US Steel targets 40% in-sourcing of steelmaking metallics by 2024

US Steel plans to internally source up to 40% of its iron-based metallics for steelmaking by 2024, up from the current 10% of internal sourcing, with an emphasis on pig iron over direct-reduced iron, CEO David Burritt said July 29.

"Access to virgin metallics is what keeps our mini mill competitors awake at night," Burritt said during a second-quarter earnings call with industry analysts. "We are making full use of our compelling competitive advantage at our iron ore mines right here in the US by onshoring our supply chain, an advantage that will be very difficult for our competitors to replicate."

US Steel has made several announcements since late 2021 regarding its plans to establish greater pig iron production capacity in the US, with a focus on supplying its Big River Steel electric arc furnace operations in Arkansas.

The Pittsburgh-based steelmaker's plans include building 500,000 mt/year of pig iron capacity at its Gary Works operations in Indiana, developing DR-grade pellet production at one of its Minnesota iron ore sites and transitioning its Granite City Works in Illinois away from steelmaking and toward granulated pig iron production.

Richard Fruehauf, US Steel's chief strategy and sustainability officer, said the company's move to increase its self-sufficiency in raw material sourcing is critical given supply uncertainties that arose this year following Russia's invasion of Ukraine.

"[Before the war in] Ukraine, about two-thirds of the market for [iron] was coming out of Russia and Ukraine, so the cutoff of that supply has put pressure on pig iron, [hot-briquetted iron] and DRI," he said. "As we know, 75% or more of your cost to produce a ton of steel in an EAF is your metallics, so having these virgin iron ore metallics in our footprint and able to supply the EAF fleet is a huge advantage."

The weekly Platts US pig iron import price was assessed at $545/mt CIF New Orleans on July 22, according to S&P Global Commodity Insights data. The assessment reached a record $1,030/mt in March.

Despite the proposed DR-grade pellet output in Minnesota, Fruehauf said US Steel would prioritize pig iron production over DRI production for the time being, adding that pig iron was a more efficient option for EAF steelmaking.

Fruehauf said DRI was "an opportunity for the future," while Burritt added that any investment in DRI production was "inevitable, but not anytime soon."

Burritt said uncertainty continues to cloud steel demand outlook in some of US Steel's end markets, but the company was protected against some of this volatility due to its diverse portfolio.

"As far as automotive and appliance, the supply chain issues are persisting," he said. "I'd say the issues are a bit less, but we're still going to have those challenges."

However, Burritt said the US' push for industries to source more steel from domestic producers and ongoing trade enforcement creates a more "resilient position" for US Steel in the long-term for supplying the automotive and appliance sectors.

Economic concerns are also causing "mixed or cautious buying" among industrial, construction and service center customers, but there is a firmer outlook for steel demand in the energy sector, he added.

US Steel reported net income of $978 million on sales of $6.29 billion in Q2. This compares with a net income of $1.01 million on sales of $5.03 million a year ago.