Crossroads steel industry on the rise (w/video)
May 7, 2017 at 4:11 p.m.
Updated May 8, 2017 at 7 a.m.
Business has grown for South Texas Steel because of the growth of local industrial plants.
The steel producer sold about 18,000 tons of steel in 2016 and is projected to sell about 21,000 tons this year, said co-owner Michael Means, 50. In 2015, the company produced about 14,500 tons.
"When they build these plants they have to support everything on steel or concrete," said Means' partner, Carlisle Maxwell, 71. "We furnish reinforcing steel for concrete and structural steel for these platforms and all kinds of industrial structures."
As construction increases at area industrial plants as well as general business construction, the demand for steel is increasing.
Contractors who are building at Crossroads industrial plants are buying steel from South Texas Steel, Maxwell said. The traffic in the local industry is increasing.
"We'll probably have more business this year than we have been in the last four or five years," he said.
The Formosa Plastics Corp. of Port Lavaca Olefins III expansion is underway, company spokesman Bill Harvey said. The company is investing about $5 billion in the unit and associate plastic resin units. The expansion will broaden the company's plastic resins product line and increase the overall productivity.
Much of the infrastructure being built in the expansion is of fabricated steel, Harvey said.
"The majority of steel used in the expansion is purchased indirectly through contract companies that supply piping, pipe support structures and valves, as a few examples," he said.
South Texas Steel does business with Formosa directly, Maxwell said. The company will bend and mold the steel to fit certain project plans that are different for each customer.
The company produces two kinds of steel: structural and reinforcing. Structural is exposed, and reinforcing steel is paired with concrete.
"We do a lot of cutting, welding, putting holes in things and burning plates so it all fits," he said. "So when it gets to the site, it will fit together and all be bolted and welded together to form the final structure that the engineer would want."
The downfall of the oil industry in late 2014 and early 2015 caused steel prices to be cheap, which helped lead to increased construction at industrial plants, primarily petrochemical ones, Means said.
Regional Steel Products, another steel producer, doesn't fabricate or model its steel to fit plans, but buys it as is, said general manager Chad Hall.
Regional Steel Products gets its steel from mills as does South Texas Steel.
Business is up from last year for Regional Steel Products, Hall said, but it's not like it was during the oil boom.
"A lot of optimism; this is supposed to be the year that we get back to big time business. The oil field opened back up," he said. "It's a trickle rather than a flood. ... Statistically we're up from last year but not where we want to be just yet."
Hall would not disclose how much steel the company produces due to competition, but he said they will meet projections this year. The company sees an increased market related to the plant industry but officials are seeing a greater uptake on the commercial side, he said.
"We love to see plant expansion projects," he said.
Dow Chemical Co. Seadrift Operations has no expansion announcements, but uses steel regularly, said Gabriella Cone, company community relations manager. Steel makes up many of the components in the manufacturing process.
"We use steel components for new projects in addition to maintaining our equipment at the site," she said. "Many of the spare parts we purchase to maintain our equipment are steel based."
Even during the oil boom, Regional Steel Products officials didn't put all of their eggs in one basket and diversified their customer base, Hall said.
"That's why we we've been able to survive and make it through this downturn in this economy that has been going on for awhile," he said.
Hall, who has been in the steel industry for 10 years, said they have diversified where they buy steel from. A decade ago, he would have said that most of their sources were domestic. Now they buy from across the world.
But that all could be slowed.
The Trump administration recently launched an investigation to see if international steel imports threaten national security, according to USA Today. This could give Trump's administration broad legal power to prevent imports from thousands of steel products from companies across the world.
Trump signed a presidential memorandum Thursday asking the Secretary of Commerce to proceed on the investigation.
"These suits claim that foreign countries are dumping steel; selling it below their cost to get rid of it," Maxwell said. "That will cause foreign steel prices to increase because they've added tariffs on them."
Added taxes would give too much power to domestic steel mills because they will have less foreign competition, he said.
Hall said lawsuits that could add tariffs to international steel would negatively impact their business.
Company officials will change whom they do business with depending on the lawsuits.
He said there are 152 lawsuits and 25 active investigations that have to be decided on.
"For us it could complicate things," he said. "We have to be smarter and find new sources to be cost competitive."
As well as for the plant industry, South Texas Steel produces steel for customers who are building schools, hospitals and other commercial projects, Means said.
His partner, Maxwell, agreed.
"It's a basic building product," Maxwell said. "You have to have it to support everything from rooftops to platforms to piping."
The partners started the company 10 years ago, and its anniversary is in May. Maxwell has been in the steel industry for 53 years.
"It's gotten more technically required," he said. "More technology and computer regiments. Machinery is controlled by computers. Communications, everything is so much faster and easier to do in volumes."