An Austrian company, steelmaker Voestalpine, started making hot-briquetted iron (HBI) — a steelmaking raw material that can be melted like scrap — at a $740 million plant in Corpus Christi, Texas. The 2 million mt/year operation represents the largest investment ever made in the US by an Austrian company.
And to hear the Austrian executives tell it, the Texas USA location made perfect sense because of its “politically stable and predictable environment.”
Americans watching the 2016 election unfold may beg to differ. Most days, US politics hardly seem stable and predictable.
But here was Wolfgang Eder, chairman of the management board at Voestalpine, acknowledging at the official opening on October 26: “As an investor, during each phase of the project we were able to notice the intense efforts being made to reindustrialize in the USA. The USA has recognized that a sustainable industrial manufacturing base is essential to a country’s stable economic development over the long term.”
Let that sink in: Intense. Efforts. Reindustrialize. USA.
Eder also lauded the “professional cooperation with the authorities, cost-efficient energy supply and logistical advantages” as the key reasons behind the decision to locate the plant in Corpus Christi — and with its startup, the creation of 190 new jobs at the plant. His company’s investment will generate an estimated $600 million over the next decade in the Corpus Christi region. Voestalpine is ranked among the world’s top 50 steelmaking companies, according to the World Steel Association, producing nearly 8 million mt/year.
Hillary Clinton has often discussed her strategy to “Make it in America” by touting her detailed plan to invest $10 billion in US manufacturing companies and their workers, largely paid for by rescinding tax breaks for companies that outsource jobs abroad. Donald Trump has also talked about reshoring and the need to make things again in America by jump-starting the economy with tax reform and regulatory streamlining.
Most of both candidates’ reshoring comments have been aimed at bringing back US manufacturers who had bolted overseas, but the rhetoric has been short on luring foreign manufacturers to produce goods in the US.
In the first debate Trump said NAFTA “was one of the worst things that ever happened to the manufacturing industry.” He has pledged to renegotiate NAFTA.
But Voestalpine is a company very methodically banking on its expansion within NAFTA. Its stated strategy is “to increase revenue generated in this region from its current level of [about $1.4 billion to $3.4 billion] by the business year 2020/21.”
Eder dodged all politically sensitive questions related to NAFTA, according to our S&P Global Platts reporter Nicholas Tolomeo, who was at the event — but the Voestalpine chairman did emphasize that the new plant is a major step toward doing more business in the US, Canada and Mexico.
“The new plant will not only secure the Austrian Voestalpine sites by supplying premium pre-materials for steel production, it will also contribute significantly to further strengthening our position in the NAFTA region,” he said.
Taking advantage of low-cost natural gas, Voestalpine will produce 2 million mt of HBI in south Texas and ship 800,000 mt to Austria for use at its steel mills in Linz and Donawitz. The remaining 60% has already been allotted to steelmakers in Mexico, Arkansas and one mill in Europe.
“Compared to the USA, Austria and Europe will doubtless remain an expensive location in the long run,” Eder noted.
The company estimated average industrial gas prices in Austria over the long term are about three times higher than the US and electricity prices twice as high. Annual costs to operate an identical facility in Austria would be about $225 million more, according to Voestalpine estimates.
“In Europe, however, increasing political and social detachment from anything to do with industry is at least equally problematic,” Eder added.
It made me think:
For all the problems and challenges this country has — others want to be here.
To make stuff.
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