Big expansion for steel mill

by Charles Slat, The Monroe Evening News - last modified September 10. 2010 11:09AM

Banking on a continued improvement in the economy, Gerdau MACSTEEL said Thursday it will invest $67 million in its Monroe mill to boost production capacity, modernize the plant and improve quality.

The capital investment, starting in 2011, will increase the production capacity by 225,000 tons through 2013, and include a new caster, upgrades to the melt shop and new infrastructure construction. In addition to construction jobs, the work initially could add 50 workers and eventually add more than 100 people to the plant’s work force of about 400.

“This new capital investment program for Monroe is indicative of Gerdau’s optimism over the North American market, where we are seeing a market recovery from the historical low points witnessed earlier,” said Andre Gerdau Johannpeter, chief executive officer of Gerdau, a producer of special bar quality steel.

The company said the improvements to the process technology in the melt shop will allow the plant to meet the increasing demands of the special bar quality steel market, while the increased capacity will enable the plant to take advantage of new market opportunities. Quality upgrades also could enable it to line up new customers.

Gerdau MACSTEEL said it will continue to explore growth opportunities in new applications, both in the automotive and non-automotive sectors, which could lead to additional investments throughout the company’s production network. Traditionally, auto-related customers have accounted for most of the firm’s business, and demand for bar quality steel in the auto industry has been increasing slowly as the economy has struggled to recover.

The mill melts scrap steel in an electric arc furnace to create its bar-quality products.

“Obviously, it’s fantastic for Monroe MACSTEEL, the City of Monroe, and the Monroe region,” said Monroe Mayor Robert E. Clark. “The Gerdau family is very bold and committed to this plant and is moving forward.”

The mayor said he not only was pleased by the expansion, which has been rumored for months, but pleased with the attitudes he saw among employees when plant managers announced the expansion Thursday.“What pleased me and what was impressive to see was the employees,” he said. “Obviously they were very upbeat and happy with the expansion.” He said the Monroe plant is the benchmark for the company in terms of production and quality. “This is the highest-producing and highest quality plant they have in the country. Their standard is what the company is wanting all their plants to meet.”

He said company officials initially have sought city consideration of some tax abatements and other assistance in moving forward with the project, although no specifics have been settled upon.

Monroe City Manager George Brown said he would anticipate a 12-year, 50 percent tax abatement, but that hasn’t been decided and it would be subject to review by city council and the city’s economic review committee.

“They need to see more,” he said of council members. “They were aware of the general parameters, but they need to sit and discuss it and it needs to go through the economic review committee. But this is such a substantial project and such a substantial continuing commitment to the community by a company that’s been here long and been a major contributor and investor both business-wise and otherwise to the community, that I wouldn’t anticipate issues when you look at the relative merits of this compared to other projects we’ve had over the years.”

“If you weigh this against any other project we’ve had in the last several years, it’s going to come out on top and usually that would mean the 50 percent abatement for the 12 years,” Mr. Brown said.

He said the additional tax base wouldn’t fill in the financial hole the city has been facing in recent years, but “it’s helpful, believe me.”

State incentives also are expected to be part of the underpinning for the plant upgrade.

“Michigan state and local authorities have been very supportive in working with Gerdau MACSTEEL,” says Guilherme Gerdau Johannpeter, Gerdau MACSTEEL vice president. “We are thankful for their support and are confident that these investments will have a positive economic impact on the Monroe community.”

The commitment is the first step of a strategic investment plan for the Gerdau MACSTEEL Monroe facility, company officials said.

The Monroe mill, at 3000 E. Front St., began in 1980 as a North Star Steel Co. facility. Its last big expansion occurred in 2004 when the firm, then owned by Houston-based Quanex, invested more than $37.5 million, creating about 25 jobs. Quanex merged with Gerdau in 2008.

Gerdau MACSTEEL is headquartered in Jackson, Mich., with plants in Jackson, Monroe and Fort Smith, Ark., as well as steel processing plants in Lansing and Huntington and North Vernon, Ind.; Pleasant Prairie, Wis. and Canton, Ohio. The company is a wholly-owned division of the Gerdau Group, a Brazilian firm that’s one of the world’s major suppliers of specialty long steel.

Gerdau Group has benefited from growth in developing countries as well as economic recoveries in the U.S. and Japan. Its second quarter gross revenues were up 31 percent from a year ago and raw steel production at its facilities rose 52 percent in the first half compared to 2009.