Energy Department Defends Severstal Loan

Oct. 31, 2011
DOE says only one U.S. steel producer currently makes high-strength, lightweight steel.

UPDATED: 11-1-2011, 8:58 a.m.

A conditional loan provided to steel producer Severstal North America will not put U.S. taxpayers at risk while the federal agency issuing the funds continues to conduct due diligence on the project, according to the U.S. Department of Energy.

Oversight and Government Reform Committee Chairman Darrell Issa has questioned the agency regarding a $730 million loan issued to Severstal under the Energy Department's Advanced Technology Vehicle Manufacturing Program.

The department says it has only committed to providing the loan if Severstal meets certain conditions. The loan also would add competition to the current advanced high-strength steel market in the United States, reducing costs for automakers and consumers.

But it's unclear how the Energy Department defines advanced high-strength steel. Currently, the only manufacturer in the United States that produces "high-strength, lightweight steel" is the ArcelorMittal plant in East Chicago, Ind., according to an Energy Department spokesperson.

At least six companies in the United States provide high-strength steel grades to the U.S. auto industry, says Ron Krupitzer, vice president of automotive applications for the American Iron and Steel Institute. Another company in Canada also provides high-strength steel grades for the auto industry, Krupitzer says.

"It is actually true that all those companies do it right now, and we're all growing the amount," Krupitzer says.

In his letter, Issa asked whether the Energy Department analyzed the potential advantage the loan gives to Severstal over domestic steel makers.

"AHSS is not in short supply in the United States," Issa wrote. "Numerous AHSS manufacturing facilities already exist and currently produce under capacity. In fact, current total U.S. AHSS production capacity is just over 6 million tons per year, nearly 2 million tons more than the estimated AHSS peak demand in 2020. It would seem to be a waste of taxpayer funds to subsidize Severstal's AHSS facility when there is already more than enough production available for this material."

See also:

Lawmaker Questions Federal Loan Issued for Severstal Expansion Project

Steel Industry Faces Weighty Ultimatum

Severstal Starts New Cold-Rolling Line in Michigan

Advanced High-Strength Steel Through the Years

Nucor Expects to Replace Steel Grade Currently Sourced From Japan

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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