Millett: $2.2 Billion Aluminum Investment 'Incredibly Exciting'

Adding a high-quality, low-carbon flat-rolled aluminum mill to the Fort Wayne, Ind.-based company’s portfolio is “incredibly exciting” because it broadens SDI’s ability to serve both new and existing customers, he said.

The proposed $1.9 billion aluminum flat-rolled mill will be located in the southeastern US, with an annual production capacity of 650,000 tons of finished products. It will serve the beverage, automotive and common alloy sectors. Commercial production is expected to begin in the first quarter of 2025, the company said.

Aluminum sheet has been on SDI’s radar for many years. A significant and growing North American supply deficit in flat-rolled aluminum makes this an ideal time for SDI to enter the market, Millett said.

“I believe it’s low risk and as high as a margin-enhancing opportunity there is,” he said, noting that that investment would diversify the company’s product portfolio and provides protection against market cycles.

Two-thirds of SDI’s customers are already aluminum consumers, executives said during the call. That means “it’s a no-brainer” for the company to enter into a business that’s “significantly underserved,” Millet said.

“We see it as an adjacent business to our highly successful steel operations with considerable overlap in process, operation know-how, commercial approach, and raw material supply,” he added.

Recall that SDI owns metals recycler OmniSource Corp., which it acquired in 2007. All recycled aluminum requirements will be supplied through its recycling platform – the largest non-ferrous metals recycler in North America, Millett said. The investment in aluminum also capitalizes on SDI’s recent acquisitions and growth in Mexico.

Case in point: SDI in May acquired Mexican ferrous and nonferrous scrap recycler Roca Acero SA de CV. Those operations currently ship approximately 575,000 gross tons of scrap annually and have processing capabilities of roughly 850,000 gross tons per year.

Thus, the construction of two additional satellite recycled aluminum slab centers will be strategically located in the southwestern US and in Mexico.

Analysts on the call asked SDI why it had undertaken a greenfield project instead of acquiring an existing operation. Company executives said legacy costs, expenses, and the inefficiencies of aging mills in the aluminum industry would be counter to the company’s DNA.

“It’s what we do. We build higher-attuned quality assets that melt, cast, and roll – and then we operate them better than anyone else,” said Millett.

For Millett, a greenfield project leverages SDI’s “core strengths” – including design, procurement, and a construction team well-versed in such big projects. “They have constructed three very large mill assets and about 15 coating lines. We have great experience in fast-tracking projects and … mills that start up in short order.”

As was the case with SDI’s electric-arc furnace (EAF) sheet mill in Sinton, Texas, the company will be inviting customers to co-locate on its campus. Doing so will provide significant freight and yield savings as well as something of a closed-loop recycling system. That will dramatically reduce its carbon footprint, company executives said.

The aluminum flat-rolled mill has an expected production mix of 45% canned sheet, 35% auto, and 20% common alloy. SDI expects to first penetrate the common alloy/industrial market followed by the beverage container sector. SDI anticipates that automotive certification and automotive product to be fast-tracked.

“I expect structural aluminum products for automotive to be certified within our first year followed by higher qualities in the second and third years,” said Millett. “We are targeting exposed and unexposed products.”

There is a supply deficit driven primarily by beverage cans but supplemented by the automotive sector, which is constrained by its lack of supply for EV production, he said.

SDI estimates a 2 million metric ton supply deficit even when taking into consideration new capacity from Novelis Inc. as well as from Manna Capital Partners and Ball Corp. Those expansions are expected to come online near or around the same time as SDI’s project. Company executives also think the need for aluminum is growing.

“What excites me is we are probably entering a market that’s under-subscribed,” Millett said. “So to have all our differentiated attributes and to get into this business at a low-cost position is extremely exciting for us.”

Millett was also quick to note that the investment in aluminum rolled products is not due to a lack of opportunities in steel.

“Absolutely not,” Millett said. “We have ongoing growth activities with four coating lines – two galvanizing and two paint lines – currently under construction, and we see continued opportunities in steel.”

“This is not a change in strategy, it’s an alignment with the addition of an adjacent growth platform,” he added. “It’s not one or the other. They will grow in parallel.”

“We can’t overemphasize we have the raw material expertise and the raw-material base, and we have a large component of the customer base,” SDI CFO Theresa Wagler said. “We don’t have can customers today, but we will have them tomorrow. This is really aligned with what we do.”

By David Schollaert, David@SteelMarketUpdate.com