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New Owner of Steel Mini-Mill Now Banking on Expansion

Posted on: Wednesday, 3 August 2005, 15:00 CDT

Aug. 3--PITTSBORO, Ind. -- When Qualitech went bankrupt in 1999 and closed its steel mini-mill the following year, residents of this Hendricks County town wondered how long the plant would stand idle and how many of the 300 jobs would return.

Since it reopened last year under the ownership of Fort Wayne-based Steel Dynamics, not only have all the jobs returned, but the mini-mill is churning out steel bars for engine crankshafts like never before.

And its success may generate an additional 300 jobs at a neighboring industrial park.

Now that the mill's troubles are behind it, Steel Dynamics is building an $8 million facility on the site where bars can be straightened, machined to perfect roundness, inspected and cut to length for customers.

Steel Dynamics also is seeking permits to develop an industrial park next door that would attract fabricators and other businesses that use steel bars.

General Manager Glenn Pushis predicts 300 more jobs could result. Those jobs would pay about $50,000 a year. Jobs at the mill itself average about $82,000 a year in wages, bonuses and stock options.

Under Qualitech, which opened the mill in 1997, the situation wasn't as rosy.

New technology that involved adding sulfur dioxide to the melted scrap metal failed.

A weakened economy and cheap foreign imports depressed steel to historic lows of $200 to $300 a ton before rising demand in China and President Bush's temporary limits on imports in early 2002 drove up the price.

More than a dozen such mini-mills in the United States sank into bankruptcy early in the decade.

When Qualitech went bankrupt, taxpayers lost more than $40 million in state incentives used to lure the plant to Indiana.

Steel Dynamics reopened the mill in January 2004 after wresting it away from rival bidder Nucor Corp. for $45 million in 2002. Unforeseen troubles swelled renovation costs to $85 million from an anticipated $75 million. Still, Steel Dynamics spent $130 million on a facility Pushis estimates would cost $400 million to build new.

Pushis is happy with the red-hot results.

Aided by steel prices doubling from two years earlier, the mill ramped up in January 2004, turned its first profit in April and generated $40 million in earnings on $218 million in sales for the year.

New York steel analyst Charles Bradford said the achievement is all the more noteworthy when considering Steel Dynamics still has no contracts, only spot sales to companies as the products are needed.

Pushis said contracts with automakers will be sought soon. Norman Samways, a Pittsburgh consultant and former steel researcher who writes articles for industry trade publications, said the Pittsboro operation is benefiting from management knowledge gained at Steel Dynamics' mini-mills in Butler and Columbia City, both in Indiana.

The Pittsboro renovation improved efficiency by simplifying scrap handling and tweaking adjustments that control the molten metal, Samways said.

The product mix also was broadened to include concrete reinforcement bars that can keep the mill humming when orders slow for the expensive special bar products.

The mill is doing so well that others may follow its lead.

"Once people see them making that kind of money, other people will try to emulate what they do, and then you get a lot of competition," said Bradford, the steel analyst.

STEEL DYNAMICS INC.

--Headquarters: 6714 Pointe Inverness Way, Suite 200, Fort Wayne

--President: Keith Busse

--Products: Carbon steel in the forms of hot band, cold-rolled, structural, rail and bar

--Indiana locations: Butler, Columbia City, Jeffersonville, Pittsboro

--Other location: Lake City, Fla. (steel fabrication unit)

--2004 revenue: $2.1 billion

--2004 net income: $295 million

STEEL DYNAMICS BAR PRODUCTS UNIT

--Location: 8000 N. County Road 225 East, Pittsboro

--Vice president and general manager: Glenn Pushis

--Products: Steel bars for axles, engine crankshafts and other precision needs; reinforcement rods for concrete.

--Employees: 300

MINI-MILL HISTORY

--June 1998 Qualitech begins operations, expecting to produce 50,000 tons a year of high-quality steel bars for auto and other industries.

--March 1999 Blaming cheap imported steel and equipment problems, Qualitech files for Chapter 11 bankruptcy protection from creditors, triggering an auction of the mill. The firm lists $486 million in liabilities and $247 million in assets.

--April 1999 Qualitech ceases operations and begins layoffs.

--June-July 1999 Lenders take over after bids from five companies including Steel Dynamics of Fort Wayne, and Ispat Inland Steel, of East Chicago, are deemed too low.

--January 2001 Steelmaking ends.

--March 2002 President Bush announces a plan to levy 30 percent tariffs on cut-rate imported steel, raising hopes of reviving the mill.

--June 2002 North Carolina-based Nucor Corp. offers $37 million to buy and reopen the mill.

--July 2002 Hendricks County Redevelopment Commission approves for Nucor a 10-year property tax abatement, but Steel Dynamics announces a definitive agreement to buy the plant for $45 million. Qualitech accepts Steel Dynamics' offer, triggering a Nucor lawsuit against creditors.

--January 2003 The Nucor suit is settled, clearing the way for Steel Dynamics.

--January 2004 Steel Dynamics restarts the mill.

Sources: Star archives

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STLD, MT, NUE,

Source: The Indianapolis Star

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