Viewpoint: US EAFs to grow market share in 2020

Market: Metals
02/01/20

US integrated steelmakers are poised to lose more market share as electric arc furnace (EAF) steelmakers expand and build new flat-rolled mills, boosting demand for ferrous scrap and scrap alternatives.

EAF steelmakers continue to build nearly 7mn short tons (st)/yr of hot-rolled coil (HRC) capacity in the US to take advantage of the prolific domestic scrap market and continue their push into markets like the North American automotive industry, which traditionally has been supplied by integrated steelmakers.

In a sign of changing times, integrated steelmaker US Steel is building its first EAF, a 1.6mn st/yr furnace at its tubular operations outside of Birmingham, Alabama. The mill is expected to be online in the second half of 2020.

Arkansas' Big River Steel expects to finish its doubling of its HRC production to 3.3mn st/yr by the end of 2020. US Steel in 2019 bought 49.9pc of Big River with the intent to buy the entire operation in the next four years.

Big River Steel's flat-rolled expansion, when combined with similar expansions at

Ohio's North Star BlueScope and an expansion at Charlotte-based EAF steelmaker Nucor's Gallatin mill in Ghent, Kentucky, will add 4mn st/yr of HRC capacity to the US market in the next few years.

In the near term, Nucor's new rebar micro mill 75 miles southeast of Tampa, Florida, with an output of 350,000 st/yr, will come online in the third quarter of 2020.

While EAF steelmakers expand their production, integrated steelmakers have seen their production fall in 2019.

Integrated steelmakers ArcelorMittal and US Steel were forced to idle 4.3mn st/yr of production in the second half of 2019 because of lower prices that hampered their ability to defend their market share against their lower cost EAF competitors.

US Steel announced on 19 December that it would idle the remaining blast furnace and other steelmaking operations at its Great Lakes Works in Michigan beginning in April. The mill had produced an average of 2.4mn st/yr of steel over the previous five years.

The integrated steelmakers were hammered by a sharp decline in prices in 2019. The Argus weekly domestic US HRC index fell from $740/st at the beginning of the year to a low of $488/st on 22 October, a 34pc decline.

Since then prices have recovered by 24pc to $605/st for the week ending 31 December.

Market participants believe prices will continue to increase in the first quarter of 2020, supported by increased demand from service centers that reduced their stocks through 2019. Steel prices, which were driven to nearly $1,000/st after steel tariffs were imposed in March 2018 before falling to below $500/st in October, are expected to moderate in 2020 as service centers return to more normal levels of buying.

There are few signs that either ArcelorMittal or US Steel will bring idled production back online, with US Steel indicating that it will no longer invest in its aging Great Lakes and Granite City steel mills, which have a combined production of 6.6mn st/yr. AK Steel, the other integrated steelmaker in the US, was recently bought by US-based iron ore miner Cleveland-Cliffs.

By Rye Druzin

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