United States Steel Corp. will implement a series of “aggressive and meaningful” actions in response to the significant corporate and global oil and gas market changes brought on by the COVID-19 crisis, the company recently announced.
“In this unprecedented and rapidly changing situation, our first priority remains the safety and well-being of our employees,” U.S. Steel President and Chief Executive Officer David B. Burritt said. “As an essential part of our critical infrastructure, our employees have embraced the special responsibility to continue making the steel society needs, including the packaging for our food supply during the COVID-19 pandemic response. To ensure a more secure future for all our stakeholders, the time has come for us to take aggressive actions to reposition the company.”
Among the actions, U.S. Steel is working to align strategic projects with current market realities by reducing capital spending in 2020 by $125 million.
Impacted strategic projects include:
• Delayed construction of the endless casting and rolling line and cogeneration facility at Mon Valley Works;
• Paused planned upgrades for Gary Hot Strip Mill with a revised timeline for the completion of remaining investments;
• And a continued delay for the Dynamo Line, a new non-grain oriented electrical steel line, at USSE.
U.S. Steel currently expects to complete the Electric Arc Furnace at Tubular with an unchanged capital spending budget of $150 million. The project was prefunded with environmental revenue bonds issued in the fourth quarter of 2019.
Revised capital spending for the year is expected to be around $750 million.
As a precautionary measure, U.S. Steel increased its borrowings under its Revolving Credit Facility by $800 million to increase its cash position and preserve financial flexibility.
The company hopes that the concentrated short-term actions and a focus on cash and liquidity will strengthen the long-term value for investors and ensure a more secure future for employees.
For current operations, U.S. Steel will idle the #4 blast furnace at Gary Works immediately, ahead of its scheduled 48-day outage starting in April. It will remain idled until market conditions improve. The scope of the Gary #4 blast furnace outage has been reduced with the remainder of the outage being delayed. The company will also temporarily idle blast furnace “A” at Granite City Works and will complete the indefinite idling of iron and steelmaking facilities at Great Lakes Works.
Beginning in late May, U.S. Steel also plans to indefinitely idle all or most of Lone Star Tubular Operations and Lorain Tubular Operations due to weak tubular market conditions.
“U. S. Steel has been a cornerstone of manufacturing for over a century and our products are vital to national and economic security,” Burritt said. “I am confident in the resilience of our employees, the strength of our customer relationships, and the reliability of our regional supply chain. The actions we are announcing today make us stronger and enable us to weather the current situation to emerge as a leader in sustainable steel solutions for generations to come.”