Alabama signs bigger deal with aluminum giant Novelis, requiring only a $2.5 million state investment
Like a thief in the night, Gov. Tate Reeves couched his message to the 174 state legislators in mystery and secrecy as they were going about their normal lives on October 31, 2022.
The regular session runs 90 days from January to early April. Now, he was calling them back for a special session, asking them to approve a $246 million gift to an unnamed company.
“Biggest economic development project in MS history coming to Golden Triangle,” he said in his letter to the legislators.
That was essentially the core of Reeves’ cryptic message, claiming he had signed a nondisclosure agreement. Nevertheless, he wanted the legislators to approve the $246 million package he planned to give to the unnamed business operation located in Lowndes County, Mississippi.
Reeves, by way of contrast, showed himself to be a tightwad in May 2021 when it came to allowing the average Mississippian to take advantage of the federal relief money sent to the state as a supplement to unemployment pay, rental assistance, and Temporary Assistance for Needy Families (TANF). He refused to accept Mississippi’s full share of the hundreds of millions of dollars Washington was granting to the unemployed during the pandemic, and he returned to the federal government $130 million that was sent to the state for rental assistance. Reeves, nevertheless, was fully involved in the TANF scandal that resulted in over $130 million in welfare thefts by government insiders and their cronies, including himself and former Gov. Phil Bryant. (By some reckoning, the amount stolen was $1.6 billion over the first 26 years of the program.)
The state of Mississippi, the poorest in terms of governance and economic well-being, could little afford another shameful ploy similar to the long list of losing schemes Reeves’ predecessors Haley Barbour, Kirk Fordice, and Phil Bryant had pulled off time after time – promising a big return if only the state would invest a couple of hundreds of millions in some private company’s proposal that was being pedaled off as a surefire economic development project, but turned out to be a big loss and a waste of money in too many cases.
“Steel Dynamics, Inc., its subsidiaries, and its partners will be investing $2.5 billion into Mississippi,” Reeves says. “The deal will lead to the creation of 1,000 jobs with an average salary of $93,000.”
ALABAMA SLAM DUNK
There’s a 184-mile distance between Columbus, Lowndes County, MS, site of the Steel Dynamics plant, and the Novelis Plant in Bay Minette, Baldwin County, AL.
The state of Alabama was somewhat ahead of Mississippi in announcing a much better deal that it had obtained for its residents. Alabama was giving up only $2.5 million, about one percent of the money that Mississippi was about to sign off on for its similar project. Alabama announced its plans in May 2022, and Mississippi announced in October 2022.
“Novelis, the leading sustainable aluminum solutions provider and world leader in aluminum rolling and recycling, has announced plans to build a new advanced manufacturing facility at the South Alabama Mega Site in Baldwin County, Alabama,” the South Alabama Economic Alliance announced on May 11, 2022. “With plans to invest $2.5 billion, Novelis is expected to create approximately 1,000 jobs with its new low-carbon recycling and rolling plant at the 3,000-acre site in Bay Minette. The plant will be the first fully-integrated aluminum mill built in the United States in 40 years.”
The announcement also revealed that Alabama Gov. Kay Ivey had awarded a $2.5 million grant to help “a world leader in aluminum manufacturing and recycling build a plant in south Alabama and create 800 new jobs.”
“Community Development Block Grant funds will be used to provide infrastructure required for Novelis Inc. to invest in a $2.4 billion facility in Bay Minette. The mega-plant will be located on a 3,000-acre-site off Alabama Highway 287 and Interstate 65,” the Alabama Department of Economic and Community Affairs said in its January 19, 2023 newsletter.
Novelis announced that it will be primarily serving the beverage can market. The Columbus plant will be in direct competition with Novelis in the recycling of used beer and soda cans as a fundamental part of their business. Novelis, however, is a wholly owned subsidiary of the India company Hindalco, the world’s largest flat-rolled aluminum products and recycler of aluminum. Hindalco has a global footprint covering 49 state-of-the-art manufacturing facilities in North America, Europe, and Asia.
A further warning to the Mississippi company is that Novelis Inc. is the world’s largest producer of aluminum beverage can stock and the largest recycler of used beverage cans.
The Steel Dynamics deal is touted by Reeves as the largest economic development deal in Mississippi’s history. But the Alabama project is listed as “the nation’s most technologically advanced aluminum mill.” Steel Dynamics has no history in the processing of aluminum.
Given those differences, Steel Dynamics will hardly prove competitive in the aluminum recycling business.
“Novelis’ decision to locate the nation’s most technologically advanced aluminum mill in Baldwin County is a powerful testament to both the state’s (Alabama’s) attractive business climate and to the capabilities of our talented manufacturing workforce,” said Greg Canfield, secretary of the Alabama Department of Commerce. “The magnitude of this project makes it a game-changing development for Alabama’s industrial sector and a jobs engine for the region.”
Reeves had shown his ineffectiveness as a leader in May 2020 after House Speaker Philip Gunn and Lt. Gov. Delbert Hosemann, president of the Senate, sued him over control of $1.2 billion in federal COVID-19 funds – and won.
Now, Reeves comes once again, asking the legislature to sign off on a quarter-billion-dollar give-away to a company he refused to name.
“Once we get through the legislative process, and once we get final agreements signed, we will announce that the deal is done,” he said.
“That logic for economic development, so the governor could do a victory lap, but also not save the water crisis in Jackson and save our rural hospitals – that simply does not add up to us,” said Senate Minority Leader Derrick Simmons.
