SERVICE SECTOR / IPSCO Inc. - Alabama Site of New Steelworks
IPSCO INC.
ASE, TSE, NYSE SYMBOL: IPS
DECEMBER 22, 1998
REGINA, SASKATCHEWAN--IPSCO Inc. announced today that its U.S.
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 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 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 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 favour 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
neighbourhood 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
favourable 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, President and Chief Executive Officer of IPSCO.
IPSCO 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.
The company stated that it 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. 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 operates extensive steelmaking, pipemaking,
and coil processing facilities in Canada and the United States.
IPSCO Inc. said that while profitable, 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.
IPSCO Inc. is listed on the Toronto and New York 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 û 0.090" to 0.750";
up to 96" wide
Discrete Plate û 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)
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