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Furnace restarts could pressure HRC prices

Jun 10, 2020 | 05:03 PM | Chicago | Michael Cowden

Tags  restarted capacity, blast furnace, electric-arc furnace, EAF, JSW Steel USA, Mingo Junction, Cleveland-Cliffs, Dearborn Works U.S. Steel

At least three furnaces responsible for sustaining more than five million tons per year - 5.15 million tons, to be precise - of flat-rolled steelmaking capacity are slated to restart over the next month, according to company statements and Fastmarkets' reporting.

That figure is substantial: US mills produced 96.9 million tons of steel in 2019, according to the World Steel Association figures. The amount of restarted or soon to be restarted capacity represents 5.3% last year’s total output.

The number is even more significant when output is narrowed down to flat-rolled products. The US produced approximately 50 million tons of steel sheet in 2019, according to Fastmarkets analyst Amy Bennett, and 5.15 million tons of restarted capacity would represent 10.3% of that total.

The furnaces
JSW Steel USA plans to restart the electric-arc furnace (EAF) at its flat-rolled steel mill in Mingo Junction, Ohio, in mid-June, according to market participants.

The furnace, which has annual capacity of 1.5 million tons, was idled in mid-April for upgrades and because of poor market conditions.

The company had acknowledged, but had not responded, to requests for confirmation of the Mingo Junction EAF restart when this article was filed.

Cleveland-Cliffs plans to restart the blast furnace at its Dearborn Works in Michigan in late June or early July, sources said.

The anticipated restart there comes after the iron ore miner and steelmaker said on June 9 that it would resume operating its Tilden iron ore mine in Michigan.

Cliffs announced plans it would halt mining and pellet production at Tilden in mid-April and after temporarily idling the Dearborn blast furnace.

“The Tilden mine supplies internal feed for (Cliffs’) blast furnaces in Middletown, Ohio, and Dearborn, Michigan, implying a soon restart of the Dearborn blast furnace (we believe before end of month),” KeyBanc Capital Markets analyst Phil Gibbs wrote in a research noted dated Tuesday.

Dearborn Works has annual steelmaking capacity of 2.2 million tons.

Cliffs has not responded to requests for comments about the status of its operations from Fastmarkets, including for this article.

U.S. Steel confirmed to Fastmarkets on June 9 that it had restarted the No1 blast furnace at its Mon Valley Works in western Pennsylvania.

Mon Valley Works sports two blast furnaces and has annual capacity of 2.9 million tons. Fastmarkets, for the purposes of this article, assumed that each furnace is responsible for supporting half that amount, or 1.45 million tons.

The price
Fastmarkets’ daily steel hot-rolled coil index, fob mill US was calculated at $25.98 per hundredweight ($519.60 per ton) on Tuesday June 9, up 0.4% from $25.88 per cwt on Monday and up 3.5% from $25.10 per cwt a week before on June 2.

Domestic hot-rolled coil prices are up 18.7% from a more than four-year-low of $21.89 per cwt recorded in late April and now stand at their highest point since $26.65 per cwt on April 2 - before the full impact of the Covid-19 outbreak had hit the domestic steel market, according to Fastmarkets pricing archives.

What’s not clear is whether higher prices are sustainable because it’s uncertain if demand will continue to increase in tandem with restarted production capacity.

“US sheet product prices will trend higher in June and into the third quarter of 2020, supported by elevated scrap costs, limited import competition, reduced domestic steel production, relatively steady demand from the construction sector and the gradual return of automotive and other manufacturing capacity to production,” Bennett said. “Risks to prices from late Q3 onwards remain … largely centered on domestic steel output, declining prime scrap prices as manufacturing capacity returns, and the risks of a second wave of Covid-19 and the potential for further lockdowns later this year.”


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