Forging Ahead: Led by Mississippi County Growth, Arkansas Steel Remains Strong

News
Dec 16, 2020
Carl Kozlowski

America’s steel industry has long been associated with the mills that dominate Pennsylvania and the Rust Belt. Yet Mississippi County also has a surprisingly robust presence in its manufacturing, employing nearly 5,500 Arkansans — a 39 percent increase since 2009.

Clif Chitwood

It might be easy to assume that 2020’s pandemic-related economic downturn has dealt a devastating blow to Arkansas steel, but industry officials and corporate representatives paint a picture of impressive resilience. According to Clif Chitwood, president of the Great River Economic Development Foundation in Blytheville, steel producers already were adjusting to tough times before the pandemic hit.

“The pandemic really hasn’t had that strong an effect, because our largest setback started before COVID when Russia and Saudi Arabia got into a price war over oil,” Chitwood said. “It drove the price down to such levels that most American drilling stopped, and when the drilling stopped, they don’t need oil and gas pipes. That put as many as 1,500 people out of work, but it had nothing to do with COVID.

Osceola’s Big River Steel, which opened in 2014, is the only steel producer in the world that is LEED-certified and boasts clients such as BMW and General Motors.

“We’ve been fortunate that other expansions have employed thousands of construction workers and provided opportunities to many people laid off because of the oil and gas surplus. Otherwise, we’ve been really fortunate, as the mills haven’t stopped production. 

They’re not running at 100 percent, but they’re using the time to reinvest in and expand their mills, and that’s very fortunate for our county.”

There are several key reasons that Mississippi County has become a mecca for the steel industry, with the most essential being its location along the Mississippi River. That massive body of water provides the cheapest possible per-ton transportation of mass materials, enabling the basic raw material of scrap steel to be shipped with maximum efficiency.

The boom began in 1985, when Nucor-Yamato Steel Co. constructed the first mill in Blytheville because of its proximity to the river. Company officials were pleased to find that the area provided a highly adaptable workforce. After all, the county had been highly successful with logging, cotton farming, textile mills and assembly plants throughout the century.

“Farming was going through one of its periodic downturns when Nucor came along, and many people were perfectly adaptable to working in steel mills because they had used large machinery with loud noises that didn’t scare them,” Chitwood said. “The steel industry paid very well, and Nucor came back within two or three years to build again.”  

Chitwood noted that other factors playing into Mississippi County’s favorability with the steel industry include the fact that Interstate 55 enables finished goods to be transported by trucks, and that rail transportation is available through the Burlington Northern Santa Fe railroad, its main line running through the area. Ample energy also is key, and is supplied by a 500 KV electricity line that runs through the county and connects several of the major power companies.

“At the end of the day, the ability to buy electricity at the correct price is what allows induction steel mills to function,” Chitwood noted.

Despite Chitwood’s positive recounting of the industry’s resilience amid the downturn, Katherine Miller — Nucor’s director of public affairs and corporate communications — recalled that the entire steel industry nationwide saw a “significant” drop in demand during the second quarter as many states instituted stay-at-home orders. However, she also noted that the U.S. economy roared back stronger than expected since then and that there has been a solid rebound in demand for Nucor’s specialty products of bars, beams and sheet metal.

Production was also ramped up throughout the pandemic at the new state-of-the-art cold mill at Nucor Steel Arkansas in Hickman. That facility has added 24 new customers since its commissioning, growing production and shipments to the point that third-quarter, cold-rolled shipments surpassed the pre-COVID-19 volumes of the first quarter.

Another upside for Nucor has been its first trial runs of its third-generation advanced high strength steels, which are vital to the auto industry because they help reduce the weight of cars. As a result, the company continues to advance construction of its Gen 3 flexible galvanizing line, with production scheduled to start in the second half of 2021.

“We have been operating throughout the pandemic, as our facilities in the states where we operate were designated as essential businesses,” Miller said. “We made several operational changes to promote physical distancing and have utilized appropriate PPE. Even with the challenges posed by the pandemic, our team continues to successfully focus on safety. We are on pace to have a better year for safety than we had in 2019, which was the safest year in Nucor’s history.

“We expect the economic recovery to continue, but the pace will depend on getting the pandemic behind us with effective vaccines. We are very encouraged by the recent news about the effectiveness of a couple of vaccines, and we are confident that we will emerge a much stronger company in 2021.”

Nucor’s primary Mississippi County competitor is Big River Steel, which opened its own massive mill in 2014. Thanks to its focus on environmental sustainability, the company has become the only steel producer in the world that is Leadership Environmental Energy and Design (LEED) certified, and that has helped attract greater business from major automakers including BMW and General Motors.

