Coronavirus could delay BlueScope’s expansion of US EAF ops in Ohio

Executives at BlueScope warned that the escalating spread of the novel coronavirus (2019-nCoV) could delay the $700-million expansion of its electric-arc furnace (EAF) operations in Ohio, in the United States, due to supply chain disruptions.

The potential interruption would not be “significant,” Mark Vassella, chief executive officer of the Australian steel producer, said during the company’s half-year earnings call on Monday February 24.

“The [Ohio expansion] project is progressing to plan. Major equipment contracts have been executed, and orders placed,” Vassella said. “We are aware of some impacts on equipment supply chains due to Covid-19, which are being managed.”

Specifically, BlueScope has met difficulties in sourcing some equipment parts from Tainjin, China, that are used in the new facilities in Delta, Ohio, but is currently working on alternative supply sources.

The company said that it expects no contribution during the fiscal first half of 2020 from its facilities in China due to “near-term disruption from Covid-19 and seasonality.”

“Our February performance [in China] was heavily impacted, and we currently expect the same for March,” Vassella said. “Beyond this, the rate of recovery in demand and activity remains unclear at this point.”

The EAF-focused steel producer confirmed the multi-million expansion of its facilities in Delta, Ohio, in August 2019 in order to target integrated steelmakers in the US hot-rolled coil market. 

“The US steelmaking industry continues to evolve through a further shift toward the EAF production, with the U.S. Steel-Big River Steel merger announced in October and the idling of several blast furnaces (BFs),” Vassella said during the earnings call.

Lower steel prices during the six months ended December 31, 2019, sped up the BF idling processes among US mills, he said, adding that prices “regained momentum” in the new year.

Fastmarkets’ daily steel hot-rolled coil index, fob mill US was calculated at $29.09 per hundredweight ($581.80 per short ton) on February 24, up by 1.4% from $28.70 per cwt on February 21 and up 25.7% from a 2019 low of $23.15 per cwt on October 24.

“The US economy remains robust, and we continue to see it as a great place to build our business with plenty of opportunities for us to grow,” Vassella said. “In our buildings business, customer demand in the light manufacturing and warehousing sector remains strong.”