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.
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 doesnt mark the companys first foray into
scrap-based steelmakingU.S. Steel operated an EF shop in
Baytown, Texas, a few decades agosome 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. Steels
president and chief executive officer) has moved quickly
and has plans. Things are looking on the upside."
While U.S. Steel
didnt 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 isnt especially competitive.
"The (hot strip mill)
was built in the 1930s and its narrow. I think they have
to shut the sheet mill down," he told AMM.
"Theyve 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 AGs 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 wont change, given the pending purchase of
Essen, Germany-based ThyssenKrupps 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. Steels Granite City Works is
An executive from a
competing mill said one of the more interesting aspects of U.S.
Steels 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.
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 companys top executive said recently that it
was evaluating its next steps for the project (
amm.com, Jan. 28).
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, theres going to be a need for that scrap
if it doesnt 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 companys 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