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Analysis: Granite City, US Steel restarts may disrupt US met coke balance

London (Platts)--8 Mar 2018 956 am EST/1456 GMT


US Steel's announced restart of one of its Granite City blast furnaces may start to create supply challenges for the US coke industry, which has undergone restructuring and closures.

Related news -- Metallurgical coke imports may meet demand from US blast furnace restarts: sources

Securing coke supplies may contribute to delaying any start of iron production at Granite City or higher output at existing integrated operations in the US, industry sources said. Coke moving to Canada could change flows, while an overall increase in production rates may be necessary.

In response to the decision by the administration of President Donald Trump to impose 25% import tariffs on steel, US Steel said it plans to call back around 500 employees to Granite City Works beginning this month.

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Restarting the 1.2 million st/year "B" blast furnace may take up to four months, the company said Wednesday.

The Pittsburgh-based company did not respond to questions on the company's coke supplies, and whether it may seek to secure tons from the SunCoke Gateway coke facility alongside Granite City, close to regional hub of St Louis.

US Steel needs to source coking coal for additional coke demand and secure iron ore pellets, an industry source said.

Coke supplies for a restart at one of the two Granite City blast furnaces could be secured by increasing coke production at Gateway, and at US Steel Clairton, he said.

US industry sources, including procurement executives, have said that materially increasing coke output in the US may be difficult because coke plants at Shenango, Ashland and US Steel Granite City had been shuttered.

There is currently high water on the rivers after the winter melt, and low coal inventories at some US coke plants, along with rail performance issues in Appalachia this quarter, which delayed shipments.

"The biggest issue is buying coal from a very tight supply chain at a very elevated price," a US source said late Wednesday. "They may get the blast furnace started in the second half of 2018 but it would be unlikely any sooner."

US Steel may require coke imports in 2019, but that would depend on whether additional domestic coke supplies were available and on the rate of blast furnace demand, he added.

Another source said there was a potential for US blast furnace coke imports, but it was very early to tell.

The US Steel Clairton coke works was said to have been operating at just over 90% of capacity of nameplate capacity of 4.4 million st/year.

US Steel also operates blast furnaces at Gary, Indiana and at Mon Valley, near Pittsburgh.

SunCoke's Gateway Energy and Coke Co. can produce 650,000 st of blast furnace coke. It started up in November 2009.

"As the company is currently running near full capacity at most of its coke-making operations, management perceived the primary benefit [of steel import tariffs] to be improved counter-party performance as well as greater long-term off-take visibility," B Riley FBR analysts led by Lucas Pipes said. His team met last week with SunCoke executives.

In 2015, SunCoke said US Steel would have to take specified coke volumes under a take-or-pay contract running to 2025, understood to be for substantially all coke sales from the site.

SunCoke at the time said it may ship coke from Granite City to other US Steel sites. Master limited partnership SunCoke Energy Partners has a 75% interest in the Granite City coke operations.

SunCoke has five coke-making facilities in the US, with ovens at sites in Virginia, Indiana, Ohio and Illinois, supplying US Steel, AK Steel and the largest US blast furnace-based steelmaker, ArcelorMittal.

SunCoke's decision on whether to refurbish the B-Battery at Indiana Harbor, where ArcelorMittal has a site, is expected later this year and may be swayed by improved domestic steel market fundamentals. SunCoke is already committed to refurbishing the site's A-Battery.

"Should blast furnace utilization rates and customer demand increase, the company could respond with increased production in the tens of thousands of tons beyond nameplate," B Riley FBR said in a note this week.

The Haverhill SunCoke facility in Ohio is running below nameplate capacity by about 75,000 st, it said.

As for reopening previously closed coke ovens, this is highly unlikely. The technical requirements to replace and restore oven structures following their contraction after halting the carbonization process from charging coal blends is the key barrier. The permitting and other environmental processes may also be major obstacles.

--Hector Forster, hector.forster@spglobal.com
--Edited by Jonathan Fox, jonathan.fox@spglobal.com




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