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A defective component in a new hot-rolling mill in Harrison, PA, could cost specialty metals producer, Allegheny Technologies Inc. (ATI), $20 million in lost profits this year.

A defect ended up discovered during routine maintenance of the rotary crop shear (RCS) that trims metal during the production process, company officials said.

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“It’s essentially a big knife” was how ATI spokesman Dan Greenfield described the piece of equipment.

The new $1.2 billion hot-rolling and processing facility that was put into service this year “will continue to operate without the RCS,” according to an ATI news release.

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“This outage will not impact any dimensional capability of ATI’s flat-rolled products.”

Metal slabs process through the rotary crop shear before entering the seven-stand finishing mill, which incrementally reduces the thickness down to as thin as 0.08-inch.

ATI said the rotary crop shear will not be back in service until at least late September.

“We expect to continue to produce the vast majority of our flat-rolled products (at the new Harrison mill) while the RCS is off-line, and we don’t expect this issue to have an impact on our customers,” said Chief Executive Rich Harshman. “For grain-oriented electrical steel, we will use alternative, less efficient production processes, including the legacy hot strip mill which was warm-idled earlier this year.”

That rolling mill is elsewhere within the sprawling site of what was Allegheny Ludlum Steel Corp.

Grain-oriented electrical steels are iron-silicon magnetic alloys used to construct the cores of highly efficient electrical transformers.

As to whether the change in production will result in layoffs, Greenfield said, “At this point, it does not appear that way. As far as the employees, one of the things we would like to relay, when this occurred, the team at the (new mill) had done what we could call a heroic effort to work with new pieces of equipment and all the extensive electronics involved,” Greenfield said.

Greenfield said ATI is in the process of a “root cause analysis” on what caused the defect and how it can end up fixed or replaced. He did not expect its repair to come at a cost to the company.

“This was a component that was designed to last a long time — many, many years,” Greenfield said.

However, ATI will realize a cost in terms of lost profits expected this year from more efficient production on the new mill and increased sales.

“As a result of the temporary loss of the RCS, we expect the fourth quarter 2015 operating profit benefit related to the (new mill) to fall short of earlier projections by as much as $20 million, pre-tax,” Harshman said.

“We remain confident that the expected (new mill) annualized operating profit benefit to ATI Flat-Rolled Products of $150 (million) to $250 million from cost reductions and new product sales will be fully realized,” Harshman said.

“However, the expected benefit of this projected improvement has likely moved from the fourth quarter of 2015 to the first half of 2016 due to the temporary loss of use of the RCS.”

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