Industry expert calls Jax steel mill a 'good bet'
By Will Robinson Reporter, Jacksonville Business Journal Jan 5, 2018, 2:42pm
Jacksonville's 280-employee steel mill was among the Gerdau (NYSE: GGB) assets purchased by Commercial Metals Company (NYSE: CMC) this month. An industry expert told the Business Journal the facility is a "good bet" for CMC.
Jacksonville's 600-acre facility is more than 40 years old and transforms 100 truckloads of scrap metal per-day into steel rebar. Now is a good time to be a producer of rebar, according to Lee Keevican, managing director of Renaissance Partners and former general counsel to Standard Steel (Freedom Forge Corporation) and American Alloys.
"Rebar goes into construction. I think it's a good bet," said Keevican, noting White House efforts to pass an infrastructure plan and reconstruction efforts in storm-ravaged cities. "You can't build infrastructure without rebar."
The change in ownership shouldn't affect Jacksonville's facility, Keevican noted.
"Jacksonville will keep its jobs," he said. "They're [CMC and Gerdau are] both in the same business."
Gerdau Executive Vice Chairman André Gerdau Johannpeter said in a statement that the company sold the facility as part of an effort to focus on other types of steel production.
"We are selling the US rebar operations as part of our global transformation, in order to be more profitable in an extremely competitive steel market," said Johannpeter.
Keevican said this wouldn't have much impact on Gerdau's large footprint in North America.
"Gerdau is not going to go away," he said. "This [transaction] is really one large company trading out a facility with another."
There's one other reason now could be a good time to buy rebar assets: protective tariffs. Tariffs are currently in place to protect high quality steel, Keevican noted, but rebar, which is easily made from scrap metal, is not protected. It is currently cheaper for Turkey to buy American scrap metal, ship it to Turkey to manufacture into rebar and ship the rebar back to America than make rebar in the U.S., Keevican said.
U.S. steel manufacturers currently produce just a tenth of the steel produced by China, and the quality of Chinese steel has steadily improved, according to Keevican.
"If they get even modest protection, especially, from China, it can make money," he said. "If you combine the two [infrastructure projects and tariffs], that's why you would invest in a rebar facility today."