Steel News

U. S. Steel Accelerates Best of Both Strategy

12/20/2019 - United States Steel Corporation plans to indefinitely idle parts of its Great Lakes Works in Michigan next year as it advances its “best of both” strategy, through which it intends to narrow its operational focus to a few core integrated assets and expand into electric arc furnace steelmaking.

In an announcement Thursday, U. S. Steel said it intends to mothball the Great Lakes Works’ two blast furnaces and its steel shop by April 2020, followed by the hot strip mill at year’s end. Production at the plant will be re-routed to U. S. Steel’s Gary Works in Indiana.

However, Great Lakes’ process lines, including its cold mill, galvanizing line, annealing line and pickling line, would remain open.

U. S. Steel said the move could affect up to 1,545 employees, although it anticipates that the number of number of employees impacted by the idling will turn out to be lower.

“The United Steelworkers have been notified of this decision, and the company will remain in contact with them as it determines staffing needs at the portions of the facility that will remain operational,” the company said.

U. S. Steel chief executive David Burritt said the decision was driven by the need to accelerate the best of both strategy.

“In this case, current market conditions and the long-term outlook for Great Lakes Works made it imperative that we act now, allowing us to better align our resources to deliver cost or capability differentiation across our footprint,” Burritt said.

“Transitioning production currently at Great Lakes Works to Gary Works will enable increased efficiency in the use of our assets, improve our ability to meet our customers’ needs for sustainable steel solutions and will help our company get to our future state faster.”

Concurrent with the announcement, U. S. Steel issued its fourth-quarter earnings guidance and said it expected to post an adjusted EBITDA loss of US$25 million.

The company said that while the flat-rolled market is improving, quarterly earnings were impacted by lower shipments and lower steel selling prices in the third quarter and October.  Earnings were further hindered by a late November flood at Gary Works.

“Fourth-quarter expected results confirm the need to change to make the business more resistant to factors outside of our control.  While the decisions being made are difficult, we believe they allow us to drive increased stockholder value as we move towards our future faster with a more capital-efficient footprint,” Burritt said.

U. S. Steel’s best of both strategy places special emphasis on three key areas in its flat-rolled group: its US$1 billion endless casting and rolling and cogeneration projects at the Mon Valley Works in Pennsylvania; its US$750 million in improvements to the hot strip mill and other facilities at the Gary Works; and its acquisition of Big River Steel in Arkansas.