US flat-rolled EAFs fuel new-capacity tsunami

US steel mills are on pace to add more than 13.5 million tons of electric-arc furnace (EAF) flat-rolled steelmaking capacity at a cost of at least $6.3 billion over the next three years, according to Fastmarkets’ research.

Most of that additional capacity is concentrated in the Southeast and Gulf Coast - a development that sources have said could squeeze regional scrap markets.

That investment amount is significant because it is more than three times U.S. Steel’s market capitalization of $1.67 billion.

And that capacity figure is significant because US mills produced 96.9 million tons of steel in 2019, according to World Steel Association figures. The amount of new capacity represents 13.9% of last year’s total output.

The number is even more significant when output is narrowed to flat-rolled products. The US produced approximately 50 million tons of steel sheet in 2019, according to Fastmarkets analyst Amy Bennett. And 13.5 million tons of new capacity would represent 27% of that total.

Early ‘20s bring the tons
The wave of new capacity begins with Big River Steel, which expects to start up a second EAF in December at its steelmaking campus in Osceola, Arkansas.

The addition of that second EAF and caster is expected to allow the company to double output from 1.65 million tons per year to approximately 3.3 million tpy.

Scrap prices have already begun to inch up in part due to expectations of Big River Steel stockpiling material ahead of the new furnace striking an arc, Fastmarkets has reported.

And major publicly traded EAF steelmakers - including Nucor, Steel Dynamics Inc (SDI) and BlueScope - are forging ahead with expansion plans despite domestic hot-rolled coil prices having recently fallen to their lowest level in more than four years in the wake of the Covid-19 pandemic.

Indeed, US steel prices - despite protection from anti-dumping and countervailing duty orders as well as Section 232 quotas and tariffs of 25% - are now below Chinese HRC tags. The US HRC price had been the highest in the world and China the lowest.

The next big jump in capacity will come about a year from now, in mid-2021, when SDI is scheduled to commission its new, 3-million-tpy flat-rolled steel mill in Sinton, Texas. That’s roughly when Nucor will be wrapping up a project to increase the hot-rolled capacity at its steel mill in Ghent, Kentucky - also known as Nucor Steel Gallatin - from 1.6 million tpy to 3 million tpy.

And in 2022, Australian steelmaker BlueScope - after initially delaying an expansion at its HRC mill in Delta, Ohio, due to the virus crisis - is moving ahead with plans to add a third EAF and second caster, which will bring another nearly 1 million tpy of HRC to the market.

ArcelorMittal is adding a new EAF in Alabama at its AM/NS Calvert joint venture with Japanese steelmaker Nippon. That project will not increase rolling capacity but will give Calvert - which relies on slab shipped south from the company’s northern mills or imported from abroad - the ability to melt and pour steel onsite.

An ArcelorMittal spokesperson could not provide a cost figure or timeline for that project on Friday August 21. But the company has said the new EAF will start up approximately 24 months after construction begins.

Additional US capacity additions are more speculative.

Big River Steel has said it is moving ahead with plans to build a second steel mill - with roughly the same capacity as its Arkansas mill - in the Gulf Coast, potentially in Brownsville, Texas.

A site has yet to be officially selected. But Big River Steel expects to make steel from a new mill come 2023, chief executive officer David Stickler has told Fastmarkets.

JSW Steel - which operates an HRC mill in Mingo Junction, Ohio - has said it plans to add a second EAF to the facility to double capacity. But the company has more recently idled operations at the mill and said it is focusing on upgrading the mills’ existing EAF.

A company spokesperson could not immediately confirm on Friday the status of a potential second EAF at the Ohio mill.

In Mexico too
It’s not just US mills that are adding flat-rolled capacity - so are Mexican steelmakers.

ArcelorMittal Mexico has said it expects to complete a hot-strip mill in 2021 with capacity of 2.75 million tpy at its Lázaro Cárdenas site in Michoacán, in southern Mexico.

And Latin American steelmaker Tenium plans to start up a hot-rolling mill with annual production capacity of 4.5 million tpy in Pesquería, a northeastern city near Monterrey, Mexico, in April 2021.

Fastmarkets is hosting a webinar, “Insights to Drive Success in the 2020 HRC Contract Season,” on September 9. Click here to sign up.

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