SMU Deep Dive: Mill Outages Could Take 1M+ Tons Out of Market

Some have told SMU that domestic mills have informed them they have no spot tons available.

“I was always bullish and saying the prices will go up, but (supplies chains are) getting very stretched,” one manufacturer source said.

He said he was uncertain what the longer-term impact might be, but he speculated that the combination of scarce supplies and higher prices could result in at least some slowdown in end markets such as construction.

Other sources echoed that sentiment. “Things are tight, and we need to be selective on who we sell large quantities to,” one respondent to a recent SMU survey said. “We are having more and more difficulty getting tons from our usual sources as the year moves along,” a second respondent said. 

The Blast Furnace Tally

U.S. Steel has confirmed plans to take a 25-day outage at the No. 1 blast furnace at its Mon Valley Works in western Pennsylvania beginning around March 21.

The No. 1 blast furnace has a stated capacity of 3,175 tons of hot metal per day, according to the Association for Iron and Steel Technology’s 2021 Directory of Iron and Steel Plants. That equates to 79,375 tons of liquid metal removed from the market.

Cleveland-Cliffs, meanwhile, has said it will take a 45-day outage on the blast furnace at its steel mill in Middletown, Ohio.

“We will be taking our Middletown facility down for a 45-day maintenance outage to do some work inside the blast furnace, but not a full reline,” Cliffs President and CEO Lourenco Goncalves said during a quarterly earnings conference call last month.

Cliffs has not responded to inquiries from SMU about the dates of such outages. But market participants have said the Middletown outage is either underway or will start later this month.

Middletown has one blast furnace, the No. 3, which has capacity of 5,897 tons per day, according to AIST. A 45-day outage could therefore result in as many as 265,365 tons of hot metal being removed from the market.

“Once Middletown comes back, we will have another maintenance outage at Indiana Harbor No. 7,” Goncalves said on the February earnings call. Cliffs has 10 blast furnaces and plans to keep between six and eight operating, he noted. “At any given time, we will probably have some maintenance to perform,” Goncalves said.

The No. 7, located at Cliff’s Indiana Harbor steel works in East Chicago, Ind., is the largest blast furnace in North America. It has daily capacity of 11,500 tons, according to SMU furnace status records.

It’s not clear to SMU exactly when the outage at Indiana Harbor will be taken or what the scope of the work might be. While some sources said work might include a reline and might begin as soon as June, others said the outage would focus on stave repairs and would not take place until September.

Whatever the case, a 45-day outage, the length of the one at Middletown, could result in 517,500 tons of hot metal being taken out of the market, according to SMU calculations. But some sources have said the Indiana Harbor outage could last as long as 60 days, which would take 690,000 tons of hot metal out of the market.

The outages would be in keeping with Cliffs’ “value over volume” approach since its acquisition of ArcelorMittal USA.

“We are not going to produce more tons just to create a situation that we will have more out there in the marketplace and we will start to see price deteriorating,” Goncalves said on the February earnings call. “We will do our part to protect price, and that is the right thing to do from a return on capital investment standpoint.” 

The EAF, Re-Roller and HSM Count

Outages at EAF producers, at slab re-rollers and on hot strip mills are shorter, and so their impact on the market is smaller than a lengthier blast furnace outage.

Still, the number of such facilities planning spring or summer maintenance outages is not insignificant. And, taken together, the impact of such smaller outages on a tight steel market could be meaningful.

North Star BlueScope plans to take outages of 3-7 days in April and again in June for work related to an expansion project at its mill in Delta, Ohio.

AM/NS Calvert has scheduled a four-day outage on its hot mill and a seven-day outage on its pickle line in May.

And NLMK USA has slated an approximately one-week outage at the melt shop and hot mill at its mill in Portage, Ind.

All three of those companies have confirmed to SMU, to varying degrees, the scope and timeline of those outages.

Nucor, the largest steelmaker in North America, did not confirm outages said to be upcoming at several of its hot strip mills in the late spring or early summer. But Steel Market Update has been told that Nucor’s mills in Ghent, Ky., and Hickman, Ark., might be taking hot strip mill outages of approximately one to two weeks.

Taken together, such outages could account for an additional 200,000 tons or more of steel being taken out of the market, according to SMU calculations. 

A Wildcard and the Price

Another wildcard is ongoing labor talks at stainless and specialty steelmaker Allegheny Technologies Inc. (ATI), where a contract between the company and the United Steelworkers (USW) union expired on Feb. 28.

The USW has voted to authorize a strike at nine ATI locations. The one that matters as far as carbon steel goes is Brackenridge, Pa. That is where ATI toll rolls carbon slabs for third parties at its hot rolling and processing facility (HRPF).

SMU has previously reported that ATI has toll rolled slabs for NLMK USA, JSW Steel USA and Brazilian steelmaker CSN.

Steel prices in the meantime remain at all-time highs. SMU’s average U.S. hot-rolled coil price stands at $1,300 per ton, up 8.3% from $1,200 per ton a month ago and up 32% from $985 per ton at the beginning of the year.

By Michael Cowden, Michael@SteelMarketUpdate.com