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U.S. Steel targets cost cuts, sets closures

Keywords: Tags  steel, U.S. Steel, Mario Longhi, flat-rolled steel, coke batteries, DRI, direct-reduced iron, steelmaking iron ore


NEW YORK — U.S. Steel Corp. is looking to improve its bottom line by shuttering major parts of one steelmaking operation, changing its raw materials strategy and dissolving an existing joint venture, its top executive said Oct. 29.

The changes are needed to make the company more profitable, and are "just the beginning," Mario Longhi, Pittsburgh-based U.S. Steel’s president and chief executive officer, told analysts during a conference call to discuss the steelmaker’s third-quarter financial results.

Those changes include permanently shuttering the iron and steelmaking operations at the company’s Hamilton, Ontario, facility effective Dec. 31. The Hamilton Works produces some 2 million tons of semifinished steel annually, according to U.S. Steel’s website.

"The Hamilton Works cokemaking and finishing operations will continue to operate," a U.S. Steel spokeswoman told AMM via e-mail. "This difficult decision will affect 47 non-represented employees. Those employees will be provided working notice and the company will endeavor to reassign them."

The Hamilton Works employs 875 workers.

The company will take a non-cash charge of some $225 million in the fourth quarter in connection with the closure, Longhi said.

U.S. Steel also plans to shut down two of its coke batteries in Gary, Ind., and confirmed its earlier announcement that it would dissolve its Double Eagle Steel Coating Co. joint venture due to economic changes (amm.com, July 15).

"After a thorough review of the business ... the economic viability of electrogalvanized production at Double Eagle could no longer be maintained at an acceptable margin," Longhi said, adding that the company would move volumes from the joint venture to its own facilities, as well as provide alternative products to its customers.

U.S. Steel also announced plans for the procurement of raw materials, including moving forward with plans to pursue direct-reduced iron (DRI), as well as letting two long-term iron ore contracts expire, which have end dates of 2013 and 2014.

Asked about the DRI future, Longhi said plans to build an electric-arc furnace (EF) operation were still on the table, although moving forward with DRI and an EF operation could be "mutually exclusive."

U.S. Steel has been going through the testing phase at its Minntac mining operations in Minnesota, and has determined that "with the appropriate investments" it could produce quality DRI. As a result, it is moving into its engineering phase, Longhi said, without providing additional detail on a timeline.

Those announcements, part of U.S. Steel’s Project Carnegie cost-reducing initiative, are part of efforts to help it boost its bottom line.

"You’re not happy. We’re not happy. That’s not acceptable. We have to fix the business," David B. Burritt, executive vice president and chief financial officer, told analysts after the company reported its sixth net loss in the past eight quarters. "In order to be a good company, we have to develop economic profit."

In its flat-rolled division, Longhi said that the flat-rolled supply chain is in the "healthiest position it’s been for this time of year since the economic recovery began," noting that in past years market sentiment has typically turned negative in the fourth quarter. "We’re experiencing a market (now) that has a different feel to it."

However, Longhi warned that cautious order entry patterns from spot market buyers coupled with end-users increasing consumption rates is causing lean inventory levels, and U.S. Steel is trying to position itself for more flexibility as shorter cycles are becoming more common in the steel sector.

But while prices saw an uptick in the third quarter on the sheet side, the company wasn’t fully able to take advantage of higher pricing due to the lockout at Lake Erie Works in Nanticoke, Ontario, which saw its furnaces restarted in October.

Thorsten Schier, New York, contributed to this story.

 

 


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