new ships heading to Metro’s yard are the USS McDonnell, a frigate, and the USS Claude V. Ricketts, a destroyer. According to the Inquirer, dismantling the two vessels will bring about $4 million worth of work to the yard.

Strem told the newspaper that Metro has developed government-approved procedures for dismantling ships, disposing of toxic waste, and selling scrap material to cover part of the cost.

The company is hopeful that more shipbreaking work will come its way as dozens of decommissioned Navy warships sitting in harbors on the Atlantic, Pacific and Gulf coasts are designated for scrapping by the Navy.

Computer Recyclers To Meet

The third annual Electronics Recycling Summit has been scheduled for May 6 to May 9 in San Francisco.

The four-day series of events is co-sponsored by the International Association of Electronics Recyclers (IAER) and the Computer Society Technical Committee on Electronics and the Environment of the Institute of Electrical and Electronic Engineers (IEEE).

Guest speakers from Ford Motor Co., the California Integrated Waste Management Board (CIWMB) and electronic products maker Canon have all been scheduled. Exhibits, tutorials, panel sessions, tours and meetings are also part of the Summit and an accompanying event, the International Symposium on Electronics and the Environment (ISEE).

Diana Bendz, senior location executive with IBM’s Endicott, N.Y. office, and a principal founder of both the ISEE and the Summit, says, “This joint meeting is a unique opportunity to bring together all of the segments of the electronics industry to address critical technical and business issues concerning our industry and its impact on the environment.”

An advance look at the program, plus conference registration and hotel reservation forms, are available at the IAER’s Web site, www.iaer.org.