VAM Project Holds Promise for More Expansion Here
YOUNGSTOWN, Ohio -- City officials are optimistic that Vallourec intends additional projects beyond the new pipe threading mill announced Thursday, and say they're prepared to encourage the company to make those investments in Youngstown.
Mayor John McNally announced at Thursday’s Board of Control meeting that VAM USA LLC had confirmed it would move forward with establishing the $81.6 million mill, which is expected to create 80 jobs (READ STORY).
At the meeting, the board approved selling 27 acres of land adjacent to the Genmak Steel building VAM USA purchased last for $365,000 and approved a 10-year, 75% tax abatement for the project.
Houston-headquartered VAM USA is a joint venture of Vallourec Star, which last year opened its $1 billion pipe mill in Youngstown, Nippon Steel and Sumitomo Metals.
Shortly after 9:30 a.m. today, VAM issued its first public statement regarding the project since the city's announcemen. The new plant "will thread VAM connections on pipe produced at the adjacent Vallourec Star plant and destined for the North America oil and gas shale plays," the company said.
In the prepared statement, Eric Shuster, VAM USA's president, expressed his appreciaiton to the city, JobsOhio, Team NEO and the Youngstown/Warren Regional Chamber for their efforts. "VAM USA's investment responds to the customers' requirements for high quality tubular products in proxiity to their operations and provides the one stop shop for the finished goods they need," he said. "This project will also create numerous construction jobs and around 80 full-time positions when production starts next year."
“We’re looking forward to some hopeful projects down the road,” McNally told reporters. “If you look at the footprint of the site that’s involved, I believe there’s significant room for expansion, not only of work with VAM but also with Vallourec. So we’re hoping this is not the last of future announcements.”
The announcement affirms the city’s ability to take on big projects involving brownfield redevelopment and bring “significant investment into the community” to create well-paying jobs, said David Bozanich, city finance director.
“We don’t have anything specific on the horizon. But as the [oil and gas] industry develops and it continues to grow, we want to make sure that [Vallourec and VAM officials] know we want them to spend their money here before they spend it somewhere else, and to date we’ve been pretty successful with that strategy,” Bozanich said.
The company can do “some expansion” on its current footprint and there are alternative sites that could be discussed, he added. “We’re going to go out of our way to make sure that we provide them with adequate spacing before they make a decision to go somewhere else."
Added Sarah Boyarko, vice president of economic development for the Youngstown/Warren Regional Chamber, “They’re working really hard to create their own campus-style setting over there on route 422,” said Sarah Boyarko.
The VAM project was initially announced in November 2011. A decision subsequently was made not to use Vallourec's existing facilities, Boyarko explained. "We needed to scramble around and make sure we got all of the other potential locations in front of them” for the project, which now faced competition from sites elsewhere including in the Houston area.
The chamber is in “constant communication” with Vallourec’s leadership, Boyarko emphasized.
“This sort of investment and activity is what others in the industry want to hear about. So when something like this happens, it makes the case greater that we -- Youngstown, the Mahoning Valley -- are the hub for manufacturing for the oil and gas industry,” she remarked.
“The next logical step in the supply chain is the threading,” said Laura Jones, spokeswoman for JobsOhio, the public-private state development agency, which also worked with Vallourec. “You have to be able to connect those pipes so those are the value-added pieces of the supply chain for drilling, producing and moving hydrocarbons.”
VAM's products will not only support the oil and gas drilling in Ohio but also will be shipped globally, she noted.
Jones said JobsOhio is “always staying in touch with companies” in and out of Ohio to determine what their growth potential is and determine whether the agency can provide assistance. “The whole oil and gas development is still very much in its early stages and there are probably other opportunities that exist,” she said. “Our goal will be to help drive that growth where we can.”
The threading mill is expected to open with two lines, with potential to expand by another two depending on demand, Bozanich said. About 80 jobs will be created.
Based on the projected employment, the city anticipates receiving $250,000 to $300,000 in additional income tax revenue, and total compensation for the positions would probably be in the $70,000-$80,000 range per employee, Bozanich reported. Under the enterprise zone agreement, Youngstown City Schools will receive $400,000 to $500,000 annually, he said.
The tax abatement agreement gives an April 1 start date for construction on the project, although city officials said the company plans to begin work as soon as the weather permits. The mill is expected to be completed by Sept. 1, 2015.
Once the mill is ready to open, it will require welders and other skilled trades for workers, McNally said. “This goes to a lot of what we’re talking about with the Oh-Penn Manufacturing Collaborative,” he said. “You need to have some skilled workers. We’re always trying to get people into the trades.”
The announcement serves as another example of the need for skilled trades, affirmed Jessica Borza, sector partnership coordinator with the Oh-Penn Manufacturing Collaborative and executive director of the Mahoning Valley Manufacturers Coalition.
“What exciting news!” she remarked. Vallourec has been a great partner in both MVMC and Oh-Penn “so it’s great to see another one of our members growing,” she said. The announcement also provides “real-life examples of growth and opportunity” that potential candidates for manufacturing positions “can put their arms around and see that manufacturing truly is growing and here to stay.”
U.S. Rep. Tim Ryan, D-13 Howland, hailed the news as “a real signal” to global markets that "this is where the action is,” he said. Ryan predicted that VAM’s projected investment and jobs “will probably grow into many more.”
The announcement builds on the earlier Vallourec project, which was supported by infrastructure work funded through the American Recovery and Reinvestment Act of 2009, which Ryan supported. “Another piece of this is the tariffs on Chinese tubing that we’ve been advocating,” he said. The tariffs that have been put in place allow companies in the industry “to try to thrive in places like Youngstown,” he said.
Ryan confirmed his office is getting “a lot of inquiries” around the entire Mahoning Valley and up and down eastern Ohio, although nothing he could discuss publicly. There have been “early discussion” regarding projects “which we hope will blossom someday,” he said.
The congressman was unsure what role the recent vote by workers at Vallourec’s existing area plants not to unionize played in the company’s decision. “Ultimately workers have to make those decisions but unlike many companies, Vallourec is a company that goes out of its way to treat its workers well and that’s why the vote went the way it did,” he said.
“We just want good corporate citizens who treat their employees well.”
Copyright 2014 The Business Journal, Youngstown, Ohio.
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