ATI and Tsingshan to Form Innovative Stainless Steel Joint Venture
November 02 2017 - 6:55AM
Business Wire
- Two Global Innovators to Form Joint
Venture
- Tsingshan’s Vertical Integration
Provides Reduced Raw Materials Cost Volatility
- Conversion Agreement Expected to
Significantly Increase ATI’s HRPF Utilization
- JV’s DRAP Finishing Facility to
Restart; Adds 100 Jobs
- JV Provides a Highly Competitive and
Uniquely Differentiated Offering
- Another Action to Position ATI’s FRP
Business for Sustainable Profitability
Allegheny Technologies Incorporated (NYSE: ATI) today announced
that it has reached a definitive agreement to form an innovative
50-50 joint venture (JV) with an affiliate company of Tsingshan
Group (Tsingshan). Tsingshan is vertically integrated and is the
world’s largest stainless steel producer. Formation of the JV is
subject to customary regulatory and anti-trust clearances, which
are expected by the first quarter 2018. The JV will manufacture and
sell 60 inch-wide stainless sheet in North America. First shipments
are expected in early 2018.
“As we have stated over the last two years, our strategy is to
first return our Flat Rolled Products (FRP) business to
profitability, and then position our FRP segment for sustainable
profitability regardless of raw materials costs or trade policy,”
said Rich Harshman, ATI’s Chairman, President and Chief Executive
Officer. “We believe this innovative joint venture combined with
the strategic actions and cost reduction initiatives taken over the
last several years lays the foundation to achieve this
objective.
“This joint venture benefits ATI and Tsingshan as well as our
customers in the North American stainless market. Tsingshan’s
capabilities to produce stainless steel slabs using its
unparalleled vertically integrated mining, refining, and casting
assets combined with ATI’s innovative, low-cost Hot Rolling and
Processing Facility (HRPF), and the JV’s unique Direct Roll Anneal
and Pickle (DRAP) facility creates a cost competitive supplier of
stainless sheet products for the North American market.
“For ATI, the conversion agreement volume will significantly
increase the utilization of our HRPF and will utilize the
previously idled DRAP finishing facility in Midland, PA, which will
be owned and operated by the joint venture.”
Key points of the joint venture:
- Allegheny & Tsingshan Stainless is
the joint venture company’s name.
- Tsingshan’s operation in Indonesia is
vertically integrated from mining raw materials, including
ferronickel and ferrochrome, through refining and casting.
Tsingshan will supply the JV with redi-to-roll slabs with reduced
raw material cost volatility.
- The Tsingshan-supplied stainless slabs
will be hot-rolled into coils on ATI’s HRPF under a conversion
agreement between ATI FRP and the JV. The HRPF provides customers
with the market’s most consistent quality and edge-to-edge,
tip-to-tail gauge control.
- The hot-rolled coils will be finished
into stainless sheet using the JV’s DRAP line, which is ATI’s major
investment in the joint venture. The Midland operations’ assets
were impaired in 2015 and the DRAP finishing line was idled in
early 2016.
- The JV is expected to add approximately
100 manufacturing jobs in Western PA.
“Tsingshan has built the world’s newest and most innovative
stainless production facilities,” Harshman continued. “Our HRPF
provides unsurpassed coil quality and is a modern, low-cost
facility. The JV’s DRAP line is an efficient continuous automated
facility. It is the only one of its kind in North America that
completes the finishing process in minutes rather than the weeks
required by the conventional finishing path.
“As one global supply chain, the joint venture will provide a
highly competitive and uniquely differentiated offering.”
The JV will be treated as a 50-50 equity investment. The
partners will share in JV operating profit and in the cash flow
generated by the JV. Sales of the joint venture will not be
consolidated into ATI sales. ATI’s FRP segment will benefit from
the conversion services provided by the HRPF to the JV, increased
utilization of the HRPF, and ATI FRP’s share of JV profits.
Aerospace & Defense, which is approximately 50% of sales,
will continue to be ATI’s largest market. ATI’s consolidated sales
of standard stainless sheet are expected to remain at 10% or lower
as a percentage of total ATI sales.
ATI will provide live Internet listening access to its
conference call with investors and analysts scheduled for Thursday,
November 2, 2017 at 8:30am ET. The conference call will be
broadcast, and accompanying presentation slides will be available,
at ATImetals.com. To access the broadcast, go to the home page and
select “Conference Call.” Replay of the conference call will be
available on the ATI website.
This news release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on management's current
expectations and include known and unknown risks, uncertainties and
other factors, many of which we are unable to predict or control,
that may cause our actual results, performance or achievements to
materially differ from those expressed or implied in the
forward-looking statements. Additional information concerning
factors that could cause actual results to differ materially from
those projected in the forward-looking statements is contained in
our filings with the Securities and Exchange Commission. We assume
no duty to update our forward-looking statements.
Creating Value Thru Relentless Innovation™
ATI is a global manufacturer of technically advanced specialty
materials and complex components. Our largest market is aerospace
& defense, representing approximately 50% of total sales and
led by jet engines. Additionally, we have a strong presence in the
oil & gas, electrical energy, medical, and automotive markets.
In aggregate, these key markets represent about 80% of our revenue.
ATI is a market leader in manufacturing differentiated products
that require our unique manufacturing and precision machining
capabilities as well as our innovative new product development
competence. Our capabilities range from alloy development through
final production of highly engineered finished components. We are a
leader in producing powders for use in next-generation jet engine
forgings and 3D-printed aerospace products.
Tsingshan Group, founded in 1998, is a multi-national fully
integrated stainless steel producer engaged in nickel ore mining,
ferronickel and ferrochrome smelting, stainless steel making, hot
rolling, and cold rolling with captive supportive power plants and
ports. Tsingshan produces stainless sheet, plate, bar, rod, wire,
pipe, and tube. Tsingshan Group, along with other partners, have
been investing significantly in Indonesia and India. Tsingshan
Group, as the global leader in the production of crude stainless
steel, produced 5.5 million tons of crude stainless steel in 2016.
Tsingshan Group continues in persistent pursuit the of the company
culture of “Dare to be the First, Incorruptible and Dedicated.”
Yongqing Limited Liability Company (Yongqing) is the Tsingshan
Group affiliated company mentioned in the first paragraph of this
news release.
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version on businesswire.com: http://www.businesswire.com/news/home/20171102005648/en/
Allegheny Technologies IncorporatedDan L. Greenfield,
412-394-3004
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