NEW YORK U.S. Steel Corp. is said to have recently delivered steel slabs into ThyssenKrupp AGs Calvert, Ala., mill for rolling, according to three sources familiar with the matter, fueling speculation that a raw material supply agreement could be in the works after the southern mills imminent sale.
Sources indicated that the slabs, which were likely brought in from U.S. Steels Fairfield, Ala., facility, are going to be tested to make American Petroleum Institute (API)-grade coils for the pipe and tube market, as well as extra wide hot-rolled coils.
Fairfield Works, located some 200 miles southwest of ThyssenKrupps Calvert facility, has a slab capacity of 1.9 million tons per year, according to the Association for Iron and Steel Technologys 2012 iron and steel plants directory. While U.S. Steel can make slabs up to 100 inches wide, its hot strip mill can only produce 24- to 60-inch wide product.
In contrast, ThyssenKrupps Calvert hot strip mill can product 73.6-inch wide material, according to the directory.
A spokeswoman for Pittsburgh-based U.S. Steel Corp. declined to comment.
"ThyssenKrupp Steel USA has not rolled and currently has no plans to roll any (U.S. Steel) slabs," a spokesman for ThyssenKrupps U.S. arm said via e-mail Nov. 4, but couldnt be reached for additional comment. ThyssenKrupp sales representatives are said to have told customers of the recent move.
"My understanding is that theyre going to send slabs to (ThyssenKrupp), roll them and then send the product back north to its customer base," one source in the South said. "That could be a lot of money in freight. Im kind of raising my eyebrow."
Testing slabs to make API-grade coil would be logical, market participants said, particularly because U.S. Steel is focused so heavily in the energy space. While much of the conversation over ThyssenKrupp has remained on its ability to feed into the automotive space, sources indicated that the energy space is also a strong end market for steel.
Additionally, having access to making wider hot-rolled bands would also be beneficial for U.S. Steel, as it can offer more options for its customers.
The move by U.S. Steel could mean that a supply agreement is in the works, speculators stressed. They indicate that Fairfields existing hot strip mill needs to be upgraded, so moving some slabs over to ThyssenKrupp while the hot strip mill is idled could be a strategic move for the producer.
Market rumors concerning the imminent sale of ThyssenKrupps Calvert facility started to circulate in late October, with many players expecting the deal to help tighten supply and increase pricing in the Southeast.
Participants noted that an announcement from the Essen, Germany-based steelmaker or from the likely joint buyersLuxembourg-based ArcelorMittal SA and Tokyo-based Nippon Steel & Sumitomo Metal Corp.could be seen in the coming days (amm.com, Oct. 29).
Concerns over supplying raw material and other factors have caused Cia. Siderúrgica Nacional SA, the other named bidder, to fall behind, sources familiar with the situation have indicated.