Liberty Steel USA acquires Keystone EAF mill
According to a news release from GFG announcing the transaction agreement, Peoria, Illinois-based Keystone Steel & Wire recently posted its strongest results in its 100-year history in the steel and steel products business.
The acquisition adds a wire rod facility with an electric arc furnace (EAF), RedBrand agricultural fence products, industrial wire, a bar mill, three welded wire reinforcement mesh facilities and a PC (prestressed concrete) strand facility to the Liberty Steel USA portfolio.
“The Keystone acquisition is a core part of GFG’s Greensteel vision to become a leading United States producer of high-quality, cleanly produced steel,” says Sanjeev Gupta, executive chairman of Liberty and the GFG Alliance. “As we look ahead to the future, GFG will benefit from Keystone’s century-long history, its robust operations and its reputation for producing top quality steel.”
The merger combines the existing South Carolina-based Liberty Steel Georgetown steel plant with a downstream business and more than 1,300 employees, GFG says. The combined company has operations in Illinois, Ohio, South Carolina, New Mexico, Texas and Georgia.
GFG says the deal was financed by two large North American banks with funds managed by BlackRock Financial Management Inc. GFG contributed equity and its Liberty Steel Georgetown plant to the transaction.
“KCI and its businesses offer Liberty the chance to merge our existing U.S. steel business with one of the country’s most productive wire rod operations,” says GFG North American Chief Investment Officer Grant Quasha. “Combined with Liberty Steel Georgetown, KCI will increase our downstream capabilities, create critical synergies, add strong management and provide better value and products for customers as we advance our U.S. steel business.”
GFG acquired Liberty Steel Georgetown at the end of 2017 from Arcelor- Mittal. The plant reopened in June 2018 and has been steadily ramping up production, according to the company.
More than 100 employees have been rehired at the site. GFG Alliance says it has recruited more than 50 new employees, revitalized the facility and has “re-established its reputation to be the premier producer of high carbon wire rod in the U.S.”
KCI and Liberty Steel Georgetown form the core of GFG’s North American business. GFG Alliance says it is actively pursuing additional acquisitions in flat products by 2020.
Lower nonferrous scrap prices compress margins for Schnitzer’s recycling business unit
First quarter fiscal 2019 earnings for Schnitzer Steel Industries Inc., headquartered in Portland, Oregon, show the effects of operating margin compression on the company’s Auto and Metals Recycling (AMR) business unit.
AMR’s operating income was $23 million, or $25 per ferrous ton, compared with operating income in the first quarter of fiscal 2018 of $35 million, or $44 per ferrous ton. According to Schnitzer, AMR’s year-over-year performance included benefits from 15 percent higher ferrous sales volumes and 18 percent higher nonferrous sales volumes. However, these increases were more than offset by operating margin compression resulting primarily from a 19 percent decline in average net selling prices for nonferrous products that outpaced the reduction in purchase costs for raw materials, the company says.
“In challenging market conditions that saw a significant decline in the net selling prices for our nonferrous products, AMR delivered solid operating performance with significant year-over-year improvement in ferrous and nonferrous volumes, demonstrating the benefits of our sales diversification strategy and our commercial initiatives to increase supply volumes,” Tamara Lundgren, Schnitzer Steel president and CEO, says in the news release annoucing the quarterly earnings.
In the Jan. 9 conference call to discuss the earnings, she said “diverging export and domestic ferrous prices that occurred toward the end of the quarter” also affected AMR’s performance. Lundgren added that this divergence in pricing “created pressure on purchase prices,” compressing margins.
“The ferrous and nonferrous export markets have been adversely impacted over the past six months by uncertainty surrounding tariff and nontariff barriers, regulatory changes in China and expectations of slower economic growth, all of which led to lower prices,” she continued.
Schnitzer has sought new export destinations for nonferrous scrap that has been displaced by China’s import regulations. In the first quarter of fiscal 2019, the company shipped 73 percent of its nonferrous volumes to destinations other than China, Lundgren added.
However, she said the situation regarding nonferrous scrap shipments to China could be eased by a recent announcement. “In late December, the Chinese government announced that beginning July 1, 2019, new regulations will recharacterize certain scrap from solid waste/scrap to raw or furnace ready materials. This change could allow China to deliver on its proposed 2020 solid waste import ban while still allowing Chinese industries to import needed clean grades of scrap.” Lundgren added, “This could be positive for recyclers like ourselves who produce high-quality products.”
According to the conference call, approximately one-third of the company’s nonferrous sales volumes are related to zorba.
“We expect to roll out advances to our nonferrous processing systems that will enable us to increase our throughput, lower our processing costs, increase our processing rates and created products with the metallic content sought by our customers around the world,” Lundgren said.
