Allegheny Technologies Incorporated on September 17 announced that its board of directors has approved, subject to satisfactory resolution of certain open issues, a strategic investment in ATI's Flat-Rolled Products segment. The project is estimated to cost approximately $1.16 billion and take four years to complete. The return on investment should be more than 20 percent by 2014, including estimated annual cost reductions of $120 million. The project is expected to be self-funded. As a result of this strategic investment, ATI's annual capital expenditures are likely to remain in the range of $500 million to $600 million for 2009 through 2012.
The strategic investment includes:
1) A new advanced specialty metals hot rolling and processing facility. This investment, which should be completed in 2012, is designed to produce exceptional quality, thinner, and wider hot-rolled coils at reduced cost with shorter lead times, and lower working capital requirements. ATI has tentatively chosen to locate the advanced specialty metals hot rolling and processing facility at its Brackenridge, PA site pending resolution of certain open issues, including state and local approvals.
2) The consolidation of the Natrona, Pa., grain-oriented electrical steel melt shop into ATI's Brackenridge, Pa., melt shop. This consolidation is expected to improve the overall productivity of ATI's flat-rolled grain-oriented electrical steel and other stainless and specialty alloys, and reduce the cost of producing slabs and ingots. The investment should also result in significant reduction of particulate emissions. This consolidation is expected to be completed in 2010.
"This investment is a critical step in our ongoing transformation of ATI's Flat-Rolled Products segment into a globally-focused business capable of generating high levels of profitability and cash returns across business cycles," said L. Patrick Hassey, chairman, president and chief executive officer. "Our Flat-Rolled Products segment has been repositioned over the last several years with an improved cost structure and product mix and a diversified global market focus. This segment has been transformed into a profitable specialty metals business and is no longer a typical stainless steel business. The initiative is expected to further enhance ATI's Flat-Rolled Products segment's competitive position in the global chemical process industry, oil and gas, electrical energy, and aerospace and defense markets as well as other durable goods and consumer markets. When completed, we believe ATI's new advanced specialty metals hot rolling and processing facility will provide unsurpassed manufacturing capability and versatility in the production of a wide range of flat-rolled specialty metals. We expect improved productivity, lower costs, and higher quality for our diversified product mix of flat-rolled specialty metals, including nickel-based and specialty alloys, titanium and titanium alloys, zirconium alloys, Precision Rolled Strip(R) products, and stainless sheet and coiled plate markets.
"We view this investment as a game changer for our Flat-Rolled Products segment. It provides a quantum leap in manufacturing technology. Our new advanced hot-rolling and processing facility is designed to be the most powerful mill in the world for production of specialty metals. It is designed to roll and process exceptional quality hot bands of up to 78.62 inches, or 2 meters, wide. We believe this investment will further improve the overall cost structure of our diversified flat-rolled products, provide our customers with a full complement of products at much shorter lead times, and reduce our working capital requirements.
"The new facility and enhanced capabilities are expected to create a new production model for our standard grade stainless sheet products. By producing hot-rolled coils wider, thinner, flatter and faster, we intend to cut our flow times in half by finishing more of our standard grade stainless sheet products through our continuous automated finishing line in Midland, Pa. This results in exceptional quality products to our customers with the shortest lead times in our industry, enabling our customers to reduce their working capital requirements. We also expect to be able to nearly double our own inventory turns on these products."
Key facts on the Advanced Specialty Metals Hot Rolling and Processing Facility:
· Unique alloy versatility – Common facility to produce hot bands for titanium and titanium alloys, nickel-based corrosion and high temperature alloys, zirconium alloys, super and duplex stainless alloys, grain-oriented electrical steel, and austenitic, ferritic and martensitic stainless alloys
· Facility Design – 88.5 inches, or 2250 millimeters, hot rolling system with continuous variable crown system and a seven-stand, four-high finishing mill
· Power – Separating force more than three times current capability
· Product Capability – Hot bands capable to produce up to 78.62 inches, or 2 meters, wide finished product
· Product Processing and Handling – Advanced walking beam furnace, laminar cooling, and slab and plate handling
· Automation – Fully automated facility providing safe working environment with best available controls technology and increased productivity
· Environment-Friendly – Green systems include advanced environmental controls such as a fume collection system, low-NOX furnace burners, fume suppression sprays, and closed-loop water treatment plant
"The consolidation of our grain-oriented electrical steel melt shop into our highly efficient and flexible Brackenridge, Pa., melt shop is expected to improve our cost structure by eliminating a plant footprint, improve our melt capacity utilization rates, increase overall productivity and significantly reduce our particulate emissions footprint," Hassey added.
