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USS, Republic mull DRI joint venture in Ohio

Keywords: Tags  U.S. Steel, Republic Steel, Lorain plant, DRI, direct-reduced iron, Ohio plant, John Surma, Thorsten Schier

NEW YORK — U.S. Steel Corp. is considering a direct-reduced iron (DRI) venture with Republic Steel in Lorain, Ohio, it said.

"We are ... working with Republic Steel on a joint study for a potential DRI joint venture that would be located at Lorain and primarily feed the new electric-arc furnace (EF) that they are constructing there. Phase one of the study was completed last year and we’re well into the second phase of the study, where the project will be defined to the extent required for final decisions by the potential partners," chairman and chief executive officer John P. Surma said April 30 during the Pittsburgh-based company’s first-quarter earnings call.

The project "could afford us the opportunity to leverage the rounds supply agreement, abundant and competitively priced natural gas, and potentially our iron ore assets to provide a very attractive cost structure for our tubular operations at Lorain," he added.

U.S. Steel recently signed an agreement with Republic for the supply of steel rounds to its tubular facilities beginning in January 2014 (, April 29), which will "largely supplant commercially purchased rounds that we’ve been purchasing from a number of sources," Surma said.

The move also comes as U.S. Steel has determined that it is possible to make a DRI-grade pellet from its iron ore operations in Minnesota, he said during the call.

Surma didn’t comment on the targeted size of the proposed DRI facility with Republic, but did say that in general "1 million tons, 1.1 million tons might be the normal size range," with "most projects" reporting costs of about $318 per ton.

Also in Lorain, U.S. Steel’s board has approved an upgrade to its tubular facility’s No. 4 seamless hot mill, which will allow it to make larger sizes and increase output, according to Surma. "This project will increase the mill’s range of outside diameters from a maximum of 4.875 inches to just over 6 inches," he said.

"The expansions on the (No.) 4 mill will give us some additional firepower and we’ll have some additional capacity; how much remains to be determined," Surma added during a question-and-answer period.

The mill investment will likely cost around $100 million, he said during the call.

Surma also said this week that U.S. Steel doesn’t expect a disruption in supply to customers due to the lockout at its Lake Erie Works in Nanticoke, Ontario (, April 29).

"We have inventory in position to make sure that our customers of those lines in Canada are well taken care of. We expect to serve those customers without missing a beat, and we’re going to get them what they need on the terms that we agreed," he said, adding that U.S. Steel could ship steel from its operations in the Great Lakes to its finishing lines in Canada if needed.

The lockout could cost the company $45 million to $50 million per quarter, based on U.S. Steel’s experience with the previous lockout at the facility, Surma said, adding that any labor agreement at the plant would need to "reflect the position of this facility in a very, very competitive flat-rolled steel market."

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