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USS’ EF plan hailed despite concerns

Keywords: Tags  steel, U.S. Steel, USS, EF, electric-arc furnace, blast furnace, ArcelorMittal, Nucor Nippon Steel & Sumitomo Metal


NEW YORK — U.S. Steel Corp.’s proposal to build an electric-arc furnace (EF) has been hailed as a step in the right direction for the company, although the steelmaker will have to address certain concerns by sheet market participants regarding a possible dislocation and ensuing imbalance in its supply chain.

The Pittsburgh-based integrated producer last month said it was taking initial steps toward building an EF at its Fairfield (Ala.) Works (amm.com, Jan. 29). While installing an EF at Fairfield doesn’t mark the company’s first foray into scrap-based steelmaking—U.S. Steel operated an EF shop in Baytown, Texas, a few decades ago—some industry players consider the move a radical one.

"They say that a new broom sweeps clean," one Mid-Atlantic service center source said. "Mario (Longhi, U.S. Steel’s president and chief executive officer) has moved quickly and has plans. Things are looking on the upside."

While U.S. Steel didn’t respond to requests for comment, one issue raised by some observers called into question how and to what degree the move will affect the supply side of the domestic flat-rolled sheet market. In particular, they expressed concern that installation of the planned 1.1-million-ton EF, which is expected to be completed in mid-2017, could translate into a capacity shortfall at Fairfield, particularly since the existing blast furnace there produces some 2.4 million tons of molten iron annually. The implication is that the company could begin shipping slabs from other facilities, including Granite City, Ill., or Gary, Ind.

According to Charles Bradford, an analyst at New York-based Bradford Research Inc., the Fairfield facility might not produce flat-rolled sheet at all once the EF is constructed, particularly because the existing hot strip mill isn’t especially competitive.

"The (hot strip mill) was built in the 1930s and it’s narrow. I think they have to shut the sheet mill down," he told AMM. "They’ve got the toughest competition in that neighborhood compared with any other place that U.S. Steel operates."

Fairfield Works can process slabs up to 100 inches wide, but its hot strip mill can only produce coils that measure 24 to 60 inches wide. Meanwhile, the facility is located 200 miles southwest of ThyssenKrupp AG’s Calvert, Ala., facility and 120 miles east of Severstal North America Inc.’s Columbus, Miss., facility, both of which can produce wider 72-inch coils.

Some sources expressed concern that if U.S. Steel melts less steel in the South, the sheet market might tighten.

Others indicated that capacity won’t change, given the pending purchase of Essen, Germany-based ThyssenKrupp’s facility in Calvert by Luxembourg-based ArcelorMittal SA and Tokyo-based Nippon Steel & Sumitomo Metal Corp., as well as the possible construction of Big River Steel LLC in Osceola, Ark. Additional slab supply could also become available once the upgrade of the caster now under way at U.S. Steel’s Granite City Works is complete.

An executive from a competing mill said one of the more interesting aspects of U.S. Steel’s planned move to EF steelmaking at Fairfield is that it comes at a time when traditional mini-mills are moving away from relying on scrap.

Charlotte, N.C.-based Nucor Corp. said late last year it made its first shipment of direct-reduced iron from its 2.5-million-ton facility in St. James Parish, La., and is aiming to produce some 6 million to 7 million tons of high-quality scrap substitutes for steelmaking (amm.com, Dec. 31). Fort Wayne, Ind.-based Steel Dynamics Inc. also has majority ownership in Mesabi Nugget LLC, although the company’s top executive said recently that it was evaluating its next steps for the project (amm.com, Jan. 28).

"It’s an interesting move (for U.S. Steel) because all the other major EF manufacturers are getting away from the need to buy scrap," the executive at the competitor mill said. "I suppose, theoretically, there’s going to be a need for that scrap if it doesn’t go offshore."

However, given its investments in iron ore and earlier discussions regarding direct-reduced iron, U.S. Steel could be best positioned for the future. Longhi said recently in the company’s earnings call that U.S. Steel has received the necessary state permit and approvals to expand its Minntac Mine boundary in Minnesota by 400 acres (amm.com, Jan. 29).

"This allows us to mine more of our existing iron ore reserves and positions us to continue to explore opportunities to generate value from one of our most significant assets and competitive strengths," Longhi said.


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