Japanese steel firm Kyoei has noted in its latest financial report that steel prices in Vietnam remained low due to oversupply and international competition. Of its overseas assets, businesses in North America performed better. Akira And Kosugi, vice president at Vinton Steel, Kyoei’s steel asset in Texas discussed the North American market and the challenges associated with acquiring Alta Steel.

 

How has COVID-19 affected business?

The pandemic has certainly, affected the overall worldwide demand including that in Asian mills in North America. Fortunately, Vinton Steel will contribute well to the company’s overall financials as we have maintained strong sales and have good reserves in 2020. The second half of the year looks tough for everyone in steel, but we have managed to minimize certain risks at our Texas location. Our essential business designation kept us operational through the shutdowns and we were not as directly affected since our product lines are not related to the automotive industry.

 

Our employees are also happy as we did not initiate layoffs like so many other steel-related firms. 

 

What has been the pandemic’s impact on the rebar market?

Rebar is going through a transition period due to the pandemic. Our industry has faced some struggles as spending and construction projects were stopped through most of the second quarter. 

 

Mexico is not our market in the world of rebar as Vinton Steel focuses primarily on the US market. However, Mexican mills compete in our space as some are large importers of rebar to the southern US. Recently, the US Department of Commerce reviewed and revised the antidumping and countervailing duties on rebar imports from some Mexican mills. It is a competitive space, but Vinton Steel seeks to think about the customer first. We have excellent long-standing relationships and are building new ones. 

 

What is the production capacity at your North American sites?

The monthly production capacity at Vinton Steel is 20,000mt with 95pc rebar and a small percentage for grinding ball products used in mining. 

 

Alta Steel, our Canadian operation in Alberta, does not focus on rebar. Its primary product is grinding balls also used in mining. Alta was a subsidiary of the MC group of companies. Kyoei made the purchase agreement in February 2020. Alta has a production level of 25,000-30,000mt per month. It is larger than the Texas operation. 

 

What challenges did Kyoei face while acquiring a company during the pandemic?

Kyoei has a vision and they took advantage of the opportunity to purchase a desirable asset in Canada. The biggest challenge was overcoming the travel and social distancing restrictions at that time since we could not send engineers and managers from Japan or Texas for some time. All the initial elements of transition and communication with the new entity were done via web meetings. It was a novel way of completing a transition for a newly acquired company.

 

Finally, in summer the Japanese team was able to make its comprehensive analysis. Some aspects we could have assessed six months earlier, but such were the circumstances during H1 2020 and the COVID-19 challenges.

 

Although the Japanese team had to delay certain usual assessments at the time of the acquisition, as the comprehensive analysis was finally done it was found to be well-organized, well-managed, and technologically well-suited. Some technical upgrades are being planned as Kyoei wishes to install and utilize the best technology to benefit its end customers and employees, and meet operational efficiency objectives at Alta.

 

What are your thoughts on scrap trends as the primary input in an EAF?

China is expanding its use of EAFs and moving away from blast furnaces. Much of the move was driven by environmental concerns. 

 

Moreover, China has maintained high levels of steel production throughout this year despite the pandemic. Scrap procurement will remain strong from them as they continue to grow. For now, China does not have significant imports of ferrous scrap but its needs will grow. China has inquired for billet from Turkey and Vietnam and those billet producing entities will, in turn, purchase scrap from countries such as the US.

 

Scrap prices are not expected to dramatically decrease even though normal fluctuations in short-term supply and demand exist. In fact, scrap prices worldwide will continue to strengthen, with the growth of EAFs. In Texas, we are fortunate to have access to affordable raw material inputs too. 

 

What are Kyoei’s plans for North America?

Kyoei’s central leadership is in Japan and to the extent that I can share the plans from the North American team’s perspective, we wish to continue to expand in the region either through another acquisition in the US, a transaction in Mexico, or both. Additionally, we are improving our capacity at Vinton Steel. 

 

We are competing within a niche market and see much potential. Since 2016, when Vinton Steel was acquired, Kyoei has made substantial capital expenditures and while the end result is still in the works, with uncertainties from COVID-19 not helping gain more clarity, the production at Vinton Steel could be increased by 60-100pc depending on the final conclusions by corporate.

Leave a Reply

Your email address will not be published.