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US mills fall into autumn with wave of outages

Sep 23, 2019 | 02:38 PM | Chicago | Michael Cowden

Tags  outage, AK Steel, Dearborn Works, ArcelorMittal, Burns Harbor, Cleveland, U.S. Steel, Gary Works Gerdau

Domestic mills have scheduled a host of outages next month, but sources aren't convinced they will help falling steel prices.

Case in point: AK Steel plans to press ahead with an October outage at its Dearborn Works in Michigan, a company spokesperson confirmed.

The outage is expected to last less than 20 days. “We plan in advance to have appropriate product to meet our customers' needs,” she said in an email to Fastmarkets on Monday September 23. The spokesperson declined further comment.

Fastmarkets reported in July that AK Steel was planning a $60-million maintenance outage, beginning in October, at its Dearborn Works blast furnace and steel shop.

Dearborn Works produces hot-rolled, cold-rolled and hot-dipped galvanized flat-rolled steel as well as advanced high-strength steel. The facility supplies original equipment manufacturers, including customers in the automotive industry, according to AK's website.

AK not alone
Several domestic mills - both integrated and mini-mill producers - also have outages slated for the fall.

On the integrated mill side, ArcelorMittal told Fastmarkets in June that it planned to take autumn maintenance outages at two of its US blast furnaces. The planned outages will take place at ArcelorMittal’s Burns Harbor steelmaking complex outside of Chicago and its Cleveland steelmaking operations.

At Burns Harbor, the C furnace will be taken down for two weeks in October for stack shotcrete work, large bell hopper replacement and other routine maintenance, a company spokesperson said in an email to Fastmarkets on Monday.

At Cleveland, the C-6 furnace will be taken down for one week in November for stack shotcrete work and routine repairs, she said.

Both mills produce flat-rolled steel. Both outages were scheduled months in advance, the spokesperson noted.

On the mini mill side, Gerdau Long Steel North America’s mill in Midlothian, Texas, will take a nearly two-week planned outage in October, a company spokesperson confirmed to Fastmarkets in August.

Fastmarkets has confirmed the outages even if precise dated are not available. Market participants said other mills have outages scheduled for October and November too.

U.S. Steel was said to have a significant outage coming up at its Gary Works outside of Chicago.

“Regarding the outage, we do not have anything to report outside of the earnings calls,” a U.S. Steel spokesperson said in an email to Fastmarkets.

U.S. Steel's third-quarter earnings call is scheduled for Friday November 1, she added.

U.S. Steel has already idled furnaces at Gary Works and Great Lakes Works near Detroit. Those idlings will last into 2020.

The U.S. Steel idlings haven’t materially reduced supplies, Cowen analyst Tyler Kenyon wrote in a research note last week. “We continue to believe that inventory accumulation ahead of these outages will delay any supply-side relief until early [fourth quarter 2019],” he wrote.

Mills typically build up inventory ahead of outages or idlings so that customers won’t be left short of supplies.

Nucor also has significant outages coming up between now and the end of the year, according to market sources. The company did not respond to a request for comment.

Price impact
While some market participants have said such outages should support steel prices by reducing supplies, others have said that the downtime will pressure scrap prices, because mills will require less scrap. Lower scrap prices will, in turn, lead to negative sentiment around steel prices, the sources said.

Fastmarkets' daily steel hot-rolled coil index, fob mill US stood at $27.61 per hundredweight ($552.20 per short ton) at the time of publication, up 0.7% from a two-month low of $27.42 per cwt hit last week but down 6.8% ($2 per cwt) from an August average of $29.61 per cwt.

The declines in steel roughly match those in scrap, where prime scrap fell by $40 per gross ton in September. Scrap prices are expected to continue to fall in October.


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