US Steel to Accelerate Asset Optimization

“We issued equity last August to give us the financial strength and liquidity to position us to establish an asset revitalization plan large enough to resolve our issues, and to see that plan through to completion,” said CEO Mario Longhi.

The multi-year plan consists of smaller and less complex projects that will result in improved operational and commercial benefits and reduce major events that disrupt the supply chain and production. About 40 percent of the spending will be on projects costing less than $10 million and the rest on projects of $20 million or less.

President and COO Dave Burritt added, “We need to perform, we need to execute, and to Dan’s point, if you look at our balance sheet, we do have the firepower on our balance sheet to finance this thing. But we have to perform and we do have to do better and that’s why we need to move faster on this. And we need to take advantage of the opportunity we have now when the market conditions are good because we know at some part, hopefully in the distant future, things would head in the opposite direction, but we will be in much better shape to manage the downturn.”

US Steel reported a net loss of $180 million for the first quarter of 2017, compared to net losses of $105 million loss in Q4 2016 and $340 million in Q1 2016. First quarter loss included $35 million attributed to shutdown of tubular assets.

The flat rolled segment results declined as expected by US Steel, recording a $90 million loss before interest and taxes. Poor results were attributed to higher raw material costs, increased planned outage costs, seasonally lower results from our mining operations, and restart costs associated with the Granite City hot strip mill and our Keetac iron ore mine. The Tubular segment improved from fourth quarter but recorded a loss of $57 million. US Steel Europe was the bright spot for the company, reporting earnings of $87 million.

Flat-rolled raw steel capability utilization was 65 percent in Q1 based on 17 million net tons of annual capability. Excluding the idled 2.8 million tons of capacity from the idled Granite City Works, capacity utilization was 78 percent. Lead times for hot-rolled coil are approximately six weeks and eight weeks for cold-rolled and coated products.

US Steel sees opportunities on the energy front and is ramping up Lonestar Tubular #2 mill. Production of welded tubes is expected to begin in May. Currently, Fairfield Tubular is seeing benefits from increased onshore rig counts. Lorain is tied to offshore rig count which has not changed. US Steel hopes to be in a position to take advantage of the improving energy sector market.

Longhi said US Steel is looking again at the EAF project it was forced to suspend a few years ago. An EAF would benefit the tubular segment while not consuming full capacity thus giving US Steel the flexibility for making flat rolled slabs.

CEO Mario Longhi said the company’s mining operations were impacted by the seasonal closure of the Soo Locks in Q1. US Steel is supply pellets to its former Canadian asset, US Steel Canada (Stelco) and expects to enter an agreement to supply all of Stelco’ pellet requirements through 2021 following the acquisition of the assets by Bedrock Industries Group. Closure of the sale is near, said Longhi, and US Steel expects to receive $127 million for its secured and unsecured claims.

Longhi praised the executive memorandum signed by President Trump on April 20 which began an investigation of the impact of foreign imports on national securing under Section 232 of the Trade Expansion Act of 1962.

Said Longhi, “Steel is a core industry to our nation and a critical building block of our economy and national security, and we cannot afford to be undermined due to unfair trade practices and other abuses that target our steel makers and steel jobs.”

US Steel is also pleased with the Buy American order signed on April 18. “The foundation of a strong Buy America program is the longstanding requirement that all iron and steel-making process occur in the U.S. for the product to be Buy America compliant – from the actual steel production to the finishing processes,” said Longhi. “This “melted and poured” standard has been successfully applied since 1983 and must continue to be the standard used in federal Buy America rules for steel procurement.”