US Steel to idle furnaces to preserve cash

Pittsburgh — US Steel on Friday said it plans to idle multiple furnaces and slash capital expenditures by $125 million, delaying some projects, to prioritize cash and liquidity in order to better serve customers.

The company said it will immediately idle the No. 4 blast furnace at its flagship Gary Works in Indiana to begin a planned outage that was originally planned to begin in April and last 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," US Steel stated, adding that the furnace is expected to remain idled until "market conditions improve."

In addition, US Steel is set to temporarily idle blast furnace A at its Granite City Works outside St. Louis. The move had been anticipated by market participants earlier in the week with the possibility growing after the company announced it would be idling its Lone Star Tubular Operations in Texas, which receives hot-rolled coil from the mill.

The previously announced output reductions at its Lone Star and Lorrain Tubular operations are slated to begin in late May for an indefinite period 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," according to the company.

US Steel also plans to slash its capital spending by $150 million to $750 million in 2020. The reduction is set to delay certain projects.

Investment at its Mon Valley sheet mill operations near Pittsburgh – an "endless casting and rolling line and cogeneration facility" – is now delayed as a result of both the coronavirus and the cut in spending. Earlier in the week the Allegheny County Health Department announced a temporary pause in the permitting process as a result of challenges posed by the coronavirus. In addition to the regulatory delay, US Steel plans to delay the groundbreaking on the project for an indeterminate period until "market conditions become more certain."

The steelmaker is also pausing planned hot-strip mill upgrades at Gary Works. It plans to "continue to evaluate the pace and timeline for completing the remaining investments in the HSM," according to the release.

US Steel is continuing construction of the electric arc furnace at its Fairfield, Alabama mill and currently expects to complete the project as planned, with the first arc anticipated in the second half of this year. The investment in the EAF has been prefunded with environmental revenue bonds issued in the fourth quarter of 2019, according to the company.

As a precautionary measure, US Steel increased its borrowings under its Revolving Credit Facility by $800 million in order to increase its cash position and preserve financial flexibility.

The steelmaker said it expects a meaningful reduction in demand for the full year as a result of the coronavirus, though an updated full-year estimate of third-party shipments for each of its operating segments "cannot be determined at this time."

"Our world-competitive, 'best of both' integrated and mini-mill strategy is our future," US Steel CEO David Burritt said in a statement. "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."