Steel Mills

Ternium CEO: New Hot Strip Mill a "Game Changer" for Auto

Written by Michael Cowden

SMU caught up with Ternium CEO Máximo Vedoya about the Latin American steelmaker’s plans for its new, $1.1-billion hot strip mill in in Pesquería, just outside of Monterrey, Mexico.

The new mill – also known as #4 Pesqueriasports capacity of 4.4 million tons per year. It rolled its first coils in May and Vedoya said it would be a “game changer” when it comes to Ternium’s participation in the automotive sector.

Vedoya, who was appointed CEO of Ternium in March 2018, is also president of the Latin American Steel Association (Alacero) and the Mexican Iron & Steel Producers Association (Canacero).

Below is a lightly edited version of his conversation with SMU.

What is the ramp up schedule for mill #4 Pesqueria? And what makes that mill unique vs. Ternium’s existing hot strip mills and vs other hot strip mills in North America?

Originally it was scheduled for June 1. But due to the hard work of our extraordinary team, we managed to be ahead of schedule. We ran the first trials successfully on May 18. You have to realize that this is very sophisticated equipment, so the ramp-up curve is going to be methodical. But to be honest, I am highly encouraged that we are ahead of the curve – so this is very good news. What makes this mill unique in North America is that it is the latest generation of conventional rolling technology, traditional slab thickness, with a full range of automotive and general industry applications. It is a mill that has not been built in North America in well over a decade. And it incorporates all the latest features of these modern, environmentally friendly, advanced steels of the future. During this process, we need to certify that it is capable of fulfilling all the different qualities and specifications. So, again, the ramp-up will take a while. But, as I said, today we are well ahead of the curve. And so we are very optimistic that our customers will have product available ahead of our original schedule.

What drove the decision to make this investment in the first place?

Since the beginning, Ternium has been investing in growing its offerings of ever more sophisticated products. Our industrial center in Pesqueria, which we opened in 2013, is the preeminent steel complex in North America. Its unique aspects: LEED certification for its environmentally friendly processes, automation, digitalization, and quality of products. I believe this complex sets the new standard in steelmaking. Keep in mind, Mexico is a net importer of hot rolled steel. At the same time, the steel-consuming industry here developed at a very fast pace, and it is as modern as any other in the world. This new mill closes this gap between what domestic mills in Mexico are able to produce and what sophisticated steel consumers here need. In short, we are supplying locally the steel that is needed today for these industries – as well as what will be needed in the future .

How does the new mill advance Ternium’s strategy for Mexico, for the U.S. and for any other markets the company might be targeting?

There are highly engineered products that our customers need that require a partner that is just as committed on the steelmaking side to be able to support their long-term investments. The certainty that they will have the supply for their own growth plans, for their own reshoring of manufacturing back into this region, is of utmost importance in selecting our region to be the location for those investments. Ternium also has had high-end finishing operations that support this industry. But we were missing, in part, the link between the upstream portion of this high-end steel and the downstream portion. Now we will participate in both.

Will the new mill allow Ternium to expand in certain markets and participate in new ones? Are there products you can make on this mill that you have not been able to make on other mills?

We will have the ability to continue to participate in some markets starting with double or triple widths, which will optimize the production process and allow better service from our part. For automotive, this is a game changer. As you know, we are very active in the automotive sector. But we were not in a position to roll certain sizes and grades on our own hot strip mills. Our new mill changes that and allows us to plan alongside our customers for the auto platforms of the future – without having to rely on any third parties for substrate. There are certain product attributes, even in the commercial sectors, that were outside of our scope. We will be able to make coils that have a large PIW (pounds per inches wide) – big coils that optimize our customers’ own productivity. We also will be able to make thickness, width, and grade combinations in energy-sector products that will help meet the ever-increasing environmental demands for energy transmission.

How will Ternium meet increased slab requirements to feed mill #4?

We are going to buy slabs from the market. But we also supply them, to a significant extent, from our own melt shop in Brazil. That is one of the most modern slab-making facilities in the world. The slab market is very tight, and there is a deficit in the region that will probably grow in the future. But the ability to supply the mill in part from our own production gives us the flexibility to offer our customers a full range of high-quality products at a very competitive cost. 

Is Ternium concerned about overcapacity, or at least increased competition, given, for example, that Steel Dynamics Inc. (SDI) is starting up a new mill in Sinton, Texas, in a few months?

Global overcapacity is always a concern. But, regionally, the USMCA market is net importer of flat steel products, with the potential for increased reshoring in the future. In this scenario, it seems to me that the steel consumption in the region will grow. On top of that, these new plants that are coming onstream in the U.S. and Mexico all have something that makes them unique. These are new investments with high-end new technology, making steels of the future, in an industry that happens to also have old plants that cannot keep up with the stringent customer and environmental requirements of industry and government. High-tech steel production in the region is good for customers and should give them confidence to increase long-term investments in the region.

What comes after this project? Will Ternium increase its physical footprint elsewhere, and what kind of projects do you think might come in the future?

Our track record reflects that we are continuously looking at and analyzing opportunities to grow either by investing in new capacity in our facilities or by acquisitions. We do this after a long-term and profound analysis. And I expect that to continue.

By Michael Cowden,

Michael Cowden

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