U.S. Steel to Idle Two Furnaces as Demand Falls
June 18 2019 - 8:02PM
Dow Jones News
By Bob Tita
United States Steel Corp. said it will cut production by idling
two blast furnaces in response to falling demand for steel from a
weakening manufacturing sector.
The company will take one furnace off line at its flagship mill
in Gary, Ind., and another at its mill in Ecorse, Mich. The latter
was idled recently for maintenance work and won't be returned to
service when the work is completed.
U.S. Steel and rivals Nucor Corp. and Steel Dynamics Inc have
all issued downbeat guidance for second-quarter profit this week,
citing weaker-than-expected demand for steel. Production of cars
and farm equipment have slipped recently and U.S. manufacturing
output fell in three of the first five months of this year.
"Market conditions have softened," U.S. Steel said on Tuesday.
"We will resume blast furnace production at one or both idled
furnaces when market conditions improve."
The company restarted two blast furnaces at its Granite City
Works near St. Louis last year after the Trump administration
imposed tariffs on imported steel. The duty allowed domestic
producers to raise prices, but falling demand for steel has blunted
the benefit of the tariff in recent months.
U.S. Steel is among the highest-cost producers of steel in the
U.S., making the company more vulnerable to falling prices. The
benchmark price of hot-rolled coiled sheet steel in the U.S. has
dropped by more than 35% since approaching a decade high last
summer. Hot-rolled steel on Tuesday was at $533 a ton, according to
S&P Global Platts's price assessment.
The moves will lower the company's monthly production of steel
by 200,000 tons to 225,000 tons starting in July, U.S. Steel said.
If the two furnaces remain idle for the remainder of the year, the
company said production would total about 11 million tons. That
compares with an earlier forecast of 11.5 million tons, which took
into account planned furnace outages for maintenance. Over 12
months. idling the two furnaces would reduce production by about
2.5 million tons, or about 15% of the company's total steelmaking
capacity, according to analysts.
U.S. Steel said it expects to earn about 40 cents a share for
the quarter ending this month. Analysts had been expecting 51 cents
a share in profit. The company said its bottom line is being
weighed down by costs to repair a coal coking plant near Pittsburgh
following a Christmas Eve fire.
Another fire at that plant this week knocked out pollution
controls there, prompting a flood of complaints about foul smells
and warnings to limit outdoor activity.
U.S. Steel's shipments in the second quarter also will be
reduced by flooding along the Mississippi River and in the Southern
U.S. that has restricted river-barge traffic.
Write to Bob Tita at robert.tita@wsj.com
(END) Dow Jones Newswires
June 18, 2019 19:47 ET (23:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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