Steely Resolve

U.S. Steel to idle three blast furnace sites in Indiana, Michigan, Europe

We left you with a very optimistic scope on U.S. Steel Corporation in the June 6 edition of EA‘s Direct & Current newsletter. The original American steel king had just announced the completed conversion (and subsequent operations) of its state-of-the-art endless casting and molding facility at its original Mon Valley location outside Pittsburgh.

Sadly, the modern news cycle yields no favors. Not even two weeks later, USS announced Tuesday it would idle three of its blast furnaces. Two of these are located in the United States (Gary, Indiana, and River Rouge, Michigan) while the third is in Slovakia. The decision(s) made national news immediately, with nervous manufacturers and clients worrying about tariffs hurting those they were designed to save.

The American blast furnaces are being idled in response to soft market conditions and “to better align out global production with our order book”, US Steel said in a statement. Lower steel prices and softening demand led the steel producer to forecast current-quarter earnings below the Wall Street estimates, Reuters reported. In Europe, the producer cited increased imports, higher raw material costs and lower demand. Early speculation connecting the dots indicates that the Slovakian plant is being idled permanently to boost American production, and that the Indiana and Michigan plants will resume production eventually. It is worth noting that Dan Brown had just been named to the position of general manager at the Great Lakes Works facility in Gary on March 18.

A blast furnace is a smelting furnace in the form of a tower into which a blast of hot compressed air can be introduced from below. Such furnaces are used chiefly to make iron from a mixture of iron ore, coke, and limestone.

Nerves are heightened mainly due to implications of the ongoing U.S. trade war with China. A number of steel producers in the United States—namely the nation’s top three in Nucor, U.S. Steel, and Steel Dynamics—had actually upped their capacity to its former levels following the initial imposing of tariffs on imported steel last year. Analysts say that has now resulted in a surplus supply at a time when manufacturing demand has weakened.

The Gary Works facility in Indiana has been in negotiations about a $47 million tax break package from the city and state in return for promises of modernization. That location has four blast furnaces with an annual raw steel production capability of 7.5 million tons. The Great Lakes Works facility in Ecorse/River Rouge in Michigan has three blast furnaces with annual raw steel production capability of 3.8 million tons.

If there is a bright side to this story, it could come from the company’s persevering history. It has brought back jobs to its Granite City facility over the past year, and has even showed resolve through the trade war—in the video above, USS CEO David Burritt says the company “has been in a trade war with China for 30 years” noting that adverse conditions are nothing new for steel producers. Hopefully, U.S. Steel will still be “always hiring” for years to come.

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