After the vote on the surprise package was affirmed in the legislature, the company with the surprising new plan – Steel Dynamics – turned out to be a company that had been in Columbus since 2014. The steel mill taken over by Steel Dynamics was previously owned by Severstal North America.
Steel Dynamics is listed as the third-largest steel producer in the U.S., and one of the largest metal recyclers.
But Steel Dynamics produces steel, yet somehow plans to use the state’s $246 million gift to set up an aluminum processing and recycling plant in Columbus, either near or on the same site as its current plant.
“Steel Dynamics, a Fortune 500 company founded in 1993, is the third-largest producer of carbon steel products in the U.S. and one of the largest metal recyclers. It owns facilities across the U.S. and in Mexico,” its prospectus says.
Curiously, Steel Dynamics had announced in 2018 that it was investing – presumably its own money – in an expansion plan for the Columbus plant.
“Steel Dynamics, Inc., is expanding its Columbus, Mississippi, operations by adding a new galvanizing line and upgrading existing equipment to increase higher-margin production capability. This announcement represents an investment of at least $200 million and creates 45 jobs over three years at its Columbus Flat Roll Division.”
Why was there no mention of this earlier plan in the “deal” that Reeves laid out for the company in Nov. 2022?
HISTORY OF FAILURE
Despite the warnings of P.T. Barnum, Mississippi taxpayers just can’t seem to get from under the wand of their hustlers in state government.
Hurricane Katrina was a major disaster to Mississippi’s economy, but the ensuing theft and misuse of disaster relief funds by then-Gov. Haley Barbour and his operatives he brought with him into the state from Washington, D.C., was an outright catastrophe.
A great mystery still exists over the disappearance of most of the $5.4 billion sent for housing restoration and reconstruction after Katrina hit in 2005.
Then-HUD Secretary Alphonso Jackson said affordable housing in coastal Mississippi was a “more pressing need” than the port expansion that Barbour wanted to make.
Barbour, formerly the number one lobbyist in D.C., had a way of strong-arming his way through the Washington hearings and complaints about his handling of the $5.4 billion sent to Mississippi. He went directly to Bush, the man he had been instrumental in getting elected while serving as National Chair of the GOP. The public arguments nearly always referred to $570 million, rounded off to $600 million, spent on the port, while giving little notice to the paltry $135 million spent on housing restoration in the predominantly Black communities of the Gulf Coast. Until now, there has been no accounting for the $4 billion-plus left over after the housing ($135 million) and port ($600 million) allocations were made.
Barbour’s niece, Rosemary Barbour, who had no experience in business management beyond an ironing service she once ran while in college, was able to get a $500 million contract for maintenance of FEMA trailers that were supposed to be used as a part of the Hurricane Katrina recovery effort. Barbour was on record claiming that he knew nothing about his niece’s contract.
The state auditor during this period of such massive rip-offs was none other than Phil Bryant, there to help Barbour cook the books on the $5.4 billion Katrina fund. Bryant had already helped Gov. Fordice arrange the TANF program to become a “slush fund” for certain insiders.
Haley Barbour, who served as governor from 2004-2011, was at the center of more boondoggles and scams against the state than any other governor of the new century. The Yalobusha meat plant scandal wound up in 2004 with a leader of the scam going to prison and leaving the state liable for $35 million scammed by the scam artist.
Barbour’s love affair with the purported biofuel company KiOR, which promised the state a $500 million investment and 1,000 jobs, wound up costing the state $75 million and a bankrupt enterprise in 2010.
The Sierra Club challenged Mississippi Power of Kemper County, calling the “proposal dirty, expensive, and unnecessary” for its failed $2.53 billion “clean coal” project that had been snapped up by Barbour (“This project brings hope and the promise of a brighter future to east Mississippi, an area of the state that can certainly benefit from it,” Barbour promised in 2006.) But he was gone when the cost overruns of over $366 million first cropped up in May 2012. Phil Bryant, Barbour’s pliable state auditor and lieutenant governor, was now governor. Mississippi Power first reported cost overruns of $366 million in May 2012, although the company had known for months the plant was over budget.
The Mississippi Public Service Commission shut the Kemper “clean coal” operation down in 2018 after its original projected cost of $2.5 billion ran up to $7.5 billion.
ASIA LEADS MARKET
Financial analysts of the metals markets agree that Asia and the Pacific hold a 69 percent share of the aluminum markets globally, including the demand of the automotive, construction, and manufacturing sectors. And the Asian-Pacific manufacturing giants India, China, and Russia will continue to hold their leading positions well beyond 2030.
From both the production and consumption standpoints, Asia-Pacific will keep expanding to new markets in Africa and Latin America who keep calling on their resources for development and expansion.
“The thriving manufacturing sector and high consumption of aluminum in the Asia Pacific are set to establish the region as the leading aluminum market in the projection period,” The Global Newswire reports in its Dec. 30, 2022 newsletter. “Major economies such as China and India are contributing significantly to such market growth.
“Notably, promising advancements in China’s automotive and aerospace industries are scaling the expansion of APAC’s aluminum market. Furthermore, favorable construction and automotive manufacturing activities in India are enabling the Asia Pacific to sustain its dominance in the global aluminum market.”
With such glowing prospects coming out of the Asia-Pacific global sector, Steel Dynamics, a new kid on the aluminum block, will have a very hard time finding its place and holding on through the projected year 2030.