For the first quarter of fiscal 2019, which ended Nov. 30, 2018, Schnitzer reported earnings per share (EPS) from continuing operations of 57 cents and adjusted EPS of 58 cents. In the conference call, Lundgren said the company’s adjusted EPS for the quarter were the second highest first quarter performance for the company since 2011. Its EPS from continuing operations were 64 cents, while adjusted EPS were 63 cents.
The company’s consolidated financial performance for the quarter included corporate expense of $12 million, a decrease of $4 million from the prior year’s first quarter, which had included a charge for a legacy environmental liability of $4 million.
Century Aluminum to expand capacity in Kentucky
Century Aluminum Sebree LLC, a wholly owned subsidiary of Century Aluminum Co., based in Chicago, has announced two expansion programs at its Sebree, Kentucky, smelter to increase production of value-added and secondary aluminum.
The programs, which the company says it expects to be completed in the first quarter of 2019, have been designed to improve the smelter’s product mix by adding approximately 90,000 metric tons of additional billet production to the Sebree casthouse. The company also will increase the smelter’s overall output by adding 20,000 metric tons of additional secondary (scrap reprocessing) capacity. Following the expansions, Sebree is expected to produce approximately 230,000 metric tons of aluminum (primary and secondary) products in 2019, including approximately 175,000 metric tons of billet, the company says.
“These new expansion programs demonstrate our confidence in the future of the United States aluminum industry and the continued positive effects of the Trump administration’s Section 232 program,” says Michael A. Bless, president and chief executive officer of Century Aluminum.
“With the 150,000 [metric ton] restart of Century’s Hawesville (Kentucky) smelter nearing completion, we are now able to continue to reinvest in our plants to increase value-added production and enter the expanding secondary market. These programs, along with the previously announced technology improvement program at Hawesville, should ensure the continued competitiveness of these plants well into the future.
“This expansion is also a testament to the hard work of our excellent employees, and we are proud to announce that, as a result of the programs, Sebree plans to add nearly 50 new employees,” Bless adds.
According to Century’s website, Sebree’s location is situated in the middle of the Midwestern market, with a majority of the smelter’s customers within 600 miles of the plant.
Nucor eyes Midwest for new plate mill
Charlotte, North Carolina-based Nucor Corp. has announced plans to build what it calls a state-of-the-art plate mill in the U.S. Midwest. Nucor’s board of directors has approved an investment of $1.35 billion to build the mill, which the company says it expects to be fully operational in 2022 and capable of producing 1.2 million tons per year of steel plate products. Nucor’s existing mills are scrap-fed electric arc furnace (EAF) steel mills.
“This investment is consistent with our drive to continue delivering sustainable, profitable growth and superior returns for shareholders,” says John Ferriola, chair, CEO and president of Nucor. “Together with the significant share repurchases completed in 2018, the board’s decision to fund this high-return opportunity demonstrates our commitment to balanced capital allocation.”
Leon Topalian, who is the executive vice president of beam and plate products for Nucor, says, “By building this state-of-the-art plate mill in the Midwest—the largest plate-consuming area in the United States—we will enhance our ability to serve our customers in the region while also furthering our goal of meeting all the steel needs of our customers around the country.”
The new plate mill will produce cut-to-length, coiled, heat-treated and discrete plate ranging from 60 to 160 inches wide and in gauges from 3/16ths of an inch to 14 inches. Producing those dimensions will enable Nucor to supply plate products it does not currently offer.
Ferriola credits Trump administration tariffs as a factor in its investment. “This administration is taking the decisive and meaningful actions that American manufacturers need to compete on a level playing field,” he says. “Tax reform, continued improvements to our regulatory approach and strong trade enforcement are giving businesses like ours the confidence to make long-term capital investments here in the United States that create jobs and ensure our success for decades to come.”
China expands list of restricted scrap grades
The People’s Republic of China has announced that eight types of scrap metal will move from its “Catalogue of Solid Waste Not Restricted to Import as Raw Materials” list to its “Catalogue of Solid Waste Restricted to Import as Raw Materials” list. According to a news release issued by the Brussels-based Bureau of International Recycling (BIR), the items will be moved to the restricted list beginning July 1, 2019.
China’s Ministry of Ecology and Environment, Ministry of Commerce, National Development & Reform Commission and General Administration of Customs made the decision. The following items will be moved to the restricted list (per the terminology of China’s government):
- waste and scrap cast iron;
- waste and scrap alloy steel – other;
- waste and scrap of tinned iron or steel;
- waste and scrap iron and steel from machining (turnings, shavings, chips, millings waste, sawdust, filings, trimmings and stampings);
- waste and scrap iron or steel – other;
- remelting scrap ingots of iron or steel;
- copper waste and scrap – other; and
- aluminum waste and scrap – other.