Big River CEO David Stickler speaks highly of Mississippi County’s location be tween Memphis, St. Louis and Little Rock, noting that all three cities provide plenty of scrap metal, which is its primary raw material. He notes that Big River doesn’t use iron ore and coal in its steelmaking process, instead converting the scrap metal of old refrigerators, cars and bridges into new cars, appliances and refrigerators. Thus, the old image of steel mills as being pollution-belching problem spots has been replaced by one of a vital recycling industry.

“In the months of March, April and May, when the COVID pandemic first reared its ugly head, most steel companies in the world including most in the United States either shut down or reduced their capacity to less than 50 percent,” Stickler said. “But at Big River, we didn’t shut down, we kept running fully 100 percent and paid weekly production bonuses of 148 percent, which was even more than the 134 percent of base wages that we paid in 2019.

“Although the pandemic made us clearly more aggressive and nimble in decision-making and pursuing customers, we had customers more than willing to stick with us and continue buying their steel throughout the entire year,” he added. “The good news is, we were down only slightly because the automotive companies worked overtime to get their inventories back up.”

As secretary of the Arkansas Department of Commerce and executive director of the Arkansas Economic Development Commission (AEDC), Mike Preston has seen the year’s ups and downs from a particularly strong vantage point. He noted that the jobs in the Arkansas steel industry have increased by 0.3 percent this year, as the industry followed health safety protocols of the Arkansas Economic Recovery Task Force rather than surrendering to a shelter-in-place mentality.

“In 2019, we saw steel manufacturers invest in communities statewide. Nucor Steel held a ribbon-cutting ceremony for its $230 million specialty cold-mill complex at its Hickman facility, and SFI Arkansas announced an expansion of its Conway facility,” he said. “Zekelman Industries announced plans to build the world’s largest continuous ERW tube mill in Blytheville.

“Additionally, in November 2020, Big River Steel announced the completion of its $716 million Arkansas Flex Mill expansion — completed ahead of schedule, despite the public health crisis. My hope for 2021 is that we would continue to see these companies and our other steel manufacturers thrive and that we would continue to attract business to the state.”

Those positive sentiments are echoed by Chris Caldwell, the federal co-chairman of the Delta Regional Authority (DRA). This federal-state partnership was created by Congress in 2000 to promote and encourage the economic development of the lower Mississippi River Delta and Alabama Black Belt by investing in projects supporting transportation infrastructure, basic public infrastructure, workforce training and business development.  

“Both in manufacturing and commodities, I expect first quarter reports to be excellent,” Caldwell said. “The surge in manufacturing efforts and the tremendous growth particularly in the automotive sector has resulted in a huge demand for steel. In fact, the demand is so great that more workers are needed to meet these requests. This is imperative to the work the Delta Regional Authority is doing to support and invest in industry-driven workforce training programs and initiatives throughout the Delta region.”

One example of DRA investments in Mississippi County is Arkansas Northeastern College’s Arkansas Delta Workforce Opportunity for Rural Communities (ADWORC) initiative. U.S. Sen. John Boozman (R-Arkansas) and Caldwell visited the college in July to discuss the state of industry-driven workforce development in the Arkansas Delta with ANC administration, faculty, students and industry partners. 

The initiative increases labor capacity to advance economic development and favorably impact poverty reduction by reskilling workers dislocated by labor market turbulence. As a result, more than 1,300 residents in the Arkansas Delta region will be trained as skilled laborers for careers in high-demand markets such as welding.

“As the economy improves and jobs move into the Arkansas Delta, the demand for highly skilled labor continues to grow,” Caldwell said. “The ADWORC initiative helps meet this demand by reskilling workers to fit these new industry-driven jobs, and I am proud to support this excellent program designed to get over 1,300 Delta residents back to work.”

An aerial view of Big River Steel’s operations in Mississippi County.

Ultimately, the future looks promising for the steel industry to continue weathering storms in 2021, a forecast shared by both Preston and Chitwood.

“My hope for the Arkansas steel industry in 2021 is the same as it is every year — continued resilience and growth,” Preston said. “Within the past decade, the steel industry has demonstrated consistent growth throughout the state. In Mississippi County alone, the industry has grown by more than 35 percent since 2015, making it the second-largest steel producing county in the nation.”

The old image of steel mills as being pollution-belching problem spots has been replaced by one of a vital recycling industry.

Chitwood stresses the importance of U.S. manufacturing, especially during a pandemic.

“Personally, I think the U.S. should be doing more industrial production, and I don’t think we took into account all of the costs closing all the factories just to buy from China.

“Yes, we can buy more T-shirts for $10 than when they were produced in America, but I don’t think we addressed the social costs of taking millions of people out of productive work and throwing them either into early retirement, Social Security disability or the welfare system, which has happened millions of times in the United States. I hope our leaders take that into account as we go forward with trade deals.” 

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