IPSCO Inc. - Subsidiary Selects Site for State-of-the-Art Steelworks
23 December 1998
IPSCO Inc. - Subsidiary Selects Site for State-of-the-Art Steelworks
REGINA, SASKATCHEWAN--Dec. 22, 1998--IPSCO Enterprises Inc. (TSE:IPS) (Alberta Stock Exchange:IPS) announced today that its steelmaking subsidiary, IPSCO Steel Inc., has selected Mobile County, Alabama as the site for a new state-of-the-art 1,250,000 ton steelworks which will use steel scrap as its primary raw material.At an estimated cost of U.S. $425 million including capitalized interest and commissioning costs the new facility will directly employ some 200-250 persons while on-site service providers are expected to employ a further 200-250 individuals with total employment at full capacity to be approximately 450. Exclusive of interest and commissioning the project cost is estimated to be U.S. $395 million. The facility will produce discrete plate and coiled hot rolled plate and near plate used in such diverse applications as building and construction, bridges, barges, railcars, storage tanks, machinery and equipment, agricultural implements, and pipemaking.
IPSCO Enterprises said the facility, based on technology similar to its Montpelier, Iowa Steelworks, will primarily serve the U.S. Gulf states, the American region which in recent years has had the highest growth rate in steel consumption.
A final air emission permit has been obtained for the facility and construction is planned to start in the first quarter of 1999 with completion expected in approximately 24 months. Letters of intent have been entered into with major suppliers to the project.
IPSCO Enterprises said that in making the decision to proceed with the construction of the Alabama facility at this time it was well aware that the U.S. was currently faced with excess steel supplies due to an unprecedented level of imports at dumped prices. But by the time the new facility commences operation the situation should be normalized. In an initial trade case by 12 American companies including IPSCO Steel Inc. the International Trade Commission voted 6-0 at the preliminary stage in the industry's favor and the company expects the final results to confirm this finding. In addition IPSCO anticipates that other cases will be filed in the new year. Although imports in the last several months have amounted to about half of U.S. domestic steel shipments, in so-called normal times they have typically been in the neighborhood of 20 percent of apparent domestic consumption. "Our new mill is expected to displace imports in a region which has traditionally been a high user of imported steel. IPSCO's Montpelier Steelworks has shown that its inherent low cost and favorable economics should make it possible for IPSCO to compete in the U.S. midwest with fairly traded steel from anywhere in the world and we hope to do the same in the Gulf region," said Roger Phillips, Chairman and Chief Executive Officer of IPSCO Enterprises.
IPSCO Enterprises said the Alabama facility's location permits good truck, rail, and water transport for both incoming raw materials and outgoing finished product. IPSCO further stated that key power supply and rail transportation agreements had been concluded.
The company said that the decision to locate a plant in Mobile, Alabama was based on a series of factors such as the availability of a highly skilled workforce, competitive electrical rates, good transportation logistics for water, rail, and highway modes, and a tax and regulatory regime conducive to good business. "We were highly impressed by the attitude of both the people in the Alabama business community and in government that we had dealings with. The state is certainly open for business," said Phillips.
IPSCO Enterprises said the project would be financed through equity infusions and loans from its parent company IPSCO Inc. of Regina, Canada. IPSCO Enterprises is IPSCO Inc.'s American holding company which, through various wholly owned subsidiaries, operates a 1,250,000 ton per annum steelworks in Montpelier, Iowa, two steel pipe mills in Nebraska and Iowa with a third just being completed in Blytheville, Arkansas, and coil processing operations in St. Paul, Minnesota and Houston, Texas, the latter under construction. Parent company IPSCO Inc. operates extensive steelmaking, pipemaking, and coil processing facilities in Canada.
IPSCO Enterprises Inc. stated that IPSCO Inc. had recently completed, through a wholly-owned subsidiary a $100 million U.S. financing through the private placement of junior subordinated notes. The junior subordinated notes mature on 31 December 2038, subject to the company's right to redeem the notes at any time, and have an interest rate of 8.5 percent for the first 10 years (with incremental increases in the rate every five years thereafter). IPSCO Inc. has guaranteed repayment of the junior subordinated notes. The $100 million U.S. junior subordinated notes are subordinate to a recently completed $150 million Canadian issue of preferred shares by IPSCO Inc. These financings, coupled with bank lines and projected corporate-wide cash flow, make the company feel well positioned to undertake construction of the Alabama steelworks, a spokesman said.
IPSCO Enterprises Inc. said that while profitable, IPSCO Inc. expected it would see consolidated profits somewhat lower in 1998 than the 1997 level as the result of lower sales of oil country tubular goods (reflecting reduced oil well drilling activity) and high levels of imported steel into North America. In making its cash flow projections it said it expected its 1998 fourth quarter to be down from last year's record fourth quarter and lower than the third quarter of 1998. The earnings drop due to imports is expected to reach its maximum in the fourth quarter 1998 or the first quarter of 1999. Coupled with an anticipated modest pickup in gas well drilling in Canada, IPSCO consolidated profits are expected to improve gradually on a quarter-by-quarter basis but it would not be realistic to expect that the negative impact of the import surges would be overcome in less than 12 months.
Parent company IPSCO Inc. is listed on the New York and Toronto Stock Exchanges under the symbol IPS.
This news release contains forward looking information with respect to IPSCO's operations and beliefs. Actual results may differ from these forward looking statements due to numerous factors, including those discussed in IPSCO's 1997 Annual Report for its fiscal year ended December 31, 1997.
FACT SHEET
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IPSCO Enterprises Inc: Delaware Corporation
IPSCO Enterprises Inc. acts as holding
company for IPSCO Inc.'s American
operations including:
IPSCO Steel Inc.
IPSCO Tubular Inc.
Paper Cal Steel Co.
Paper Cal Steel (Texas) Co.
IPSCO Sales Inc.
IPSCO Investments Inc.
IPSCO Inc.: Parent company
Listed on New York Stock Exchange
Market capitalization places it
in financial range between Bethlehem
Steel and Steel Dynamics
Common Shares - 40.7 million
outstanding
Preferred Shares - 6 million
outstanding
Debt - Cdn.$440 million long
term as at 30 Sept 98
29 percent of total
capitalization as at 30 Sept 98
Operates 6 facilities in Canada
(in addition to its scrap procurement
operations) and in addition
to IPSCO Enterprises Inc.
NEW MILL DATA
Location Mobile County, Alabama
Cost US $425 million including capitalized
interest and commissioning costs
Product Ranges: Coil Plate - 0.090" to 0.750";
up to 96" wide
Discrete Plate - 0.1875" to 2.0";
up to 120" wide
Technology: Twin Shell AC Electric Arc Furnace,
Twin Station Ladle Metallurgical
Furnace, Continuous Slab Caster,
Reheat Furnace, Steckel Rolling Mill,
In-line discrete plate finishing equipment.
Employment: 200 to 250 directly,
plus 200 to 250 on-site
service providers with total
employment to approximate 450
at full capacity
Project
Construction: Commences first quarter 1999
for approximately 24 month period.
Major Contractors: Electric Arc Furnaces -
(with whom Letter Fuchs Systems Inc. (mechanical and electrical)
of Intent has been
finalized) Continuous Slab Caster -
Voest Alpine Industries Inc.
(mechanical and electrical)
Reheat Furnace -
Techint Technologies Inc.(ITAM)
(mechanical and electrical)
Steckel Rolling Mill -
Danieli Corporation (mechanical)
Plate Finishing Equipment -
Danieli Corporation (mechanical)