U.S. Steel today announced plans to sell and repurpose the blast furnaces at its Granite City Works as part of a wider metallics strategy aimed at giving it an advantage in the iron ore market.
U.S. Steel signed a Non-Binding Letter of Intent with SunCoke Energy Inc., a raw material processing and handling company in Granite City. The preliminary terms call for SunCoke to acquire the two blast furnaces at Granite City Works and build a 2-million-ton granulated pig iron production facility.
Upon completion of the proposed facility, SunCoke would supply U.S. Steel access to 100 percent of the pig iron production for the next 10 years.
The transaction is not expected to impact immediate staffing levels at Granite City Works, the company said, and is contingent on a number of factors, including board approval.
U.S. Steel intends to supply the needed iron ore to be used to produce the pig iron. Because the iron ore would come from U.S. Steel’s own mines, the company said would realize a significant cost advantage. This pig iron could be used by electric arc furnaces (EAFs) and is expected to supply U. S. Steel’s growing fleet of those furnaces.
By upgrading iron ore capabilities at its Minnesota operations and repurposing blast furnaces at Granite City Works with SunCoke Energy, the company said it aims to expand its domestic, low-cost iron ore advantage.
The moves would increase U. S. Steel’s self-sufficiency by supplying domestic feedstock to its growing fleet of electric arc furnaces. The company expects related improvements to its capital and carbon intensity and financial performance from anticipated future internal and external EAF demand.
U.S. Steel plans to break ground in Fall 2022 at one of its two Minnesota Ore Operations facilities, Keetac or Minntac, to construct a system dedicated to producing DR-grade pellets. This will enable one of the company’s existing pelletizing plants to not only create DR-grade pellets but also maintain the optionality to continue producing blast furnace-grade pellets.
The company said it does not expect the approximately $150 million DR-grade pellet investment to change the 2022 capital spending budget.
DR-grade pellets are considered a critical feedstock for ironmaking in a direct reduced iron (DRI) or hot briquetted iron (HBI) process that ultimately supplies EAF steelmaking.
Upon completion, the company would have the option to sell the new pellets to third-party DRI / HBI producers or use them to feed a potential future DRI or HBI facility of its own. The DR-grade pellets produced would be a new product line for U. S. Steel. The investment and expected timeline are subject to state and local support and receipt of regulatory permitting.
The proposed transaction with SunCoke is contingent upon several conditions, including the negotiation and execution of a definitive agreement, approval by the U. S. Steel Board of Directors, and receipt of all appropriate regulatory approvals. The company said in a release there can be no assurance as to the final terms of the proposed transaction, that the conditions will be satisfied, or that the proposed transaction will be completed.
SunCoke would be leading the efforts in construction of the new facility and repurposing of the blast furnaces. The contemplated pig iron production facility’s permitting and construction is expected to last approximately two years.
Since 2009, SunCoke has operated a coke making facility at Granite City Works, supplying a key ingredient in blast furnace steelmaking.
“Our conviction remains that steel mined, melted, and made in America is vital to our national and economic security,” said David B. Burritt, president and CEO of U. S. Steel. “We are strategically investing in our raw materials that will feed the advanced steel mills of today and tomorrow, making us increasingly self-sufficient. It’s another way that we’re supporting domestic manufacturing, simplifying complex global supply chains, addressing the sustainability demands of our customers, and ultimately creating profitable steel solutions for people and the planet.”
U.S. Steel recently announced an investment in a pig iron caster at Gary Works in Indiana. The approximately $60 million investment will produce up to 500,000 tons of pig iron annually and provide a critical raw material input for the company’s EAFs. Once complete, the Gary pig iron project is expected to provide nearly 50 percent of Big River Steel’s ore-based metallics needs, contribute over $30 million of run-rate enterprise EBITDA benefits and deliver an internal rate of return in excess of 30 percen
U. Pig iron production at Gary Works should begin in the first half of 2023.