US Steel to resume spending on strategic projects in 2021
US Steel expects to resume spending on strategic projects in 2021 after pausing activities earlier this year as a result of the coronavirus pandemic, company executives said Oct. 30.
Improving steel demand seen in the third quarter and strong lead times for hot-rolled coil have improved sentiment in the market, US Steel CEO David Burritt said during the company’s Q3 conference call with analysts.
He noted that US mill capability utilization rates have rebounded from Q2, with overall US raw steel making capability utilization at 69.7% in the week ended Oct. 24, according to data from the American Iron and Steel Institute, up from a low of 51.1% in the week ended May 2.
Lead times for HRC have also stretched to an average of 8.6 weeks, as of Oct. 28, S&P Global Platts data showed.
“These industry statistics plus our current order book and customer collaborations give us confidence that today’s customer activity should continue into next year,” Burritt said, noting that current flat-rolled mill utilization is likely closer to 80% as it has been exceeding long steel and plate product demand.
With the improved demand scenario, US Steel is considering a restart of its Keetac iron ore operations in Minnesota after previously idling the facility in April, Burritt said. The restart of Keetac will de-risk US Steel’s current blast furnace configuration so that it is able to meet customer demand in the winter months when locks are closed on the Great Lakes, he said.
Looking ahead, with the stronger demand seen in the market, US Steel plans to resume previously planned strategic capital investments, executives said. Following capital expenditures of roughly $750 million in 2020, US Steel expects to spend $675 million in 2021.
Burritt stressed that the company is focusing on optionality and flexibility with capital allocations going forward.
US Steel is looking to invest approximately $80 million on hot-strip mill capability upgrades at its Gary Works facility in conjunction with planned outages at the Indiana facility next year, US Steel CFO Christie Breves said.
At its Mon Valley Works in near Pittsburgh, US Steel plans to resume equipment purchases related to its endless casting and rolling facility, with plans to spend approximately $150 million in capital on the project next year, Breves said.
US Steel first announced plans to spend 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 in Braddock, Pennsylvania in May 2019. The company is currently pursuing permits for the project.
Following the $150 million spending on the endless casting and rolling equipment next year, approximately $1 billion to $1.2 billion in spending will remain, Kevin Lewis, vice president of investor relations said. The company will time its decision for construction of the facility based on market conditions, cash flow generation and liquidity, but the current focus is on equipment purchases, executives said.
“They keyword in all of this is really the optionality so we can decide to put it in Mon Valley, we can decide to put it somewhere else, we have a lot of flexibility to decide where this goes when we pull the trigger on all of these things,” Burritt said.
US Steel had liquidity of $2.86 billion, including cash of $1.7 billion at the end of Q3, the company said.