GFG Alliance may buy more US metals assets this week

London-based GFG Alliance's next US metals acquisitions may come as early as this week as it moves forward with its planned $5bn US investment program.

"We didn't come here just for [the re-commissioning of the mill]," GFG's executive chairman Sanjeev Gupta told Argus in an exclusive interview at the opening of the company's Georgetown, South Carolina, wire rod mill.

"I will be traveling around the country this week and will look to close on [potential acquisitions] as we go along."

Gupta said steel will be GFG's primary focus initially through its Liberty Steel subsidiary. Another company source suggested that a second steel mill could be the company's next acquisition.

Market participants have indicated the company is also looking at several scrap metal shredder opportunities, including in Tampa, Florida, where Liberty Recycling purchased Export Metals in March.

But holding company GFG Alliance plans to invest in US assets across its portfolio. GFG owns assets in the metals, energy, engineering and financial services industries.

"Banking is more progressed, we are looking at a couple of options on that sooner," Gupta said.

The group's London-based Wyelands subsidiary provides merchant banking and financial advisory services to GFG companies as well as outside clients.

Gupta is also interested in aluminum assets.

"It's one of our sectors, so we are definitely examining options on that," he said.

With the 750,000 t/yr Georgetown rolling mill as a foundation, Liberty Steel will look to become a "significant, relevant producer" with a goal of 5mn t/yr of capacity. Gupta suggested that 3mn t/yr of flat product capacity and 2mn t/yr of long product capacity would be a "nice mix."

Company sources suggested that the steelmaker could meet this goal as soon as the end of 2019. The company is looking at flat assets right now in addition to a complementary business to its Georgetown mill.

Still, value-added flat capacity may be favored over the more cyclical hot-rolled market. Hot-rolled coil is a product that sits in service center inventories, one representative from the company suggested. This compared with wire rod, which is a "living product" shipped direct to consumers.

Liberty Steel has invested an estimated $30mn-40mn in its Georgetown mill, which it acquired from ArcelorMittal late in 2017.

The mill is expected to be fully ramped up to its rolling capacity of 750,000t by next year. A 500,000 t/yr electric arc furnace (EAF) at the site is in the testing phase, while the rolling mill will start-up in coming weeks using imported billets.

Gupta expects that the mill's second EAF will be operational around this time next year.

ArcelorMittal closed the facility in July 2015, citing the impact of unfairly traded imports. Some market participants suggested that customer satisfaction may have also played a part.

Liberty Steel's acting chief executive Michael Setterdahl identified customer satisfaction as a key risk and an area of focus for the mill. Hurricanes were another risk given the mill's Atlantic coast location, he said.

Liberty will streamline its customer service approach. Mills push hard to achieve a 25¢/t savings on the production side, while spending $20/t on the sales side, he said.

Setterdahl does not see a drop in steel prices as a risk, given the plant's scrap-based production platform.

"If steel prices fall 30pc, scrap prices will drop 20pc," he said.

The company is expected to purchase more than 40,000 t/month of scrap by rail, truck and barge with the first furnace operational. But the mix will range from primes to #2 HMS, depending on the grade of product being produced.