Fort Wayne-based Steel Dynamics plans to build a new steel mill that will cost between $1.7 billion and $1.8 billion, stoking fears among investors and industry observers of more overcapacity in the United States.
The mini-mill operator is looking to add more than three million tons of flat-rolled capacity in the United States. Steel Dynamics is eyeing an electric arc furnace mini mill somewhere in the Southwest that would make advanced high strength steel products for the energy, appliance and automotive sectors in the South and in Mexico.
The facility would employ 600 workers and include a 450,000-ton galvanizing line, a 250,000-ton paint line, and other value-added finishing lines.
Steel Dynamics will decide where to locate the mini mill based on which community offers the best incentives. The company hopes to have it online by 2021.
"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," Steel Dynamics President and CEO Mark Millett said.
Millett said the company plans to use new technologies "that will further reduce the gap between existing (electric arc furnace) and integrated steel mill production capabilities."
The Organisation for Economic Cooperation and Development's most recent estimate is that the world has 561 million tons of steelmaking overcapacity, due largely to China's command economy building many new mills in recent years.
Steel Dynamics' announcement caused steel stocks to plummet. U.S. Steel's stock dropped from nearly $26 a share to $22.80 around mid-day Thursday. Steel Dynamics' own stock sank from about $37.50 to around $35.20 a share over the same period.
KeyBanc and Longbow Research both projected additional supply would drive down steel prices in the United States. Longbow predicts hot rolled steel coil will sell for $10 to $15 less a ton on the spot market in 2019, a year before construction on the project begins. It estimates 2019 hot-rolled steel prices will fall 5 percent year-over-year to $790 to $795 per ton.