Steel mill investment in Lowndes County a gamble that paid off
Sep. 30—COLUMBUS — There were plenty of doubters in early 2005, when discussions emerged that a $650 steel mill employing 450 people might be built in Lowndes County.
Joe Max Higgins, the executive director of the Golden Triangle Development Link, ignored them at the time. But defending his decision to bring in veteran steel industry executive John Correnti to build what was then SteelCorr became challenging when Correnti's promises were taking time to fulfill.
"When Correnti came, he said when we get the steel mill, we'll get these customers, these suppliers and these processors," he said. "We got the mill, but we didn't get some of those things initially."
The mill broke ground in October 2005 and opened two years later, with the promise of 450 jobs in Lowndes County paying $70,000 for production workers.
The mill was financed with senior debt facilities of $345 million, a $25-million USDA loan, $15 million for water treatment facility financing, $18 million in vendor financing and a $75-million company bond issuance, necessitating the state to commit $25 million through an infrastructure grant, and a $12-million Lowndes County grant. If needed, the state would provide a $75-million contingent loan.
SteelCorr said related industries and services would generate another 1,000 jobs in the Golden Triangle. Employment of up to 1,500 workers would be needed to build the plant over 16 to 20 months.
"Slowly but surely those jobs started coming in," Higgins said.
Mississippi Steel Processing built on-site with the mill and has expanded three times; New Process Steel has doubled its facility. In July, Altex Tube said it would open a $108 million plant.
"When you factor in what the mill has done since 2007, what was supposed to be originally a $650 project was already at $1 billion after the first phase," Higgins said. "Not long after it opens, they added another melt line, taking the investment up to $1.65 billion. A few few years later they built a $110 million paint line. Last year they'd finished a $250 million expansion to the galvanizing line. So the mill itself is at $2 billion."
SteelCorr became SeverCorr in October 2005 when Russian steelmaker Severstal kicked in some $260 million in financing. In early 2008, the company bought out Correnti's shares in the joint venture, along with other senior management, and the plant was renamed SeverSteel. Eight years ago, Steel Dynamics purchased the mill for $1.65 billion.
Today, the Steel Dynamics employs some 850 people in Columbus, and about the same number are employed either directly or indirectly by the steel industry there.
"The steel mill was already an exciting project, and we're working on another project with them on site," Higgins said. "If we land this project, then we will fill up the entire site."
The TVA megasite upon which Steel Dynamics sits covers some 1,400 acres.
"It's a good problem to have," Higgins said.
"But we still have land out there that available. Steel Dynamics has invested year after year, and we've got a project going out there all the time," he added. "We've got some money from the ARC and the state legislature, about $4.2 million, to expand their rail yard ... we could assign somebody just to work with the mill and the projects they bring."
Correnti, was a veteran steel industry executive, had been pitching his idea for a new steel mill in 2004, and Arkansas, Louisiana and Missouri were the leading contenders. The strongest appeared to be Osceola, Arkansas, which already was home to two Nucor mills.
Correnti, a longtime Nucor exec who was CEO from 1996-1999, left the company and immediately sought to build his own mills. Columbus was not on anyone's radar but Correnti apparently. The deal was all but done in Arkansas, but according to Higgins, Correnti was unable to get a competitive power rate. So he showed up in Columbus to pitch his idea to Higgins at the right time. TVA had certified the Columbus site as one of its first two megabytes, and Correnti shifted his plans to Columbus.
The move has paid dividends.
Higgins said a recent analysis showed that the steel mill has provided the greatest ROI to the state so far, compared to the likes of Toyota, Yokohama Tire and Continental Tire, all billion-dollar investments or more.
"That's not saying those other projects weren't important, too, but we didn't incentivize the mill very heavily because this was a start-up and there was risk," Higgins said. "Now that Steel Dynamics owns it the financial risk just isn't there because they have deep pockets and they invest and reinvest. So what was a bit of a gamble with John and his team starting this thing from scratch now is a Fortune 500 company that's very good at what it does."
