United States Steel Corp. (U.S. Steel), Pittsburgh, says it will take “a series of aggressive and meaningful actions to provide greater certainty on the company’s response to impacts from the coronavirus (COVID-19) and the sudden, significant changes in global oil and gas markets.” According to the company, these actions “strengthen its ability to serve customers, partner with suppliers, create long-term value for investors and ensure a more secure future for employees and the communities” where U.S. Steel operates.
The company says it is prioritizing cash and liquidity to maintain its strategic flexibility, positioning itself for when the global economy recovers from the current situation.
“In this unprecedented and rapidly changing situation, our first priority remains the safety and well-being of our employees,” says President and Chief Executive Officer David B. Burritt. “As an essential part of our critical infrastructure, our employees have embraced the special responsibility to continue making the steel society needs, including the packaging for our food supply during the COVID-19 pandemic response.”
He continues, “To ensure a more secure future for all our stakeholders, the time has come for us to take aggressive actions to reposition the company. U. S. Steel has been a cornerstone of manufacturing for over a century, and our products are vital to national and economic security. I am confident in the resilience of our employees, the strength of our customer relationships and the reliability of our regional supply chain. The actions we are announcing today make us stronger and enable us to weather the current situation to emerge as a leader in sustainable steel solutions for generations to come.”
U.S. Steel says it will idle the No. 4 blast furnace at its Gary Works operations in Indiana immediately to begin a planned outage that was originally planned to begin in April and last for 48 days. The scope of the current outage has been reduced and the remainder of the Gary No. 4 blast furnace outage is being delayed. The company says it expects the Gary No. 4 blast furnace to remain idled until market conditions improve.
In addition, the company says it will temporarily idle blast furnace “A” at its Granite City Works in Illinois, effective immediately.
US steel had already announced that it would complete the indefinite idling of the iron and steelmaking facilities at Great Lakes Works in Detroit. The company says it will continue to monitor the impacts of the coronavirus on its orderbook and will regularly assess the footprint required to support its customers’ needs.
As Recycling Today previously reported, beginning in late-May, U.S. Steel plans to idle all or most of its Lone Star Tubular Operations and Lorain Tubular Operations for an indefinite time in response to weak tubular market conditions, including continued high levels of imports and decreased demand driven by a sudden, significant drop in oil prices. The company has issued Worker Adjustment and Retraining Notification (WARN) Act notices to employees at both facilities.
U.S. Steel says it also is aligning its strategic projects with today’s market realities by reducing capital spending in 2020 by $125 million. The company says it now expects 2020 capital spending to be approximately $750 million. Strategic projects will be affected by this move:
- The company plans to delay construction of the endless casting and rolling line and cogeneration facility at its Mon Valley Works near Pittsburgh. March 23, the Allegheny County Health Department (ACHD) announced, after consultation with the company, that a temporary pause in the permitting process is appropriate given the challenges posed to the public comment process while COVID-19 public health orders are in effect in Allegheny County. U.S. Steel says it agrees with the pause during this time of social distancing precautions implemented by the county. In addition to the regulatory delay, to preserve cash and liquidity, the company says it currently expects groundbreaking for this project to be delayed for an indeterminate time until market conditions become more certain and 2020 capital spending for the project to be approximately $85 million. U.S. Steel says it will continue to assess the project timeline and remaining budget.
- U.S. Steel says it expects to complete the electric arc furnace (EAF) at Tubular as planned, with first arc anticipated in the second half of 2020. The expected 2020 capital spending budget for the EAF project is unchanged at $150 million. The investment in the EAF has been prefunded with environmental revenue bonds issued in the fourth quarter of 2019.
- The company says it has paused planned upgrades at its Gary hot strip mill (HSM) and will continue to evaluate the pace and timeline for completing the remaining investments in the HSM.
- The investment in a new nongrain oriented electrical steel line at U.S. Steel Europe in Slovakia remains delayed, U.S. Steel adds.
As a precautionary measure, U.S. Steel says it has increased its borrowings under its revolving credit facility by $800 million to increase its cash position and preserve financial flexibility. According to the company, “This action safeguards the business, as well as the company’s customers, suppliers, workforce and investors and ensures that the company will maintain the cash and balance sheet strength required to navigate the current environment.”.
U.S. Steel says it doesn’t expect the actions to meaningfully affect its first-quarter adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted net loss or adjusted diluted net loss per share included in its guidance that was provided previously in March. “However, given the rapid pace of change in market dynamics in the current environment, the company is regularly monitoring and updating impacts to first-quarter shipments,” it adds.
The steelmaker says it expects a “meaningful reduction in demand for the full fiscal year, though an updated full-year estimate of third-party shipments for each of its operating segments cannot be determined at this time.”
Burritt adds, “Our world-competitive, ‘best of both’ integrated and minimill strategy is our future. The short-term actions announced today are difficult but necessary. Our focus on cash and liquidity will ultimately position us to achieve our longer-term goals as a stronger organization.”