CRU Aluminum: Progress Check on New Rolling Mill Investments

Novelis Breaks Ground

Official ground breaking took place on Novelis’ Bay Minette, Ala., mill on Oct. 7. The core leadership team is in place to build the plant. CRU understands that Ken McMillen, senior director of operations, has been tapped to oversee construction. McMillen is a highly experienced and capable mill operator with prior experience at Alcoa’s Tennessee operations before he joined Novelis in January 2021. They could not have found a better man to lead the effort.

Concurrently, Novelis is hard at work mapping flow paths of different scenarios to acquire the UBC and processed can scraps (“class scrap”) required to feed the 600,000-metric-ton-per-year plant.

Equipment orders are in place and initial commissioning appears to be on track for mid-2025

SDI Moving Ahead with Secondary Casting Plants and Rolling Mill

Steel Dynamics Inc.’s skill at delivering large capital projects, such as its Sinton, Texas, steel mill is getting put to good use in its aluminum venture.

The consensus is that one of the two standalone secondary casthouses supporting the mill is earmarked for Monterrey, Mexico. This will nicely leverage their Roca Acero and Zimmer SA scrap acquisitions. This locale will give them excellent access to the substantial UBC and processed can scraps generated in the fast-growing Mexican market. Production is expected in 2024.

The second standalone casthouse is not yet announced but the market is betting on it being in Arizona or Nevada to capture the West Coast scrap flows coming East. Production is expected in 2025.

SDI continues to have a nice head start on scrap sourcing by leveraging its Omnisource business unit. Long-time aluminum executive David Rosenblum is leading due diligence on the scrap side and has an excellent reputation in the market.

The company announced on Nov. 2 the location of the rolling mill to be in Columbus, Miss., where it already operates a steel sheet mill.

SDI is still aiming for 2025 commissioning of the mill and their track record says it will happen.

Manna Capital-Ball Corp. Have Gone “Radio Silent”

This leaves the 650,000-metric-tons-per-year Los Lunas, N.M., mill that Manna/Ball aimed for start-up in 2026 when announcing the mill May 26 of this year.

Manna and Ball’s announcement was greeted with great excitement. It represented the first major backward integration by a beverage can manufacturer (Ball) in partnership with a highly respected private equity firm (Manna), who had built their fortune in the fast-food industry. Ball is scheduled to take a 20% equity stake in the mill, while being the anchor customer for its 100% dedicated beverage can output.

However, things have gone quiet since the announcement, leading to speculation as to why there has not been more news on the venture:

• The near-term market conditions for beverage cans have weakened for all the participants in that market, not just Ball. This seems to be a function of stout price increases pushed through by the beverage companies in response to broad price increases for all their input costs. There has been an immediate pushback by consumers and unit volumes have suffered.
• This led Ball to accelerate the closure of two can plants in Phoenix and St. Paul, Minn. It may also have prompted them to temper their growth capital plans, including the rolling mill.
• From Manna’s perspective, the cooling of the beverage market may have also chilled their ability to syndicate part of their 80% stake amongst other investors.
• Finally, SDI’s announcement in July may have also raised questions about the market’s need for three mills to satisfy demand for beverage can sheet.

At this point, it would be very premature to speculate that the mill is off the table. Every month there is nothing reported raises questions as to whether the mill will be delayed beyond 2026.

Granted, it has only been five months since the announcement, but Novelis and SDI are “getting after it.” Both have big appetites for key mill equipment, plus the talent to both run the mill and buy the scrap to fully load the capacity.

Manna/Ball cannot afford to get too far behind in the process. They risk serious delays in getting critical equipment, finding the right people in an already tight labor market, and losing traction in the rapidly changing flow path of scrap coming to market.

By Greg Wittbecker, Advisor, CRU Group, Gregory.Wittbecker@crugroup.com