BlueScope Cranking Up North Star HRC Expansion, Eyeing CR and Coated

Once that is complete, North Star BlueScope will account for approximately 5% of total annual US flat steel production, its Australian parent company said.

 That status update was provided when BlueScope Steel Ltd. released fiscal year (FY) 2022 earnings results on Monday, Aug. 15.

A host of US EAF sheet mills have already added or are adding new capacity to the market. SMU maintains a list of those expansion projects here.

Still Growing

“We have grown significantly in a short space of time, and despite the Covid pandemic. Our growth ambitions continue,” BlueScope said of its US strategy in commentary provided with earnings figures.

The North Star expansion project included adding a third EAF and second caster. BlueScope expects the facility to gain another 550,000 short tons per year of hot-rolled coil capacity from debottlenecking.

The mill sells approximately 90% of its production in the Midwest, with 50% of its sales going to the automotive sector, 35% to construction, 10% to manufacturing/industrial, and 5% to agriculture.

The company said it would further expand its reach with its $500 million acquisition of Coil Coatings, previously owned by Cornerstone Building Brands.

Coil Coatings has since been renamed BlueScope Coated Products (BCP) and is the second largest metal coil painter in the US with annual painting capacity of roughly 990,000 tons. BCP can paint both steel and aluminum substrate, BlueScope said.

BlueScope in an investors’ presentation said the BCP deal opens the possibility of offering a full suite of flat-rolled steel products. The company currently makes hot-rolled coil at North Star and paints steel at BCP. Future opportunities are in cold rolling and metallic coating, the company said. (Think galvanized and Galvalume, for example.)

On the upstream side, BlueScope noted its 2021 acquisition of scrap recycler MetalX. That $240 million deal landed the steelmaker recycling businesses in Waterloo, Ind., and in Delta. A third location in Ohio was added in August in a deal valued at $80 million, the company said.

BlueScope has combined those recycling operations under the umbrella of BlueScope Recycling and Materials (BRM). BRM is focused on improving the quality and quantity of obsolete scrap so that North Star can reduce the amount of prime scrap – which is typically higher cost – in its mix.

Also on the raw materials front, BlueScope said it had entered a multi-year contract with Cleveland-Cliffs for hot-briquetted iron (HBI) from the rival steelmaker’s HBI plant in nearby Toledo, Ohio. BlueScope said the deal was aimed at diversifying its metallics supply arrangements.

North Star, like other EAF sheet mills, has relied on imported pig iron. Domestic mills in general have been looking for alternatives to Russia and Ukraine – which previously accounted for 2/3 of global pig iron production.

BlueScope said war-related disruptions saw it shipping plate iron from its facilities in New Zealand and the Pacific Islands to North Star to make up for pig iron shortfalls.

The Numbers

North Star reported underlying earnings before interest, taxes, depreciation, and amortization (ebitda) of $1.45 billion in its fiscal ’22, up 155% from $567.5 million in fiscal ’21 on sales revenue that rose 81% to $3.26 billion over the same period.

North Star’s financial metrics are reported in US dollars. BlueScope Steel, which is based in Melbourne, reports complete financial results in Australian dollars (ASD).

BlueScope Steel reported a net profit of $2.81 billion ASD in FY’22 (~$2 billion USD), up 136% from $1.19 billion in FY’21 on revenue that jumped 48% to $19.03 billion.

“This was an outstanding result, with tremendous performances across our business portfolio,” BlueScope managing director and CEO Mark Vassella said. “We saw continued strong demand for our steel products and solutions despite recent macroeconomic and geopolitical volatility.”

But BlueScope expects leaner times ahead. The company forecast underlying ebit of $800 million to $900 million ASD in the first half of its FY 2023. The reason: “significantly lower Midwest US HRC steel spreads and weaker Asian HRC steel spreads.”

Steel Market Update’s HRC price stands at $820 per ton, down 45% from a post-war peak of $1,480 per ton in April and down 58% from a 2021 peak of $1,955 per ton recorded last September. Spreads between HRC selling prices and scrap costs have also narrowed.

By Michael Cowden, Michael@SteelMarketUpdate.com