USS Q3 guidance: Prices have bottomed, expansions on track

The company also said Q3 likely reflected a “bottoming steel price environment.”

Case in point: The low end of SMU’s price range for hot-rolled (HR) coil fell to $600 per short ton (st) in July. Our HR price now stands at $690/st on average.

Broadly speaking, U.S. Steel said adjusted earnings from its flat-rolled steel mills in the US would be lower because of weaker prices. Big River Steel – its EAF sheet mill in Osceola, Ark. – saw that trend partly offset by lower metallics costs. But it also recorded $40 million in start-up and construction costs for Big River Steel 2 (BRS2).

Operations update

U.S. Steel said it remains on track to start up BRS2 in Q4 this year.

Recall that BRS2 – an expansion of the Osceola steelmaking campus – is expected to almost double capacity there from 3.3 million short tons per year (stpy) to 6.3 million stpy.

Meanwhile, U.S. Steel said it continues to “steadily advance” the ramp-up of its non-grain oriented electrical steel (NGOES) line at Big River as well as the mill’s new dual Galvalume and galvanizing coating lines.

Editor’s note: Note SMU lists new sheet capacity here and new coating capacity here.

Recall that U.S. Steel operates flat-rolled steel mills in the US, energy tubular mills, and a large steelmaking complex in Kosice, Slovakia.

U.S. Steel said Europe has seen a “softening demand environment.” The No. 1 blast furnace at its Slovakia mill will, therefore, remain temporarily idled following a planned 30-day outage. Despite that, the European results received a boost from carbon credits, the company said.

The tubular segment also remains under pressure from “a weak pricing environment,” it added.

Nippon Steel sale

The regulatory saga continues for Nippon Steel’s planned ~$15 billion acquisition of U.S. Steel. Note that a decision on the acquisition has been pushed to after the US presidential election.

U.S. Steel said Nippon Steel plans to invest at least $1 billion at the hot strip mill at its Mon Valley works in western Pennsylvania. That is notable because the company in 2021 shifted a planned investment of that amount from Mon Valley to Big River, a non-union mill. That infuriated the United Steelworkers union, which represents Mon Valley and U.S. Steel’s other integrated mills.

The Japanese steelmaker also aims to invest $300 million to upgrade blast furnace No. 14 at U.S. Steel’s Gary Works in northwest Indiana, another union-represented mill. That’s important because No. 14 is the largest blast furnace at Gary Works. It has a capacity of 7,450 tons of iron per day. The other three furnaces at Gary – No. 4 (3,800 tons per day), No. 6 (3,450 tons per day), and No. 8 (3,000 tons per day) – are substantially smaller, according to SMU’s blast furnace status table.

“We are heartened by the outpouring of support from our employees and communities who see their futures benefitting from the transaction and maintain the view that this deal is the BEST deal for American steel, and steel communities,” U.S. Steel President and CEO David Burritt said in a statement.

USW still opposed

The leadership of the United Steelworkers (USW) union remains against the deal. It said the US government should reject the acquisition because of “important national defense reasons.”

“USS can remain an independent company – we would hope if this occurs, with a new and responsible CEO and management team,” USW International President David McCall and Negotiating Committee Chairman Mike Millsap said in a letter on Tuesday.

The union also cited commitments it said former USW President Tom Conway, who died last year, had received from Cleveland-Cliffs. It, in addition, expressed frustration at the expansion of Big River.

“If Cliffs or any other company again bids in the future, it will need to make the same commitments as Cliffs made to President Conway for the union to support the deal,” the USW said.

“That is, it must commit to honoring all provisions of our contracts, investing billions in our facilities, and finding ways to expand our markets without shifting our jobs to Big River,” the union added.