October 2021
In the US, the emerging themes of steel tariffs and self-reliance have been prominent during the past few years. With Covid-19 in the rear-view mirror, US steel producers are embracing the ‘new steel economy’ of green steel and electric vehicles (EVs).

The US economy is bouncing back as US steel imports in August were 2.51Mt up significantly from Covid-19 induced levels of 1.15Mt back in September 2020. AME expects US finished steel demand to remain strong for the next few years with growth rates of 7% for 2021; 5% for 2022; and 3.2% for 2023.

US steel producers have continued to make record-breaking revenues and operating EBITDA for the first half of 2021. Company preliminary results for the September quarter for both Nucor and Steel Dynamics indicate the record-breaking results will continue again through the December quarter. The recent strong financial results have been caused by higher steel prices, particularly in flat roll steel, with many companies reporting low inventories. Also, supply issues causing a semi-conductor shortage have contributed to falling US motor vehicle production.    

In a developed economy like the US, the market for steel in the automotive industry is approximately 13% of the total market, compared to building and infrastructure which is more than half at 51%. Motor vehicles also have a medium service life, meaning they are typically replaced every 8-12 years depending on personal preference.

According to the International Organisation of Motor Vehicle Manufacturers, global provisional data for the number of vehicles (cars and commercial vehicles) produced for the first half of 2021 is 40.3m units. Specifically, US government statistics for total domestic vehicle sales for August were 13.47m units (seasonally adjusted annual rate). Units peaked in April 2021 to 18.72m units, before the Covid-19 trough in April 2020 reduced the number to 8.96m units. Excluding the pandemic, total domestic vehicle sales (seasonally adjusted annual rate) from 2016 were typically between 17m and 18.3m units. The US automotive market is lucrative, and it appears many new projects are targeting the expected growth required from EVs and in particular, advanced high-strength steels (AHSS).

AME’s forecast for US crude steel production for 2021 is 85Mt, up 16.5% from the prior year. Moving forward, AME’s forecasts for 2022 and 2023 are 90Mt, up 6.3%, and 93Mt, up 3.6%. Beyond 2024 AME forecast of US crude steel production will continue at a moderate growth rate averaging approximately 3%.

 

New Projects

US steel producers have provided new announcements for significant capacity expansion during September. Both Nucor and United States Steel are targeting the premium market for flats which include galvanising lines and AHSS. Both facilities will utilise EAF technology, with Nucor adding a new melt shop at one of the existing bar mills in the Western US.    

United States Steel (USS) will invest $US3bn in a new mini mill as it transitions to its ‘Best of All’ strategy. The new 2.72Mt EAF mill is expected to produce flat rolled products and AHSS. The exact site location is still under consideration, which can include USS’s existing site operations as well as greenfield sites. The mini mill will be funded by surplus cash and expected free cash flow. The new facility will expand US Steel’s verdeXTM sustainable product line, providing customers with steel solutions with significantly lower greenhouse gas emissions compared to traditional steelmaking. Once the final site is selected and construction requirements and operating permits are met, the final approval will be given by the board. The company expects construction of the mini mill to commence in first half of 2022 with production anticipated by 2024.

Nucor will invest US$2.7bn in a state-of-the-art greenfield sheet mill. The board has recently approved its construction and is now considering possible locations in Ohio, Pennsylvania or West Virginia. The new facility will allow better service of its customers in the Midwest and Northeast markets and be equipped with the most up-to-date technology available to minimise its carbon footprint. The mill will have a crude steel capacity of 2.72Mt and include hot-rolled sheet products, a tandem cold mill, annealing equipment and two galvanising lines. The galvanising lines includes an advanced high-end automotive line and construction grade line, with full inspection capabilities. Construction is expected to take two years, notwithstanding state, local and regulatory approvals.

The top four steel companies in terms of crude steel production in the US include Nucor, Cleveland-Cliffs, Steel Dynamics, and United States Steel (USS). AME’s crude steel production forecast in 2021 for the above top four companies is approximately 62Mt and represents 73% of total US production.

