U.S. Steel to Expand Under Tariffs
February 11 2019 - 9:27AM
Dow Jones News
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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