Steel Dynamics bets on aluminium
US-based Steel Dynamics has begun construction on a flat-rolled aluminium plant in Mississippi. The project cost is estimated at USD 2.2 billion, with operations expected to get underway in Q1 2025. The site will have an output of 650,000 tons of low-carbon aluminium sheets per year.
The move has been received as an extraordinary event in the US aluminium industry for two reasons. Firstly, no new rolling mills have opened in the country for a long time. Secondly, a major steel producer is entering the aluminium market. In reality, however, Steel Dynamics’ interest in aluminium makes perfect sense.
Steel Dynamics is a ferrous metal industry leader in the US and can produce up to 13 million tons of carbon steel per year, ranking third in the US market by output.
The company is also a major purchaser of nonferrous scrap, and has been looking at processing options for some time. As far back as April 2011, Steel Dynamics signed an agreement with Spanish holding company LaFarga on the creation of SDI LaFarga, a joint venture to produce copper rod from copper scrap and waste. The founders invested an estimated USD 39 million in the construction and launch of SDI LaFarga, with Indiana chosen as the location for the enterprise.
Steel Dynamics’ involvement in establishing SDI LaFarga allowed it to generate additional revenue by processing copper scrap into products with significant added value. The project has been a success and SDI LaFarga remains in operation today.
In addition to copper scrap Steel Dynamics also collects aluminium, which explains its July 2022 announcement of a plan to establish a rolling mill with two satellite branches to remelt and cast aluminium scrap. The project concept is now beginning to come to life.
The emphasis on flat-rolled aluminium is no coincidence, as the product is experiencing high demand in the US automotive and food industries. The gap between supply and demand is over 2 million tons, with the shortfall covered by importing flat-rolled products. Steel Dynamics has therefore decided to profit from the gap in the market.
In theory the plan is sound, but Steel Dynamics must ensure that it has enough aluminium scrap and that orders remain stable until the construction of the rolling mill is completed. The possibility of orders falling cannot be discounted, as the global economy is at risk of sliding into a deep recession that would inevitably impact the USA. In this scenario, demand for flat-rolled aluminium would underperform current forecasts.