Nucor will build a new melt shop at one of its existing bar mill operations in Western US. The board of directors have approved the construction of a new melt shop, with investment of US$100m with crude steel capacity of 0.54Mt and expected commissioning in 2024. The exact location is under consideration with likely sites being Nucor Steel Kingman, Nucor Steel Plymouth, or Nucor Steel Seattle. Nucor’s new melt shop will enhance its market position along with the anticipated growth of steel bar production in the Western US region.

 

Company Product Mix

The company product mix of steel producers has been changing in recent years, with new capacity seeking to fill the demand of premium markets in the automotive industry for AHSS and in particular the growing electric vehicle (EV) market. AHSS requirements are lighter, stronger and more resistant to corrosion. Nucor’s product mix is forecast to change in the years ahead from an automotive end market allocation of 6% in 2020 to approximately 10% in the next several years.

Steel Dynamics’ end market within the automotive industry is 12%, its Sinton plant will increase production of both galvanised and painted products when two new lines commence in 2023, to 31.4% from 20.5%. United States Steel via the Big River Steel facility located in Arkansas, is planning to become the leader in non-grain oriented (NGO) electrical steels. The new electrical steel line will be constructed adjacent to the existing steel finishing line at Big River Steel Campus and target the EV market. NGO electrical steel is ideal for power generation, with demand in the automotive market growing at up to 25% a CAGR to 2025. The new facility will have annual capacity of 0.2Mt with operations commencing in September 2023. The investment will be approximately US$450m and funded from cash generated at Big River Steel.

Cleveland-Cliffs product mix is highly weighted towards the automotive end markets, representing approximately 29% of its total production. The company has various steel brands available to the market, one of these is Nexmet AHSS and includes third generation AHSS offering higher strength and high formability for lightweight structural components. The EV expansion means steel becomes more critical in motor, body and battery casing and vehicle charging networks. The Biden administration has recently signed an Executive Order to reach a target of ensuring 50% of all vehicles sold by 2030 have zero emissions. Also, infrastructure legislation includes $7.5bn for EV charging networks.

 

Other US Projects

Steel Dynamics’ new Sinton plant was delayed due to heavy flooding throughout Texas and now expected commissioning is November 2021. The company has invested US$1.9bn during the past three years. The facility is a flat roll steel mill with EAF technology and crude steel capacity of 2.7Mt. Further equipment includes a cold rolling mill, hot-dip galvanising line and painted line with capacities of 0.72Mt, 0.43Mt, and 0.25Mt, respectively. The company expects total shipments of up to 2.4Mt by 2022, with 30% of shipments planned for Mexico's export market. The Sinton mill will allow the company to be flexible in its production methods by entering markets where demand is highest. The target markets for the Sinton plant include the construction, automotive, energy tubular and appliance sectors. 

Commercial Metals Company (CMC) will expand its capacity in long steel products, with investment of US$300m.Unlike many US steel companies, CMC specialise within the construction industry in concreate reinforcement and, in particular, straight rebar and fabricated rebar. The new EAF micro-mill will have crude steel capacity of 0.45Mt and be located adjacent to its existing micro-mill at the Mesa steel facility site. The equipment supplied by Danieli for the new MIDA QLP micro mill will be the first in the world capable of producing both steel rebar and merchant product with rolling capacity of 0.32Mt and 0.14Mt, respectively. The Danieli technology is a 54t side-charge EAF, a ladle furnace and a single-strand high-speed continuous casting machine. The plant commission is expected in 2023, and it will have the capability to directly connect to renewable energy sources located at the site.

Nucor have two other major projects currently under construction at Gallatin (Ghent) Steel and new greenfield Brandenburg, Kentucky Plant. Gallatin Steel investment of US$650m will increase crude steel capacity to 1.27Mt, bringing total capacity to 2.72Mt. The new slabs and hot strip mill will modernise the facility to supply heaver gauge, wider coils to approximately 1,854mm. This project was announced in September 2018 and is due for commissioning in the December quarter of 2021. The new greenfield project of Brandenburg, Kentucky with investment of US$1.7bn with crude steel capacity of 1.09Mt, is a plate mill with capability for wider and thicker plate products. This project was initially announced in January 2019 and has expected commission in the December quarter 2022.