ALITA USA Announces Plans to Invest in Upstate New York

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Buffalo Niagara Region will likely be home to state-of-the-art OCTG manufacturing facility.

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Buffalo was once the heart of steel manufacturing in the U.S.,and most of those factors such as logistics, infrastructure and the availability of a strong and talented workforce that made the city ideal for manufacturing remain true today.

Alita USA today announced plans to invest up to $102 million (USD) to construct a 150,000 metric ton fully-integrated manufacturing facility in the Buffalo, New York area, to produce welded OCTG (Oil Country Tubular Goods) casing steel pipes. The production facility will be equipped with state-of-the-art heat treatment, process and testing units to produce the special high alloy grades which have been in great demand for high stress conditions in horizontal drilling of shale gas sites.

“We are pleased to announce that the Buffalo Niagara Region is expected to be the home of Alita USA’s first U.S. OCTG manufacturing facility,” said Ali Hosseini, President and CEO, Alita USA. “Buffalo was once the heart of steel manufacturing in the U.S., and most of those factors such as logistics, infrastructure and the availability of a strong and talented workforce that made the city ideal for manufacturing remain true today."

“We are proud that Alita USA has chosen Buffalo and Western New York as the place to grow their business and create new jobs," said New York Governor Andrew M. Cuomo. “This is yet another piece of good news for Buffalo and the entire region, as businesses are now looking at the area's strengths in manufacturing, paired with a highly-educated workforce and proximity to market, as an ideal place to start or expand. Last year we put in place legislation to allow the sale of unused hydropower to enable investments in job creating projects, and today we are seeing another example of the how this funding is helping put New Yorkers to work and rebuild the entire region's economy."

“This is the ideal location to step up our manufacturing site in the U.S. Not only is Buffalo located close to one of the largest shale gas sites in North America, but its location makes it ideal for delivery of raw materials; some of the best quality producers of HRC in North America are as close as 60 miles from our chosen location”, Mr. Hosseini added.

While demand for OCTG in the U.S. is set to grow to approximately 8.3 million tons from its current 5.9 million tons, there is a sizable capacity being built in the U.S. to meet the growing demand. By 2016 when the new capacity comes online, there could be a shake-up in the competitive landscape. When that day comes, companies with lower manufacturing and investment costs will be more flexible to meet those challenges. These factors were foremost in Alita’s thinking when considering where to site this project. Not only did they have to build a fully integrated OCTG plant for less, but their production cost had to be more competitive than others.

In the U.S. OCTG market today, welded OCTG products are used in some of the most demanding onshore well environments, such as horizontal drilling in shale sites. Where API 5CT used to call out seamless manufactured pipe for most OCTG grades and sizes, there is no longer a method of manufacture specified. This is due to the technological improvements welded pipe makers and equipment manufacturers have made in recent years.

“With the allocation of 4 MW of low cost hydropower by the New York Power Authority (NYPA), and availability of the competitively priced, locally manufactured HRC within close proximity to Buffalo, Alita will be able to produce the highest quality alloy OCTG at the most competitive price," Mr. Hosseini said.

In addition to the allocation of 4 MW of low-cost NYPA power, New York State, Erie County and the New York Power Authority have collectively put together a tremendous incentive package for Alita’s project. The incentive package includes: $6.4 million of tax credits by New York State through the Excelsior Jobs Program; a NYPA Proceeds Allocation grant of $2 million; a $2 million “forgivable loan” towards site development and other project costs by the Erie County Industrial Development Agency; and sales tax, property tax and mortgage tax incentives estimated to be approximately $6.2 million in value.

We would like to thank the State of New York, Erie County and Buffalo Niagara Enterprise for the tremendous support they provided to bring this project to New York. With their continued support, we are confident that Alita USA will be the most successful and competitive manufacturing facility for the production of high grade OCTG in the U.S.

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Paul Pfeiffer

Ali Hosseini
Alita USA
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