As Downriver steel furnace idles, another in the works
Detroit — As one steel furnace is idling Downriver despite the Trump administration's protective metals tariffs, a new one is in the works.
Nobilis Pipe, a new venture from steel trade veterans, is in the process of financing the construction of a new steel, nickel and titanium mill. The projected $950 million mill could create more than 400 jobs, including 300 in the skilled trades, and produce more than 50,000 tons of seamless pipes and tubes per year. The company hopes to begin operations in mid-2022.
CEO Brian Harroun says the 25% levies on foreign steel would benefit his business, but he doesn't support tariffs. And his plans in Downriver for a steel mill fully powered by green energy don't hinge on them.
The tariffs, though, encouraged "us to buy American again," said Harroun, who has an automotive background but has worked in the business of importing and exporting metals for the past 20 years. "There's a lot more focus on it than there has been for a while.
"I was starting to see a sector of the market where there isn’t enough supply available. If you need to get pipes in some of these mills you have to buy from, it might take 30 or 40 weeks and often from overseas. A lot of people can’t wait that long for a project."
The plans come after the Trump tariffs went into effect last year, sending steel prices higher; they've since dropped to more normal levels, said Phil Gibbs, a steel industry analyst for KeyBanc Capital Markets. The profits led major companies such as AK Steel Holding Corp., U.S. Steel Corp. and Nucor Corp. to announce capital expenditures into existing mills and future sites.
"There's a litany of projects on the board," Gibbs said. "The industry has taken the opportunity to use some of the proceeds from some of the profits over the past 12 to 18 months to reinvest in the industry. 'It's refreshing to see those investments going into American manufacturing,' that's what the president will say."
But in June, U.S. Steel said it would idle one blast furnace each at Great Lakes Works in Ecorse and River Rouge and another in Gary, Indiana, "to better align our global production with our order book." Great Lakes Works has an annual raw steelmaking capability of approximately 3.8 million net tons.
"We will resume blast furnace production at one or both idled blast furnaces when market conditions improve," the company added. It hasn't yet.
The move appears to address overcapacity and won't decrease the company's finished steel production shipments this year by much, Gibbs said, noting U.S. Steel's 76% capacity is below the industry average of approximately 80%.
Harroun says his electric arc furnace project is more specialized than those blast furnaces. Nobilis Pipe would create seamless pipes and tubes in stainless steel, nickel alloys and titanium ranging from a quarter of an inch to 16 inches, making it a one-stop-shop.
"Most mills will focus on a quarter of an inch to 2 inches, other ones from 6 to 8 inches," he said. "There's almost no quarter-inch to 16 inches mills. We’ll be able to do that under one roof. There's room for another domestic U.S. producer."
The pipes likely would support the defense, aerospace and oil and gas industries with pipes that can withstand high temperatures and corrosive environments, Harroun said.
As a steel mill based in Michigan, the company could have an advantage entering businesses like the defense sector, U.S. Rep. Elissa Slotkin said during a recent panel on the defense industry at Automation Alley.
"Anything where we've seen industry head toward China, that's going to be a profound advantage," the Democratic congresswoman from Holly said. "Any country, any military, you never want to be reliant on foreign sources, especially for base materials, for foundational commodity materials."
Nobilis Pipe is working with a couple of communities and the Michigan Economic Development Corp. to identify 100 acres for the project, Harroun said. The company expects to have the $300 million secured in financing it needs to buy land, break ground and place a deposit on equipment by the end of the year.
It hopes to obtain more favorable deal terms because of its mission for a net-zero carbon footprint, Harroun said. The company hopes to cover its planned 1 million-square-foot mill with solar panels to support about two-thirds of its power and supplement that with wind energy or some other type of renewable energy source. Harroun estimates relying on renewable energy could save the company around 25% of costs over time.
"We started at 50% using solar power or wind power, and then our partners asked us, 'Why stop at 50%?'" Harroun said. "We should be able to generate that kind of energy consistently. If you can, why would you not do it? It pays for itself."
Nobilis Pipe also looked at Toledo for the mill, but as a Michigan native, Harroun wants to see it built here: "We need the manufacturing know-how and quality found here."