JSW Steel USA is forging ahead with upgrades to its US operations even as the US steel industry reels from Covid-19-related shutdowns in industries like automotive and a downturn in the energy industry,
The US subsidiary of Indian steelmaker JSW Steel is making moves to upgrade its steel operations in Ohio, where it has an electric arc furnace (EAF) flat-rolled steel operation, and Texas, where it makes plate and pipe products for the energy industry, chief executive John Hritz told Argus last week
The downturn in the steel market has hit JSW Steel USA like it has many other steelmakers. The company's EAF at Mingo Junction, Ohio, has begun a four-week outage, and its pipe mill is set to take its own outage next month.
Hritz said in an interview that the four-week outage at Mingo Junction will allow the company to add all new automation, a first step to fully replacing the mill's aging furnace.
Hritz said the Ohio EAF has been operating at 50pc of its 1.5mn metric ton (t)/yr capacity to conduct preventative maintenance and because of reduced demand levels, and that it will be able to return to those levels after the outage. A full replacement of the EAF is expected to be completed by the beginning of 2021 and, in combination with other investments, it will be able to produce 12-inch slabs that will be supplied to the company's pipe and plate mill in Baytown, Texas.
Eventually, Hritz wants to build a second 1.5mn t/yr EAF at the Mingo Junction site, taking advantage of the rolling mill's 3mn t/yr capacity.
Since January, the Argus ex-works Midwest assessment for HRC has fallen by 24pc to $470.75/st. At the same time capacity utilization rates, which had been hovering around 80pc rates, have fallen to 55.8pc on the pandemic-related slowdown, the lowest rate in a decade.
The Mingo Junction mill has had a checkered history, with JSW becoming the sixth owner in 12 years when it acquired the idled mill for $81mn in early 2018. The EAF had been idled for nearly 10 years when it restarted melting operations in late-2018 amid a Section 232 tariff-fueled run-up in the domestic steel market.
Parent company JSW's figures show Mingo Junction only produced 241,600t of steel through 31 December, which marked the end of the first three quarters of its fiscal year 2020.
In Baytown, just outside of Houston, business at JSW Steel USA's pipe mill has slowed as many pipeline projects have been shelved following the crash in US crude prices.
"We're just waiting for ... the energy companies to get the courage to stand up," Hritz said. "Notwithstanding the price of oil, which is going to come back, they still need to put these pipelines in."
For now, the oil market is in the middle of a historic swoon.
The US oil benchmark WTI saw May futures trade in the negative range on the last day of trading this week. June futures were at $16.94/bl on 24 April, down by 72pc from the $61.18/bl WTI futures prices posted at the beginning of the year.
The US drilling rig count fell by 64 to 465 last week, its lowest since August 2016. Of the total, oil rigs fell by 60 to 378, according to Baker Hughes data released last week.
With the plunge in the market, US producer Continental Resources said that the ongoing Covid-19 pandemic has brought about conditions under which the force majeure clause applies. Most supply contracts include provisions for declaring a force majeure, which allows the parties to unwind some of their responsibilities based on actions or events outside of a company's control.
The downturn in oil prices has had immediate impacts on energy-related steelmakers. Integrated steelmaker US Steel and pipe maker Tenaris have idled multiple mills. Pipemaker Vallourec laid off 900 of its North American workers in early April, representing a third of its workforce in the region.
JSW's Baytown mill is expected to run until mid-May, after which it will be idled for upgrades. The company has already completed and begun commissioning the first phase of its $260mn upgrades to the pipe mill, which involved installing a new descaler, hot plate leveler, and giant shears that can cut up to two-inch thick steel.
The second phase will include upgrades like a new rolling mill, upgraded cooling technology, and a cold plate leveler.
A planned EAF at Baytown was shelved in August, with Hritz at the time citing market conditions and unfavorable trade policy from the Trump Administration.
The trade dispute is one that has brought Hritz, a strong supporter of the Section 232 steel tariffs imposed by President Donald Trump in March 2018, at odds with the administration. The company filed a lawsuit in 2019 against the Department of Commerce's process in denying JSW's applications for steel tariff exemptions, which were opposed by multiple US steel companies who said they could provide the slabs JSW requires. Hritz said the company is moving through the litigation process.
"It was wrong," Hritz said of the Commerce Department's decision to deny the exemptions. "We told the truth, and others did not."
While the lawsuit drags on Hritz is looking forward to the upgrades to the Baytown mill, which he believes will revamp the aging mill will allow it to better compete with newer pipe mills like Tenaris' 600,000 t/yr seamless pipe mill in Bay City, Texas, which started production in 2017. The Baytown mill has been operating at 29pc utilization rates in the quarter ending 31 December, according to JSW. Hritz blamed the mill's old equipment, which the upgrades are gradually replacing.
"When we're done with this plate mill it'll be over 1mn t/yr," Hritz said. "What we're putting in is not just a replacement, it's also something where the volume will increase dramatically, the throughput will be fabulous, and the quality will be untouchable."
