Valley leaders hail $650M project as largest in decades
By DON SHILLING
VINDICATOR BUSINESS EDITOR
VM Star Expands
VM Star Steel announced a $650 million expansion in the Mahoning Valley during a Feb 15, 2010 news conference in Younstown, OH.
HAPPY MAYORS: While negotiations over V&M Star Steel’s $650 million expansion at times were tense, Youngstown Mayor Jay Williams, left, and Girard Mayor James Melfi were all smiles Monday when the company announced the project will be built here.
NEW FACILITY: Construction on V&M Star Steel’s $650 million expansion will start next month, company officials said. The blue section of the drawing is the addition location.
ALREADY OPERATING: This is the site of V&M Star Steel’s current mill on Martin Luther King Jr. Boulevard in Youngstown. The mill also is near the city of Girard.
YOUNGSTOWN — V&M Star Steel said construction will start next month on a $650 million pipe mill that will employ 350 people.
It will be the biggest industrial plant to be built in the Mahoning Valley since the General Motors assembly plant went up in Lordstown in the 1960s, said Walter Good of the Youngstown/Warren Regional Chamber.
“We haven’t seen anything like this in decades,” said Good, who oversees economic development for the chamber.
And V&M may have more in store.
Roger Lindgren, company president, said Monday that construction of a melt shop still is under consideration.
The melt shop, where a furnace heats scrap steel as part of the steelmaking process, had been part of the long-discussed project but has been put on hold. Lindgren declined to discuss why V&M isn’t going forward with that part of the project or what would be needed for it to happen.
As with the pipe mill, the decision rests with Vallourec, a French pipe maker that is the parent company of V&M. Vallourec has several pipe and drilling companies scattered throughout North America.
David Bozanich, Youngstown finance director, said he thinks V&M will go forward with the melt shop once the pipe mill is up and running profitably.
“It’s tough to approve both investments in this kind of market,” he said.
Adding a melt shop would cost about $320 million and add more than 100 jobs.
The initial plan for V&M was a $970 million expansion with 400 new jobs.
V&M opted not to build a melt shop here now, which reduced the investment to $650 million and the jobs to 350.
But local political and business officials at Monday’s announcement said they are thrilled that V&M is making such a large investment in the Valley, and look forward to a future investment.
The pipe mill is expected to begin producing toward the end of 2011. Full production is expected to be reached by the end of 2012.
The expansion will go up next to the mill on Martin Luther King Jr. Boulevard, which has about 500 workers who produce pipe mainly for oil and gas exploration.
Lindgren said the hiring of additional maintenance workers and specialized production workers will start in about six months. Regular production workers will be brought on later, and hiring is being done through Ohio’s One-Stop system.
Skip Herald, managing director of V&M’s North American operations, said the company needs the new mill because of an expected jump in demand for drilling pipe needed for natural-gas exploration.
Advanced drilling techniques have opened new natural-gas fields, including the Marcellus Shale, a giant field that is under eastern Ohio, much of Pennsylvania and nearby states.
Lindgren said the new mill will be designed to produce the high-grade, smaller-diameter pipe exploration of the Marcellus Shale requires.
The new mill will be able to produce pipe as narrow as 23‚Ñ8 inches in diameter, compared with 5 inches at the current mill, he said.
Lindgren said V&M chose to expand in Youngstown because of its proximity to the Marcellus Shale, its work force and strong local partnerships.
Local officials said the project will draw other manufacturers to the area.
Good said chamber officials are trying to recruit other companies in the drilling industry to locate plants in the area as they prepare for projects in the Marcellus Shale.
V&M also will need more suppliers as it expands its production, he said.
Bozanich said he expects other pipe operations to open in the area. These companies would buy pipe from V&M and perform finishing operations to prepare it for other uses, he said.
Bozanich noted the city already has announced plans to tear down the former Youngstown Sheet & Tube Co. headquarters in the area and will be seeking funds to tear down abandoned houses.
Now that V&M has committed to its project, more governmental funding sources will open up to redevelop the area, he said.
“The dynamics of that area are going to change,” he said.
SEE ALSO: Williams, Melfi: Success shows value of regional cooperation.
Here are key points that led to the announcement by V&M Star Steel that it is building a major expansion project in Youngstown.
September 2008: V&M and Ohio Environmental Protection Agency officials begin discussions on an expansion project near the company’s location on Martin Luther King Jr. Boulevard in Youngstown, near the Girard line.
December 2008: Youngstown signs purchase option deals with three companies to provide about 125 acres worth of land for V&M’s proposed expansion project. V&M agrees to reimburse the city for the purchases, which cost about $5 million.
February 2009: The project hits a snag as the company struggles to sign a deal with Norfolk Southern to relocate a railroad line that runs through the site of the planned expansion.
March 2009: V&M delays its decision on the expansion project till early 2010. The company had expected to decide by September 2009. Facing financial struggles, V&M laid off about 50 local workers and cut the hours of most of its other employees. Also, the Public Utilities Commission of Ohio approves discount electric rates for the V&M proposed site and allows FirstEnergy Corp. to recover money from its other customers.
April 2009: The state announces it would provide close to $20 million from the federal stimulus package to buy the Norfolk Southern property and to make improvements to the land needed by V&M for an expansion. The city comes to a deal two months later for the needed railroad property.
August 2009: Youngstown and Girard officials hit a major snag in negotiating the transfer of property in Girard to Youngstown for the expansion project. V&M insists that all of the land be in Youngstown. The problem is some Girard city officials, most notably Mayor James Melfi, are upset about the amount of land his city will lose. It ended up being about 191 acres. The deal calls for the two cities to split a 2.75-percent income tax to be accessed on all employees at the proposed new facility and a 2.75-percent profit tax on V&M’s expansion plant. A tentative deal between the cities is reached toward the end of the month.
October 2009: Melfi objects to the language in the deal between the two cities and says he won’t rush an agreement that is bad for Girard even though V&M officials wanted a deal done by late August. After further negotiations, a deal is approved in mid-October.
November 2009: Youngstown Mayor Jay Williams meets in Paris with officials of V&M’s parent company, Vallourec Group. The mayor said the meeting went well and says the Mahoning Valley location is the company’s preferred site for an expansion.
December 2009: The U.S. International Trade Commission votes to impose duties on pipes from China used mostly in the oil and gas industries, V&M’s business. V&M and other companies testified that the Chinese government had been subsidizing its pipe industry so it can unfairly dump products in the U.S. market.
February 2010: V&M announces it’s building its expansion facility in Youngstown.
Sources: Vindicator files