John Correnti, chairman and CEO of Big River Steel LLC, has more than 40 years of experience in the steel industry, having started at U.S. Steel in 1969, where he worked in construction management until 1980. He joined Nucor Corp. that year and went on to rise to president and CEO of the company, only to be forced out by a newly named chairman in 1999. Correnti was CEO and chairman of Birmingham Steel Corp. for three years from December 1999 to December 2002. He founded steel development company Severstal Columbus LLC in 2005, serving as president and CEO. The company built a $980 million plant near Columbus, Mississippi, which opened in September 2007.
Big River Steel, a $1.3 billion project, is being built in Mississippi County near Osceola. It’s expected to employ more than 525 workers with average yearly compensation of $75,000.
It takes a long time to get a steel mill up and running. How can you predict the market for a commodity so far in advance?
It takes about two years to get a steel mill up and running, and that’s when we expect to start producing, around July 2016. As for where the market is going to be in two years, I have no idea. We could be in a boom time. We could be in a recession. But I can tell you this: The U.S. is a net importer of steel. We consume between 120 and 130 million tons of steel every year. We only can produce about 95 to 100 million tons per year, so 20 to 30 million tons come from outside the United States.
There’s also a misunderstanding about steel as a commodity: Soft steel is a commodity product, but that’s probably just about 25 percent of it. Seventy percent of the steel used is a specialty product, such as I beams or flat products like plate or other specialized steels. Let me give you a couple of examples. One is AHSS — advanced high-strength steels — which the automotive industry uses because it needs stronger but lighter steels, stronger to meet crash-test standards and lighter to meet fuel-efficiency standards. Another example are products made from wider and thicker steels, such as what we’ll be producing at Big River.
Pipe and tube will be a big market for us. A lot of pipe producers have to buy steel offshore today because many steel mills in the United States are unable to make it.
As far as being competitive, if we’re in a recession, the price is going to be much lower than if we’re in boom times for steel. But I look at something called the metal margin. That’s the difference between the raw material — in our case, mainly scrap metal — and the price that the steel is sold for. When the price of finished steel is low, guess what? Scrap prices are low. We’ll make more money at Big River paying $700 a ton for scrap then we will if we’re paying $300 a ton for scrap. Let me do the arithmetic for you. When we’re buying scrap for $300 a ton, we’re probably selling steel for $600 a ton. When we’re buying scrap for $700 a ton, we’re going to be selling steel for about $1,200 a ton. So you see the difference?
In addition, this will be the newest steel mill in North America, probably in the world. We’ll have the latest technology, which enables us to have lower capital costs, lower energy costs, lower labor costs and be more environmentally friendly. Add all those factors together and you are one of the lowest cost producers of steel.
Has the opposition of Nucor, which you once headed, to Big River Steel surprised you?
Yes, I’m disappointed. Nucor has lost its way. You compete on the playing field and that is the marketplace. You don’t compete in the courtroom. And I feel bad because they really attacked Arkansas air quality and Teresa Marks [chief of the state Department of Environmental Quality]. She was the point of the spear on this whole deal. But my hat’s off to her. She crossed every ‘t,’ dotted every ‘i,’ obeyed every law and granted that permit according to Hoyle.
What Nucor was trying to do is cause doubt and concern in our investor group and in our debt-holders. They were basically trying to chase away our investors and chase away our banks from doing the project for fear there would be a long, drawn-out litigation process, which nobody wants. At the end of the day the lawyers win. Nobody else wins. It would be like Wal-Mart or Costco or Target complaining if they put a store across the street from each other. Guess what happens when you put a Target or a Costco across from a Walmart? All three of them become better operators. And you know who benefits? You and I — the consumer.
What’s your role in BlueOak Arkansas, the $35 million electronics recycling plant under construction in Osceola and which drew an investment of up to $18 million from the Arkansas Teacher Retirement System. What attracted you to that project?
I’ll tell you what got me going — the similarities between the steel industry and BlueOak Arkansas in terms of recycling. The average automobile in the steel industry that we use for scrap recycles every eight to 12 years. A cellphone recycles every eight to 12 months, not eight to 12 years. And there are 1.5 billion sold every year. Currently, only about 15 percent of it is being recycled. The rest of it is being buried in a landfill. And there are precious metals in that e-waste, gold, silver and cadmium. It’s got a lot of development work to do yet, and it’s a very small project. But it will work.
The state Legislature in 2013 approved a $125 million bond issue and other incentives for your steel mill. What’s the role of government in big private-sector projects?
Stay out. You might say, ‘Wait a minute. You’re being hypocritical, John. Look what the state put up.’ And that’s true. But you’ve got to stay competitive as far as a state’s concerned. You can ask Grant Tennille at AEDC. His competition is Tennessee, Texas, Louisiana, Mississippi, Alabama, Georgia, North Carolina. Is it better for the state to invest in a company like Big River? Or is it better to invest in more SNAP cards and more welfare? The governor and Grant Tennille — they didn’t give away the whole candy store. They used Amendment 82 the way that the citizens of Arkansas intended them to use it. But as far as government is concerned, they should stay out of private industry.
Now, government should monitor industry to make sure they’re abiding by the rules, whether that be commerce or whether that be air quality, water quality, etc. There’s nothing wrong with that.