BIR announced in April 2018 that China intended to enact import prohibitions for 32 types of recyclable materials starting in December 2018. Sixteen additional types of scrap—including stainless steel scrap, titanium scrap and scrap wood—were banned Dec. 31.
DAK Americas to acquire Perpetual Recycling Solutions
DAK Americas LLC, Charlotte, North Carolina, has signed an asset purchase agreement with Perpetual Recycling Solutions LLC to acquire Perpetual’s polyethylene terephthalate (PET) recycling facility in Richmond, Indiana. The operation has an annual capacity of 100 million pounds per year (or about 45,000 tons per year) of recycled-content PET (rPET) flake.
DAK Americas serves as a subsidiary of Alpek S.A. de C.V., a business group of Alfa S.A.B. de C.V., which describes itself as one of Mexico’s largest global industrial companies.
According to a DAK Americas news release, the Perpetual facility will complement Alpek Polyester’s current food-grade PET recycling capacity in Pacheco, Argentina, as well as its fiber-grade recycling joint venture plant in Fayetteville, North Carolina.
“The acquisition of Perpetual and additional rPET capacity demonstrates Alpek Polyester’s ongoing commitment to sustainable product offerings to meet growing customer and consumer demand for rPET content,” says Jon McNaull, vice president of PET resins at DAK Americas. “The addition of this facility will allow us to expand our sustainability initiatives.”
The terms of the agreement have not been disclosed, and the acquisition is expected to be completed in the first quarter of 2019.
Greif to purchase Caraustar Industries
Greif Inc., a Delaware, Ohio-based producer of industrial packaging products and services, has entered into a definitive agreement to acquire Caraustar Industries Inc., a recycled paperboard and packaging company based in Austell, Georgia, from an affiliate of H.I.G. Capital. The cash transaction is valued at $1.8 billion and is expected to close during the first quarter of 2019, subject to customary closing conditions, including regulatory clearances, according to a news release issued by Greif.
Caraustar produces uncoated recycled paperboard (URB) and coated recycled paperboard (CRB) with a variety of applications that include tubes and cores and a mix of specialty products. The company’s footprint includes more than 80 operating facilities throughout the United States. Its business lines include Recycling Services, Mill Group (URB, CRB and specialty paperboard products), Industrial Products Group (tubes and cores, construction products, protective packaging, adhesives) and Consumer Packaging (folding cartons, setup boxes, packaging services).
“Caraustar offers an exceptional strategic and cultural fit for Greif,” says Greif President and CEO Pete Watson. “Its complementary paper packaging and recycled fiber operations will drive significant free cash flow growth, improve balance and profitability within the Greif portfolio and increase Greif’s exposure to U.S. industrial and consumer end markets. Most importantly, Greif and Caraustar share the same dedication to providing industry-leading service to all customers. I am excited to welcome our new colleagues to the Greif family and look forward to working closely with them.”
“We are excited about [the Dec. 20] announcement and what it means for Caraustar’s customers and employees,” says Caraustar President and CEO Mike Patton. “Greif is a well-known market leader with a strong manufacturing base. Our customers will benefit from Greif’s customer service focus and broad product offering, and our employees will join a culture with a strong legacy for service and quality.”
For the 12-month period ended Sept. 30, 2018, Caraustar generated $1.4 billion in sales and earnings before interest, taxes, depreciation and amortization (EBITDA) of $174 million. Based on trailing 12-month actual volume, adjusted for current market conditions as of that date, the company’s run-rate EBITDA is $220 million, Greif says in its news release.
The transaction significantly enhances Greif’s scale and scope in the industrial packaging market, creating significant competitive advantages and long-term operating leverage. The company says the transaction is immediately accretive to earnings and its financial profile. Greif also says it expects strategic flexibility for capital deployment going forward.
The addition of Caraustar is expected to increase Greif’s U.S. sales to roughly two-thirds of total consolidated sales from approximately half for fiscal 2018, according to the company. In addition, the percentage of Greif’s sales from paper packaging will expand to approximately half of total consolidated revenue compared with 23 percent for fiscal 2018.
Greif says it also expects the transaction to generate annual run-rate cost synergies of at least $45 million within 36 months of closing through a combination of back office savings, transportation optimization, recycled fiber savings, operational improvements and other procurement-related activities.
Greif describes Caraustar as a market leader in URB and CRB with an attractive mix of industrial and consumer customers. Additionally, Caraustar sells a variety of specialty paper products that Greif says will complement its portfolio.
The company also says that Caraustar’s business offers close operational adjacency to Greif’s current mill operations and that its operational philosophy aligns with Greif’s as well.
Wells Fargo Bank, National Association, Goldman Sachs Bank USA and JP Morgan Chase Bank N.A. each have provided financing commitments for the transaction.
Goldman Sachs & Co. LLC acted as the exclusive financial advisor to Greif for the transaction.