Steel Mills

NLMK Says No U.S. Investment While Tariffs are in Place

June 2, 2019

NLMK Group has backed off from plans to invest in its U.S. division due to the steel duties that were imposed in 2018. The Department of Commerce has denied the Group’s request for exemption from the 25 percent Section 232 tariffs so that it can supply its facilities with steel slab.

“Earlier we planned to upgrade rolled stock in the U.S. with substantial investment there, whereas now we understand that we should suspend that. We will wait, that is the matter of time, we will suspend investment in this regard until restrictions are removed,” the company’s main shareholder Vladimir Lisin told reporters at Russian news agency TASS on Friday.

NLMK USA relies on imports of slabs from its parent company in Russia and has said “it is difficult to impossible” to buy American-made slabs to use in production. The U.S. operations, which include NLMK Pennsylvania, NLMK Indiana and Sharon Coatings, require more than 200,000 tons of slab per month.

CEO Grigory Fedorishin said the company is struggling to source enough material to supply its operations in the U.S. “At the moment, we do not deliver Russian slabs there. At the moment, we buy Brazilian slabs and we partly buy U.S. slabs,” said Fedorishin.

“Now we live in the market, pretty much. We sit down every month or two and start deciding from scratch where we’re going to source (steel slabs),” he added.

NLMK Group had planned to invest $600 million in its U.S. operations in Pennsylvania to improve efficiency and costs. The proposed upgrade would have included a new walking beam reheat furnace. Although there was previously some concern that the U.S. facilities would be forced to close because of the tariffs, Fedorishin said the company currently continues to be committed to its U.S. market.

“We’re looking very carefully at our strategy to see how to make it effective,” he added.

Lisin said he expects a deficit of slabs in the U.S. will result in higher prices for semi-finished steel and for downstream products. A situation in which the U.S producer and consumer “will not be glad.”

Lisin did not rule out a future investment at NLMK USA should the trade environment return to normal.