Keeping mills running amid COVID-19’s spread is a crucial economic indicator. Steel produced in the Great Lakes region, for example, is vital to industries that are now at the forefront in this global crisis, including energy, transportation, medical supply, food packaging, nuclear resources, bridges, and the defense industrial base.
Some of these industries are being classified as non-essential though steel production that caters to them is largely classified as essential business in the US.
Sustained steel mill production would cause a surge in inventory and no longer be proportionate to some of the downstream steel-consuming industries. The second-largest steel mill end user, the auto industry, has already curtailed production and other segments will likely proceed similarly.
The construction industry, which is the largest steel downstream end user, may be driven to curtail operations which will have further impact on steelmaking. The energy sector has also adjusted after being hurt by conflicts related to global oil prices before additional effects arose from the pandemic. Mills are experiencing a decrease in demand and cancellation of projects due to effects on energy customers.
ArcelorMittal began preparations to idle its #4 blast furnace at its Indiana Harbor plant in East Chicago Indiana, as the first of more difficult changes that are expected. Production has been reduced at many of the company’s other operating sites.
Market participants learned on Monday, of a blast furnace at the Arcelor Mittal Dofasco plant in Hamilton, Ontario, Canada, that was also being prepared for shut down.
ArcelorMittal’s steel-producing operations as well as its mills and service centers in Italy, are required to temporarily shut down until April 3. However, the steelmaker’s large operation in Taranto is the only company allowed to maintain steel production after the government imposed stricter measures on non-essential industrial activity.
Separately, US Steel expects to begin a planned 48-day outage at its Gary Works #4 blast furnace in Indiana, this April. The indefinite idling of its hot strip mill operations at Great Lakes Works near Detroit, Michigan, is also approaching commencement in April, as previously announced in Dec 2019, and is expected to be complete by the end of 2020.
Steel Dynamics plans to move forward with its $1.9bn steel mill project in Sinton, Texas and mentioned in a press release, that plans have not been delayed or canceled at this time. It’s too early to determine the extent of global or domestic impact from the virus and on steel demand, the company said, but expects COVID-19 and related closures of steel consuming users to impact upcoming orders.
Steel mills in the US are being forced to adapt to the declining trend of industrial activity by adjusting production.
China’s steel production increased by 7.2pc in January compared to the prior year but the downstream demand wasn’t proportionate during the extended Lunar New Year Holidays, authorized during COVID-19’s spread in the country, which resulted in a surge of steel inventory.
US steel mills will try to avoid such a supply surge because that could create price pressures, especially as low inventories have helped domestic mills push for price increases in the past.