A Sign Of The Times: Steel Mill Resurgence

November 2013, Vol. 240 No. 11

Jeff Share, Editor

One of the best ways of gauging the strength of an industrial economy is watching the return of the steel industry. As the shale revolution continues to evolve in the U.S. and eventually Canada, owners of steel mills are restarting furnaces, expanding and building new facilities to fashion the new pipelines that will carry oil and natural gas to market.

With an eye on the burgeoning energy business, foreign businessmen with plenty of money also found that the economic recession enabled them to acquire industrial properties at bargain prices.

Many of those investors such as billionaire Roman Abraamovich, a part owner of EVRAZ, come from Russia, eager for the opportunity to make long-term investments in a stable environment. EVRAZ has eight steel manufacturing plants along with 18 recycling facilities in the U.S. and Canada.

This article was prepared shortly after EVRAZ reopened its Portland, OR spiral mill earlier this year. The mill was closed in July 2009 in the midst of the recession with corporate headquarter moving to Chicago. EVRAZ bought Oregon Steel in 2007 for $2.35 billion, the next year acquiring Delaware-based Claymont Steel and Canadian company IPSCO.

Although EVRAZ continued to operate a rolling mill in Portland, officials kept an eye on the spiral mill, determined to reopen it as soon as possible. EVRAZ announced in October 2012 that it would restart the Portland spiral mill.

Dave Coffin is vice president, Large Diameter & ERW Line Pipe Sales, responsible for all EVRAZ North America line pipe from 2-inch to 60-inch. He has been with company for 17 years and is equally knowledgeable about the opportunities and challenges facing pipe mill operators. He gives equal weight to both, but makes it evident that one issue remains lodged in the minds of most line pipe operators: cheap imported steel products from China subsidized by their government.

P&GJ: What is your background and what motivated you to work in the energy/pipeline industry?

Coffin:
I grew up in Northern California and played football at Azusa Pacific University while getting my undergraduate degree in business and my MBA. My dad was in the oil and gas business so working in the energy sector was a natural for me.

P&GJ: What is the history of the Portland mill and what led to the decision to re-open it?

Coffin: The EVRAZ Portland site has been in operation since 1928, supplying plate, coil, structural tubing and LD (spiral) pipe. The spiral mill was idled in 2009 due to market conditions, but was recently restarted because current market conditions and its geographic location are ideal to supply the oil and natural gas sector in the U.S. and Western Canada. A new double joiner was added after the restart.

P&GJ: Will you have any involvement with Keystone XL if that is approved, and are you looking at the prospect of large pipelines moving products to the west coast of Canada?

Coffin: The EVRAZ mill in Regina, Saskatchewan (Canada), has already supplied more than 400 miles of pipe for the Keystone XL project. If the pipeline is rerouted for any reason, we would expect to bid on the additional pipe needed. In regard to pipelines moving product to the west coast of Canada, we are actively involved with major players who are looking to strategically get their product to market.

We are also working with the steel industry to help ensure the U.S. government is aware of the importance of a reasonable and streamlined regulatory approval process for the construction and permitting of new facilities or modernization of existing ones.

P&GJ: How many workers does the plant employ? Has it been difficult to find skilled workers?

Coffin: EVRAZ Portland now employs about 600. That includes more than 100 employees now running the spiral mill. We expect to increase total employment to about 800 when the market strengthens further.

P&GJ: Can the plant be further expanded, and is this something you foresee in the next few years?

Coffin: We don’t foresee any expansions in the near future, but we are always evaluating opportunities to better serve our customers.

P&GJ: What is particularly unique about the pipe mill?

Coffin:
We’re a vertically integrated business so we have the flexibility to meet customer and marketplace requirements quickly and efficiently. We roll the steel and make the pipe at Portland, an economical process. And we’re geographically situated to cost-effectively serve all of the western U.S. and Canada, as well as select international markets.

P&GJ: Can you provide some background of EVRAZ ownership?

Coffin: EVRAZ North America was built on the legacy of several large American steel companies, brought together under one name. The largest of those were Oregon Steel purchased by EVRAZ in 2006, and Claymont Steel and the Canadian assets of IPSCO which were purchased in 2008. We are a wholly owned subsidiary of EVRAZ plc, one of the largest vertically integrated steel manufacturers in the world.

Pipe is just one of our businesses. We also have steelmaking, plate and long products facilities. In fact, we’re the largest producer of rail in North America, the second-largest producer of steel plate and the largest producer of OCTG pipe in Western Canada, in addition to being the largest producer of large-diameter pipe in North America.

P&GJ: How have you seen the pipe manufacturing business evolve in recent years and what is your outlook for the future? What is driving the business, particularly for large-transmission pipe?

Coffin: The North American energy renaissance is driving the pipe business – from the oil sands in Western Canada to the prolific shale plays in the Rockies and Bakken regions. Our continent can become energy-independent, and the most economical and safe way to move oil to the centers of commerce is through LD pipe.

P&GJ: What is the view of pipe mill operators of the future of shale plays?

Coffin:
The Marcellus and Utica shales are the most significant natural gas opportunities in North America. Unlike oil, this natural gas is located close to key markets in the Northeast. For that reason, there is less need for long transmission lines to feed those markets. With that said, until the midstream infrastructure is in place, there will continue to be increased demand for ERW pipe in these shale plays.

On the other hand, if our country moves forward with exporting shale gas, then there could very well be an increased need for additional transmission lines to boost gas capacity to the planned terminals.

P&GJ: The industry seems to be in somewhat of a lull, particularly for larger pipelines. Have you noticed any impact on EVRAZ?

Coffin: Natural gas is currently inexpensive, so the markets have been driven by oil, not gas. Gas pipelines tend to be larger in diameter, where liquids tend to be below 24 inches in diameter. And of course, we continue to be negatively impacted due to unfairly traded imports.

P&GJ: How competitive has the pipe mill business become?

Coffin: While there will always be a market for large-diameter pipe, five new spiral mills have opened in North America recently. In addition to that, the steel industry and EVRAZ are speaking out on the impact that unfairly traded imports are having on North American businesses.

On a level playing field, our free market businesses can compete with anyone. However, pipe imports from government-subsidized countries have increased in some cases by more than 100% in the past few years, and imports represented 55% of U.S. Oil Country Tubular Goods (OCTG) consumption in 2012, compared to 48% in 2011 (The OCTG Situation Report, US Department of Commerce).

The rate of imports is growing at a rate faster than market demand. Current U.S. trade laws are being circumvented or are no longer strong enough to deal with this activity. We need to ensure that new, stronger U.S. trade laws are implemented and enforced so the economic boost the energy renaissance will provide in terms of increased production and jobs are benefits that can be enjoyed by North American steelworkers.

P&GJ: What are mill operators doing differently today in regard to manufacturing pipe that can withstand the impact of heavier crude products such as the tar sands?

Coffin: It’s the same API pipe. There is no difference in the pipe requirements. However, EVRAZ has worked with major owner-operators to continually improve the metallurgy of its steelmaking process to improve pipeline safety.

P&GJ: When you meet with customers, what do they say are their greatest needs and challenges?

Coffin: Their biggest challenges are getting permits, quality pipe and maintaining traceability of product. That’s why we have 18 fully owned scrap operations in the U.S. and Canada. These facilities allow us to control our raw material access, ensuring less disruption in product availability; maintain supply chain control from scrap to pipe; and control our inputs and metallurgy to be technologically flexible.

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