Severstal to Manufacture Advanced High Strength Steel and Create Jobs in Dearborn, Michigan

Severstal Dearborn, LLC plans to modernize its existing plant in Dearborn, Michigan and design and build a new plant to manufacture advanced high strength steel for fuel-efficient vehicles. The U.S. Energy Department, which has granted a $730 million conditional loan commitment to the company, indicated that this new technology steel is needed to help U.S. auto manufacturers meet the lightweight and safety requirements of advanced vehicles. It is expected that the project will create about 2,500 construction jobs and over 260 permanent jobs in the plant. And the existing 1,400 manufacturing jobs will be maintained.

According to the U.S. Energy Department the steel produced in the Severstal Dearborn plan will enable creating a 10% reduction in the total weight of a vehicle. The fuel efficiency of lighter-weight vehicles made with advanced steel from the plant has the potential to reduce fuel consumption by nearly 30 million gallons a year and avoid over 260,000 metric tons of CO2 emissions.

As reported by David Shepardson for The Detroit News, Severstal is still known locally as Rouge Steel, which was formerly a unit of The Ford Motor Company. Rouge Steel filed for bankruptcy in 2004 and was acquired by Severstal Dearborn, LLC, subsidiary of the Russian steel company OAO Severstal. In 2010 the Russian parent company indicated that it planned to invest in state-of-the-art facilities in Dearborn. Shepardson points out that 50% of Severstal's automotive steel goes to Ford, General Motors, and Chrysler, with another 30% going to suppliers of parts for U.S. automakers.

The lighter steel produced in the Severstal Dearborn plant will help U.S. automakers meet their fuel efficiency requirements. The federal mandate is to raise fuel efficiency standards by 40% between 2012 and 2016 to 34.1 miles per gallon. And a requirement for 56.2 miles per gallon by 2025 is being considered.

In their announcement of the loan guarantee on PR Newswire, Severstal Dearborn indicated that when the modernization projects are complete, the facilities will include a coupled pickle line tandem cold rolling mill that will produce 2.1 million tons per year, a hot dip galvanizing line that will produce 0.5 million tons per year, and a continuous annealing line, also producing 0.5 million tons per year.

As explained by Dustin Walsh in Crain's Detroit Business, the $730 million loan commitment to Severstal Dearborn is part of the U.S. Department of Energy's $25 billion Advance Technology Vehicle Manufacturing program in the 2008 stimulus package. The loan will help to finance about $1 billion in plant improvement in Dearborn. In addition to the loan commitment, in March, 2011 the Michigan Economic Growth Authority awarded Severstal Dearborn a $10 million brownfield tax credit for the project.

Sources:

Daniel Roberts, Steelscapes: Inside the Severstal Dearborn steel plant, CNN Money

David Shepardson, Dearborn's Severstal to get $730M retooling loan, The Detroit News

Department of Energy Offers Severstal Dearborn, LLC a $730 Million Conditional Loan Commitment for Michigan Project, Energy.gov

Dustin Walsh, Severstal Dearborn to get $730 million loan from Energy Dept., Crain's Detroit Business