***REVISITED: US steel sector falls out over Anshan-SDC jv
Anshan Iron and Steel Group’s investment in Steel Development Company (SDC) wasn’t the first time a Chinese company had taken a stake in a US steelmaker
Anshan Iron and Steel Group’s investment in Steel Development Company (SDC) wasn’t the first time a Chinese company had taken a stake in a US steelmaker. The 14% share it eventually bought wasn’t even the largest.
But, when it comes to steel, the USA’s relationship with China is fractious.
US mills have filed a litany of anti-dumping complaints against Chinese steelmakers. And industry leaders seize most opportunities to make political body-blows on trade policy.
Breathy forecasts from US industry experts of a Chinese government-funded steel tsunami, poised to hit American ports sometime soon, have not helped.
Anshan’s investment in SDC could have been interpreted as a thawing in the tortured relationship between the two sectors. But the news raised hackles in the USA.
SDC’s proposition is clear. The company plans to build a 350,000 tpy rebar micro-mill in Amory, Mississippi. The mill will be based on groundbreaking technology supplied by Italian plantmaking specialist Danieli.
The facility has half the footprint of a conventional mini-mill, and is able to convert scrap into finished products in just 67 minutes. This is made possible by coupling a single strand billet caster directly to an 18-stand rolling mill.
This setup is flexible, boosts yield and reduces costs. If the first plant is successful, SDC plans to launch a second, and maybe a third.
When the deal was announced, though, SDC’s strategy took a backseat. The investment triggered a politically charged controversy that, for a time, showed all the signs of growing into a full-blown international relations crisis.
Perplexing really, when you consider Anshan was never going to take a share of more than 20%.
But this was a big enough share to get politicians excited. The backlash from representatives on both sides of the house and from some parts of the industry was severe.
They claimed the investment was politically, rather than commercially, motivated. The China Iron & Steel Assn (Cisa) even got involved.
“Cisa encourages domestic steel mills to go and invest overseas, but all the negotiations and mediations are carried out by the company, as an independent entity,” a Cisa spokesman said.
This did little to reassure the US lobby.
The US Senate’s Congressional Steel Caucus asked the Committee on Foreign Investment in the United States (CFIUS) to examine the proposal – a pretty strong step.
The CFIUS is an inter-agency committee that reviews deals which might result in foreign control of US businesses. It also determines their impact on national security.
The organization is fast acquiring a track record of discouraging Chinese investments.
“We believe the investment allows the full force and financing of the Chinese government to exploit the American steel market from American soil,” the Steel Caucus said in a letter to US Treasury Secretary Timothy Geithner.
The deal could give Anshan “access to new steel production technologies and information regarding American national security infrastructure projects,” the caucus said.
Anshan Steel’s listed unit was planning the investment, but the steelmaker is ultimately government-controlled.
But, otherwise, the caucus’ reasoning was flawed.
Take the “new steel production technologies” it referred to in its letter to Geithner. The technology SDC will use was developed in Italy by Danieli. This technology is not proprietary to the US, and is available to companies in other regions – including in China.
Presumably, if Anshan Steel really wanted to get its hands on Danieli’s latest long products engineering, a ticket to Udine (where Daniele is based) via Venice and a cheque book would be all that was required.
The caucus didn’t do itself any favours here.
“It is clear that the real authors of this letter are not members of the Congressional Steel Caucus but rather the domestic steel industry,” said Peter Brebach of Iron Angels of Colorado in a letter to MB sister publication AMM.
“An investment will be made to build one, two or more so-called micro-mills in the US for the production of steel concrete reinforcing bar, and someone sees this as a double threat,” he continued.
“Rebar is rebar, and its applications are limited to the reinforcement of concrete – the technology to be used was not developed in the US and can be bought on the open market.”
The Treasury investigation went no further. In a joint-venture agreement finalized in September, Anshan became a 14% shareholder in SDC.