Steel Mills

US Steel Great Lakes Close to Making Steel But Not Quite Yet

May 13, 2014

We have been getting mixed messages regarding the Ecorse or USS Great Lakes steelmaking operations. Our sources have been advising us that there have been plans to bring the furnaces and #2 BOP back up over this past weekend (did not happen) and then again today (still not up). Other sources close to the situation are advising any announcement of steelmaking operations being back in operation is a bit premature. US Steel told SMU that they do not have an official announcement at this time and referred us back to the comments made by the company CEO in late April.

The expectation is that the steelmaking operations will be back online by the 15th, according to comments made by USS CEO Mario Longhi during the company earnings call with analyst. The mill is struggling to make that deadline.

On March 27th a main collector pipe fell and in the process collapsed part of the roof structure over the #2 BOP (basic oxygen process or furnace) which is where liquid pig iron and scrap are combined to make steel.

The amount of downtime was compounded when, on April 4th an independent (non-US Steel employee) crane operator working on the roof repairs was killed when the crane overturned.

The Great Lakes steelmaking operation is rated at 3.9 million tons per year. The loss of steelmaking is projected to be approximately 400,000 to 500,000 net tons with today being the 47th day of lost steelmaking.

Separate from Great Lakes the U.S. Steel Gary Works steelmaking operation suffered from a lack of raw materials during this same time frame as ice on the Great Lakes slowed down shipping between Lake Superior and the Gary, Indiana plant. The Gary Works plant has been building back to full capacity as the ice coverage has been reduced and vessels are able to make the transit between Minnesota and the Gary plant without having to use icebreakers.

Getting these two U.S. Steel facilities back online will help take some of the pressure off of lead times and potentially ease price pressures.

One large service center executive shared his thoughts on the subject with SMU earlier this evening, “Mills need to get June put to bed quickly to keep momentum going, but I don’t think that’s happening. I think we’ll see some period of pause and then lower prices, due to rising supply and inventory levels. This likely will be evidenced when mills are trying to fill July books, which I think will take a long time compared with the recent past few months.”

Others are not so quick to call an end to the bull market as there will need to be a significant amount of tons produced just to rebuild contract inventories and produce late orders – not only at US Steel but ArcelorMittal, AK Steel and Essar Steel Algoma each of which have had their own production issues either due to raw material shortages or equipment problems.