Heading South: U.S. Steel Delivers Another Blow to Detroit

Yet another indication that America’s South continues to lure the steel and auto parts industry.

An image showing blast furnace being tappe. Source: U.S. Steel

An image showing blast furnace being tapped. Source: U.S. Steel

U.S. Steel is investing further in the South; the Pittsburgh-based steelmaking company has approved two capital investments – a technologically advanced electric arc furnace (EAF) steelmaking facility and a tubular products coupling factory. Both projects – situated near Birmingham, Ala. – are valued at $277.5 million. This is yet another blow to Detroit and an indication that America’s south is continuing to lure the steel and auto parts industry.

“These investments will directly support U. S. Steel’s ongoing transformation journey,” says President & CEO Mario Longhi. “Together, these projects will enhance our operational flexibility and allow us to serve our customers better, two critical steps in creating shareholder value.”

The purpose of the new Alabama facilities 

The EAF facility is part of a larger initiative called The Carnegie Way, which aims to enhance the company’s competitiveness and improve things like operation flexibility and cost structure. Similarly, the tubular coupling facility plays a big role in U.S. Steel’s plan to become a key domestic player in the oil country tubular goods (OCTG) market. The facility will manufacture couplings for all of the company’s premium connections (USS Liberty FJM®, USS-Patriot EBM™ and USS-Patriot TC™) for its customer base in the energy industry. This seems like a questionable time for the company to invest in OCTG products considering the current state of oil prices.

U.S. Steel's existing facilities in Alabama. Source: U.S. Steel

U.S. Steel’s existing facilities in Alabama. Source: U.S. Steel

Why manufacturing companies are heading south

The construction plan has already been authorized by Jeffrey County, which has provided undisclosed economic incentives to U.S. Steel. There’s no doubt these incentives influenced the company’s decision to choose Alabama. Another likely influence is the Right-to-work law that governs many southern states, which prohibits union security agreements. The economic incentives and the Right-to-work legislation, coupled with low operating costs, are making the south a highly competitive alternative for manufacturers to set up shop.

The phenomenon of moving south is anything but new; manufacturers have been relocating to states such as Alabama, Mississippi and Louisiana since the late 1980s. However, it seems as if there’s been a new wave in the last decade. Mercedes-Benz is another example; earlier this year, the company announced it would relocate its national headquarters to Atlanta.

U.S. Steel estimates its two projects will create approximately 640 temporary construction jobs. Both facilities will tentatively be completed by 2016. The company’s already-existing Alabama facilities, its steelmaking and finishing operations, will continue to function throughout the construction of the new projects.

Written by

James Anderton

Jim Anderton is the Director of Content for ENGINEERING.com. Mr. Anderton was formerly editor of Canadian Metalworking Magazine and has contributed to a wide range of print and on-line publications, including Design Engineering, Canadian Plastics, Service Station and Garage Management, Autovision, and the National Post. He also brings prior industry experience in quality and part design for a Tier One automotive supplier.