Steel Development Co. Defends Partnership With Chinese Manufacturer

Sept. 15, 2010
Companies ink deal to build rebar mill in Mississippi amid questions by lawmakers and industry.

The official signing Wednesday of a partnership between China's state-owned Anshan Iron and Steel Group Corp. and a U.S. startup could put the rest of the U.S. steel industry at an extreme competitive disadvantage, say critics.

But the U.S. manufacturing partner Steel Development Co. LLC says a plan to build a reinforcing bar mill in Amory, Miss., will create jobs in an economically depressed state and produce steel in an efficient and environmentally friendly way.

"In reality we are creating jobs in a high-unemployment state that needs those jobs," says Mark Bula, Steel Development's chief commercial officer. "Those are high-paying manufacturing jobs. It's not easy to relocate those jobs. They're going to be there for the long term. And I think more importantly we're heeding the call of President Obama to modernize and make more efficient U.S. industry."

The company formed in 2008 by former U.S. steel executives will utilize a process that removes an energy-intensive step in the production cycle. Most current steel bar producers begin by melting scrap and then casting a billet. The billet is then taken offline, cooled and reheated before it's rolled, Bula says. Steel Development will eliminate the cooling and reheating process utilizing technology from Italian minimill equipment supplier Danieli. Eliminating the cooling and reheating process will reduce natural gas and electricity usage, Bula says.

Steel Development expects to hire 130 to 140 people at the Amory plant. Anshan and Steel Development plan to eventually build and operate a total of five mills in the United States. As part of the agreement, Anshan will purchase a 14% stake in Steel Development. The deal marks China's first investment in the U.S. steel industry, the state-run Xinhua news agency reported.

When the plans were first announced in May lawmakers raised concerns the deal could present a national security risk by providing Anshan access to new steel production technologies and information regarding infrastructure projects. The companies plan to produce rebar for infrastructure applications, including the construction of highways and bridges.

But Bula says the national-security concerns are overblown. He points out that Steel Development and Anshan don't have access to blueprints for construction projects.

"We make stick rebar, and that's sold to a fabricator who fabricates according to blueprints they have," he says. "We don't have blueprints to buildings. We're once removed from having blueprints, let alone being on a construction site. I think national security concerns are a bit of an irrational discussion, and if they wanted to buy the equipment, they could buy it on the open market."

Even so, an American Iron and Steel Institute spokesperson says the alliance with a foreign government-owned company in the United States is unprecedented and poses a serious competitive risk to the nation's steel industry.

"The Chinese have been very upfront about using their central government-driven strategies to advance their own exports, so our government needs to be looking at this very seriously," says Nancy Gravatt, AISI spokesperson.

Anshan's funding comes from the Chinese government's "bottomless pocket," says Gravatt. In July a group of 50 Congressmen wrote a letter to Treasury Secretary Timothy Geithner urging an investigation into the deal.

"We believe that this investment allows the full force and financing of the Chinese government to exploit the American steel market from American soil," wrote lawmakers in the July 2 letter.

Agence France-Press contributed to this report.

About the Author

Jonathan Katz | Former Managing Editor

Former Managing Editor Jon Katz covered leadership and strategy, tackling subjects such as lean manufacturing leadership, strategy development and deployment, corporate culture, corporate social responsibility, and growth strategies. As well, he provided news and analysis of successful companies in the chemical and energy industries, including oil and gas, renewable and alternative.

Jon worked as an intern for IndustryWeek before serving as a reporter for The Morning Journal and then as an associate editor for Penton Media’s Supply Chain Technology News.

Jon received his bachelor’s degree in Journalism from Kent State University and is a die-hard Cleveland sports fan.

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