U.S. Steel to Expand Under Tariffs

Date : 02/11/2019 @ 2:27PM
Source : Dow Jones News
Stock : United States Steel Corp. (X)
Quote : 24.1  -0.02 (-0.08%) @ 1:00AM
United States Steel share price Chart

U.S. Steel to Expand Under Tariffs

United States Steel (NYSE:X)
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By Bob Tita 

United States Steel Corp. said it plans to add 1.6 million tons of steelmaking capacity next year by resuming the construction of a new furnace in Alabama as tariffs on foreign metal raise profits on domestic steel.

The furnace at U.S. Steel's mill near Birmingham is the company's second major expansion since U.S. tariffs on imported steel last March raised steel prices and reduced the flow of foreign steel into the U.S. The Pittsburgh-based company restarted a pair of blast furnaces last year at its mill near St. Louis that have a combined capacity to make 2.8 million tons of steel annually.

Nucor Corp., Steel Dynamics Inc. and other domestic steelmakers also have rolled out plans to build or restart mills that would add more than 10 million tons of steelmaking capacity in the U.S. over the next three years.

The companies are counting on the tariffs to discourage steel users from buying the cheap imports that drove down domestic steel prices and discouraged U.S. mills from expanding for years after the recession.

For U.S. Steel, the decision to proceed with the Fairfield mill furnace signals the company's renewed interest in supplying pipe and tubing for oil and natural gas fracking wells. Losses from U.S. Steel's tubular business narrowed in 2018, as steel shipments rose 13% from 2017 and the average price per ton of steel sold by the unit rose 18% to $1,483.

"This is an important step to improve our cost structure," Chief Executive David Burritt said Monday in a release.

The electric furnace at Fairfield will be U.S. Steel's first after 117 years of producing steel. Electric furnaces make steel from melted scrap metal instead of iron ore. The furnaces can operate with fewer workers and are easier to stop and restart than traditional blast furnaces that must operate continuously to avoid damage.

U.S. Steel originally announced plans to close Fairfield's century-old blast furnace in 2015 and replace it with an electric furnace. But by the end of 2015, the company had stopped work on the new furnace, as collapsing oil prices hurt demand and prices for well-site pipe. When the blast furnace closed, more than 1,000 Fairfield workers were laid off. The electric furnace has remained unassembled, in pieces, at Fairfield.

The business has performed better lately as demand for domestic pipe has risen in response to lower import volumes caused by the tariffs. U.S. Steel last week said it will reopen a mill that makes pipe in Lone Star, Texas, that has been idle since 2016.

U.S. Steel said the electric furnace and related casting equipment at Fairfield will cost about $215 million. Production of long round billets to make pipe is expected to start in the second half of next year. About 150 workers will be added at Fairfield to staff the new furnace and caster, a 20% increase from the 750 now employed at the mill.

U.S. Steel's North American workforce is about 16,500 people.

Write to Bob Tita at robert.tita@wsj.com

 

(END) Dow Jones Newswires

February 11, 2019 09:12 ET (14:12 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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