Above: At its Roanoke Bar Division, Steel Dynamics installed finishing and bundling equipment for rebar, and is able to slit rebar in sizes #4, #5 and #6. The mill serves many independent fabricators.

Production efficiencies, greater capacity allow Steel Dynamics Inc. to better serve independent fabricators of rebar, merchant shapes

September 2018 - In a crowded market with overcapacity in some product lines—especially bars—often it’s the niche strategy that pays off in the long run. That’s the

expectation among leaders and the rank-and-file sales force at Steel Dynamics Inc. SDI is beginning to see results from a capital expansion last year at its Roanoke Bar Division, Roanoke, Virginia, and is working on the next project at its Structural and Rail Division in Columbia City, Indiana.

The Fort Wayne, Indiana-based steelmaker spent $38 million at Roanoke, installing a new reheat furnace and finishing area. It allows the plant to consume its excess melting and casting capability to raise rolling mill capacity from 500,000 tons to more than 600,000 tons a year.

Roanoke

Parker Arthur, sales manager at the Roanoke Bar Division, said the new reheat furnace, which came on line in May, “allows us to produce more tons per hour.” In addition, SDI installed more finishing and bundling equipment for rebar, and is able to slit rebar in sizes #4, #5 and #6.

He surmises the breakdown of production will be one third rebar and two thirds merchant products.

SDI’s Roanoke Bar Division installed a new reheating furnace from SMS Group and a new finishing area, which enables the steelmaker to increase its rolled capacity by 20 percent to over 600,000 tons per year.

“When we looked into this expansion, we first studied merchant—what we could produce here. Making larger angles and flats cost more and the market was fairly saturated,” says Arthur. Domestic merchant bar demand, in a good year, totals 5.5 million tons. However, “rebar demand should be above 9 million tons this year. It’s a bigger market. So it was a calculation of the demand versus the dollars involved.”

The strategy is also rooted in geography. There are only two U.S. mills producing rebar in the Northeast, one in New Jersey and the other in upper New York state. “So we feel the Northeast market is ripe and could use additional domestic capacity,” Arthur says.

SDI produces sizes from #4 through #11. “Independent fabricators are a large portion of our customer base. We love to sell into that market. It should be a willing partner, since we aren’t competing against them,” meaning SDI does not own captive fabrication shops like many other minimills do.

Arthur says SDI will also serve as another channel of rebar supply to service centers. “Many distributors who were buying foreign are looking for domestic capacity.” He says the tariffs improve the demand picture. “We don’t mind competing with foreign but the pricing has to make sense.”

During SDI’s second-quarter earnings call with investors July 24, President and CEO Mark Millett reported that “virtually every domestic steel consuming sector is either already good or strengthening. The execution of some [SDI investments] resulted in increased capacity utilization of [all] our long product steel nodes to just over 90 percent.”

He says the company expects “a strong market penetration as we will be one of the largest independent producers of rebar in the middle Atlantic region. The plan is to increase rebar sales through the second half of 2018 to [an] 80 percent to 90 percent run rate.”

Columbia City

Rob King, sales and marketing manager for the Structural & Rail Division says, “Our business decision to enter into the rebar market is a strategic opportunity for profitable growth.”   .

SDI contracted Italy’s Danieli to build a mill at the Columbia City, Indiana, plant that will be able to produce 240,000 tons annually of compact spooled rebar coils.

The rebar size range will be #3 through #8, and a smooth bar size range from 3/8-inch to 1-1/16-inch in diameter. Danieli will also deliver a new billet welder, giving the capability to increase the standard coil size from 2.5 tons to a “jumbo” size of 5.5 tons each. Commissioning of the new line, estimated at $75 million, is expected during fourth quarter 2018.

Compact spooled coils greatly reduce twist, which is an inherent issue for the equipment attempting to uncoil, straighten, and cut rebar to length. Twist-free spooled coils add value to the final fabrication stages through less wear and tear on equipment and the products, King says.

SDI will also have the technology to cut straight lengths from these spooled coils for customers, but “it’s more efficient for the fabricator to use their own equipment.”

Forecast

“We foresee a good order book for rebar,” according to King. In addition to the new product form, there are additional benefits in terms of capacity utilization at the Columbia City plant. The facility rolls wide-flange beams, rail, and structural merchant products. The melt shop supports smaller opportunities with semi-finished blooms. “Rebar complements our portfolio. It will help bring this facility to capacity.”

SDI anticipates its first sales of rebar to occur during first quarter 2019.

Both the Roanoke and Columbia City projects were designed before the Trump administration announced tariffs on foreign steel. King concedes that “tariffs help, especially in the rebar market, but also with other products we sell.”

As Millett told investors recently, there is increased U.S. demand for structural products. Year over year, for example, structural imports fell by more than 20 percent through the first half of 2018, compared with the same six months of 2017. “Recognizing that a lot of that [volume] is rebar, it obviously plays well into our strategy to get into that marketplace.” MM