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US Steel drops Mon Valley investment, idling three coke batteries at Clairton

Highlights

Additional $1.3 billion in investment will not be pursued

Three coke batteries set to close by Q1 2023

Company studying final location of endless caster

  • Author
  • Justine Coyne
  • Editor
  • Richard Rubin
  • Commodity
  • Coal Energy Transition Metals
  • Topic
  • Energy Transition Environment and Sustainability

US Steel is not moving forward with a planned investment at its Mon Valley Works and plans to permanently idle three batteries at its Clairton Coke Works as the company accelerates its efforts to reduce its carbon intensity, US Steel CEO David Burritt said April 30.

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"With a clear vision for our future we have evaluated how we allocate capital through the lens of sustainability, value creation and lower capital and carbon intensity across the footprint," Buritt said during the company's first quarter conference call. "When facts change, we must change; and as we step forward to meet the needs of a rapidly changing world, we must set aside the Mon Valley endless casting and rolling and cogeneration project."

US Steel first announced plans in May 2019 to invest more than $1 billion to upgrade its Mon Valley Works through the construction of a new endless casting/rolling facility at its Edgar Thomson Plant and a new cogeneration facility at its Clairton Coke Plant.

Since then, the company has shifted its focus from blast furnace production to its "Best of Both" strategy, buying a 49.9% stake in Arkansas-based electric arc furnace mini-mill Big River Steel in October 2019 and completing its purchase of the remaining equity in January 2021.

The events of the coronavirus pandemic — which hit blast furnace producers particularly hard due to the nature of their operations and ability to respond quickly to changing market dynamics — gave US Steel the opportunity to reevaluate its capital allocation priorities, Burritt said.

The company also announced plans April 21 to achieve net-zero carbon emissions by 2050, stating this relies on growing its EAF fleet coupled with other technologies such as direct reduced iron, carbon-free energy sources, and carbon capture, sequestration and utilization.

The No. 1, No. 2 and No. 3 coke batteries at the Clairton Coke Works — the largest coke-making site in the US — are to be idled by Q1 2023, Burritt said. The three batteries represent about 700,000 st, or 17%, of the site's total 4.3 million st capacity, according to Kevin Lewis, vice president of investor relations for US Steel.

The Mon Valley Works will continue to operate and serve its strategic end markets in appliances and construction, Burritt said, however an additional $1.3 billion that was earmarked for spending there will not be pursued. Of its US flat-rolled blast furnace operations, Mon Valley is the lowest-cost operation in the company's footprint and remains a competitive asset, Burritt said.

To date, US Steel has spent about $170 million on the endless caster, with the equipment remaining in storage to give the company flexibility on its final location, Burritt said. The final location of the endless caster remains under study, he said.

The company's strategy for capital allocation going forward will be focused on debt reduction, liquidity and investments in its operations, preferably through organic growth using the company's existing footprint, he said. US Steel ended Q1 with $2.91 billion in liquidity, including cash of $753 million, it said.

Looking at its idled blast furnaces, company executives said there are no plans currently to restart the A blast furnace at Granite City or the three blast furnaces at its Great Lakes operations.

Overall, US Steel reported Q1 net income of $91 million on sales of $3.66 billion, up from a net loss of $391 million on sales of $2.75 billion in Q1 2020.