Flexing its muscle

Features - Ferrous Consumer Profile

Big River Steel says its “flex mill” in Osceola, Arkansas, will allow it to react more quickly to changing steel markets.

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April 12, 2017
Dan Sandoval

When Big River Steel (BRS) opened its $1.3 billion steel mill in Osceola, Arkansas, the project became the largest private investment in that state’s history. The company’s backers say they see the mill, which has been designed to produce 1.6 million tons of steel per year, as the start of a much larger operation.

Mark Bula, chief commercial officer for BRS, says the company’s goal is to double the capacity of the steel mill complex within the next several years, though he adds that any such expansion would be predicated on market conditions.

BRS began operations at its melt shop and hot mill in late 2016, producing its first hot-rolled coil in mid-December. It was purchased by Zekelman Industries for Atlas Tube, one of its structural tube mills, in Blytheville, Arkansas.

Bula says the company’s flexible approach to steelmaking, which includes highly sophisticated equipment, will allow it to meet the demand for high-strength steel while consuming a significant amount of ferrous scrap.

Obtaining financing

BRS was incorporated in 2013, breaking ground on its flex mill in mid-2014. The company may be viewed as a newcomer when going up against established steel companies. However, the company’s pedigree is formidable and commingles substantial steel industry expertise with business acumen.

Bula explains that John Correnti, a long-time steel mill operator who called northeast Arkansas home for many years, founded BRS and served as CEO of the company until his death in August 2015 at the age of 68. He knew of the plot of land that would become the home of BRS and always thought of the location as a “steel mill heaven.”

The site, less than 1 mile from the Mississippi River, gives BRS a critical advantage when it comes to cost-effectively transporting outbound finished steel and inbound ferrous scrap and other raw materials, according to the company.

“With our direct access to the Mississippi River, we can bring in scrap from as far away as Minnesota, Youngstown (Ohio) and Pittsburgh,” Bula says. “It doesn’t lock us into one area.”

In addition to transporting material via barge, BRS has rail and highway access.

Correnti, along with the investment banking firm Global Principal Partners LLC (GPP), Miami, attracted investors for the project that included Koch Industries, Wichita, Kansas, which was interested in getting more involved in the country’s steel business.

Koch, one of the largest privately owned companies in the country (ranked No. 2 by Forbes magazine), has substantial expertise in commodity trading, according to Bula. “They are quite comfortable with commodities.”

Through its minerals division, Koch Industries became a primary equity investor in BRS, taking a stake that amounts to approximately 40 percent.

GPP also helped bring in several other equity investors, including San Francisco-based TPG Capital, a private equity firm that owns about 20 percent of the company; the Arkansas Teacher Retirement System (ATRS), which provided a local connection and also has a 20 percent stake in BRS; and a group that included the late Correnti that provided significant steel industry expertise.

With the initial investors in place, “It was much easier to get the debt to build the project,” Bula says.

Ensuring flexibility

Another key to obtaining financing for the project was the decision to have the German equipment company SMS Group provide most of the steelmaking equipment for the mill, most notably a Ruhrstahl Heraeus (RH) degasser that was attached to the electric arc furnace (EAF), the first time such a system was constructed in the Americas, Bula says.

The RH degasser is designed to allow the BRS mill to lessen the residuals present in the steel it produces, enabling the company to compete with integrated mills while also using a significant amount of ferrous scrap. “We will be on the [quality] level of the integrated mills and higher than that of the minimills,” Bula says of BRS’ steel.

“It allows us to have the cleaner material going into the caster,” he adds.

BRS says the RH degasser will allow the mill to move beyond the traditional materials produced at EAF minimills to make purer, more formable steels.

“The flex mill is who we are—but not just the type of steel the company will be making but [also] an overall different way of viewing the business. We also can flex when it comes to how we operate. We can flex between different sizes on the fly. We are flexible with different markets.” – Mark Bula, Big River Steel

Other equipment supplied by SMS includes a tunnel furnace, hot mill, runout tables, a pickle line, a tandem cold mill and galvanizing lines.

Bula says, “The flex mill is who we are—but not just the type of steel the company will be making but [also] an overall different way of viewing the business. We also can flex when it comes to how we operate. We can flex between different sizes on the fly. We are flexible with different markets.”

He continues, “It is an attitude to be flexible and innovative enough to meet the needs of our customers.”

Bula says BRS is the only EAF mill in the U.S. that can produce hot-rolled steel as thick as 1 inch and as wide as 78 inches.

The notion of flexibility includes the mill’s finished products and the raw materials it consumes. “In the flex mill, we can flex between pig iron, scrap [and] HBI (hot briquetted iron),” Bula says, adding that this gives BRS “the ability to respond when markets change.”

During American Metal Market’s 10th Steel Scrap Conference and Fourth DRI and Mini-mills Conference, held in Chicago in 2016, David Stickler, BRS CEO, noted that the company will consume roughly 2 million tons of metal scrap and scrap substitutes per year to make the 1.6 million tons of steel. The composition, Stickler said, will be a mix of 25 percent shredded scrap, 25 percent busheling, 20 percent pig iron, 10 percent bundles, 10 percent HBI, 5 percent plate and structural scrap and 5 percent other materials, including direct-reduced iron (DRI).

Securing scrap supply

To supply the mill with ferrous scrap, BRS has hired Jefferson Iron and Metal, Birmingham, Alabama, to act as its exclusive agent. “They know the scrap business,” Bula says of Jefferson Iron and Metal. “That is what they do best.”

Rather than establish a scrap metal collection division to supply the mill, as many other steel companies have done, Bula says BRS will focus on making steel and defer to Jefferson Iron and Metal on scrap supply issues.

“We make steel, and that is what we want to do,” he says. “We want to stick to what we do best.”

As to the quality of the scrap procured, Bula again defers to Jefferson’s expertise. “They are in charge of getting the quality set for the grade we want to make.”

Carving out a niche

With BRS beginning operations at the end of 2016 while the world economy still is on shaky ground, the global steel industry might be apprehensive about new capacity coming online. However, Bula says, BRS is primed for great things. The Trump administration’s call for significant investment in U.S. infrastructure could help the company right out of the gate if realized.

However, with China producing massive amounts of steel, some pessimists may question how new steel capacity in the United States can compete. While Bula says he recognizes the challenge, he adds that he believes BRS’ flexible approach to steelmaking will help it to respond to market conditions.

Regarding the vast amount of steel being produced in China and shipped into the U.S., Bula says that while BRS supports free trade, “Trade laws on the books must be enforced.”

He adds, “We just have to figure out a way to compete. It may not be easy, but the United States needs a strong steel industry. We have to be globally competitive.

“We are innovating with the steel industry and doing it in the United States,” Bula continues. “We are looking at products that are undersupplied, not just today, but 10, 15, 20 years down the road. The world steel industry we can be competitive with, we just have to keep manufacturing here.”

He says BRS’ success also will be based on attracting the right kind of talent.

“We are trying to make the industry compelling for young people,” Bula says of BRS. “We need to attract young people to the industry.

“Steel mills today have gotten rusty on the outside, but inside they are amazing,” he continues. “The technology and equipment to run them is more important than brawn anymore.”

Dan Sandoval is the senior editor with the Recycling Today Media Group.