SYDNEY—An Australian steelmaker said it will spend roughly US$700 million to expand its U.S. business, joining American rivals that have outlined plans to add capacity domestically in the wake of President Trump’s import tariffs.
The North Star plant sells nearly all its steel to customers in the U.S. Midwest, in particular automotive and construction companies.
U.S. steel prices have fallen about a third since approaching a decade-high last summer, but BlueScope and other steelmakers are looking beyond the current weakness in commodity markets. Slowing global growth is deepening confidence among steel executives that the U.S. and other countries will resort to infrastructure spending to give their economies a boost.
Steel Dynamics Inc. plans to build a mill in the southwestern U.S. capable of producing 3 million short tons of flat-rolled sheet steel annually, which would make it one of the largest mills to open in the U.S. in decades. United States Steel Corp. is in the middle of US$1.5 billion program to repair and upgrade its facilities.
New low-cost capacity is being brought online at the expense of older steel mills. U.S. Steel, among the highest-cost producers of steel in the country, recently idled two blast furnaces in response to the sudden downswing in steel prices.
“We continue to be attracted to the U.S. as a place to build our business,” BlueScope Chief Executive Mark Vassella said.
Energy costs in the U.S. are roughly a third of what BlueScope pays in Australia, he said, and recent price increases introduced by U.S. mills appear to be sticking.
Since hitting a year-and-a-half low near US$500 a short ton on July 2, the price of hot-rolled coiled sheet steel in the U.S. has rebounded to approximately US$600 a short ton, according to S&P Global Platts’s price assessment.
Mr. Vassella said continued oversupply and the uncertainty caused by tit-for-tat tariffs continue to bedevil the steel industry. Also, prices for raw materials have been volatile.
“It’s part of the dilemma we have,” he said, referring to prices for steel, iron ore and coal. “The numbers are swinging wildly.”
For BlueScope, whose operations span from Australia and New Zealand to China, expanding in the U.S. was part of a strategy hatched in 2007 to reduce its reliance on its home market for profits. Since then, the steelmaker has continued to predict strong steel demand in the U.S., driven by construction and autos.
The company says its North Star business ranks fifth by volume in the production of hot-rolled coil in North America.
BlueScope’s growth in the U.S. included the 2007 purchase of IMSA Steel Corp. from Ternium SA for US$730 million and gaining of full ownership in North Star for US$720 million in 2015. It also exports more than US$200 million of metal to the U.S. each year from its Port Kembla steelworks south of Sydney.
BlueScope expects to finish construction work at the Delta plant in Ohio at the end of 2022, and then take roughly 18 months to ramp up to full production. There is the potential to increase capacity by another 500,000 metric tons later, but Mr. Vassella said that wasn’t a priority right now.
On Monday, BlueScope reported a 35% fall in annual profit reflecting one-time gains a year earlier. Stripping out one-time items, earnings rose 17% because of higher steel prices in the 12 months through June.