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US Steel to produce DR pellets in Minnesota, may end Granite City steelmaking

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Company to produce DR pellets at existing iron ore operation

Letter of intent signed with SunCoke for acquisition of Granite City BFs

Proposed deal would see SunCoke build 2 million st/year pig iron facility

US Steel plans to construct a system dedicated to the production of DR-grade pellets at one of its two Minnesota iron ore operations and may end steelmaking at its Granite City Works, it said June 28.

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DR-grade pellets will be used as a supply feedstock for the company's growing fleet of electric arc furnaces, while shuttering of steelmaking comes after a proposed deal with SunCoke Energy to produce pig iron at the site, it said.

US Steel plans to break ground on the project at its Keetac or Minntac operations in the fall of 2022. The investment, expected to be approximately $150 million, will allow one of the company's existing pelletizing plants to create DR-grade pellets while also maintaining the optionality to continue producing blast furnace-grade pellets.

DR-grade pellet is a critical feedstock for ironmaking in the direct reduced iron and hot-briquetted iron processes that supply EAF steelmaking.

Upon competition of the project, US Steel said it would have the option to sell the new pellets to third-party DRI/HBI producers or use them to feed a potential future DRI or HBI facility of its own. The project will produce about 4.5 million st/year of DR-grade pellets, with the company expecting pellets to be available in 2024, a US Steel spokesperson said.

The investment and expected timeline are subject to state and local support and the receipt of regulatory permitting, US Steel said.

Granite City may transition to pig iron production

Additionally, US Steel said it has signed a non-binding letter of intent with SunCoke for a potential arrangement in which SunCoke would acquire the two blast furnaces at US Steel's Granite City Works and build a 2 million st/year granulated pig iron production facility.

Upon completion of the proposed facility, SunCoke would supply US Steel access to 100% of the pig iron production for a 10-year period, the company said, adding it would supply the iron ore needed to produce the pig iron.

The proposed transaction is contingent upon several conditions, including the negotiation and execution of a definitive agreement, approval by the US Steel board of directors, and receipt of all appropriate regulatory approvals.

US Steel has two blast furnaces at the Granite City Works in Illinois, both with a rated capacity of 1.4 million st/year. Only one of the two furnaces is in operation currently.

At the final transfer date, US Steel will cease steelmaking at Granite City, US Steel spokesperson Amanda Malkowski said. Both blast furnaces will then cut over to pig iron production, concurrent with the start up of US Steel's second mini-mill at Big River Steel in Arkansas, she said.

Should the deal with SunCoke move forward, it will lead to the construction of the new facility and the repurposing of the blast furnaces. Permitting and construction are expected to last about two years.

The proposed transaction is not expected to affect immediate staffing levels at Granite City Works, US Steel said. Following the end of steelmaking, some employees will remain at Granite City works to continue operating the finishing lines, Malkowski said.

The shift in US Steel's raw materials strategy comes as the historical blast furnace steel producer continues to build out its fleet of EAF steelmaking in what it calls its "best of both" strategy, combining its legacy blast furnace operations in the US with EAF steelmaking.

US Steel entered EAF production in late 2019 with its purchase of a 49.9% stake in Osceloa, Arkansas-based mini-mill Big River before buying the remaining stake in January 2021. The company also started up EAF production at a newly constructed 900,000 st/year EAF at its Fairfield, Alabama, operations in 2020.

At Big River, the company currently has two EAFs with a total rated capacity of 3.3. million st/year and is constructing a new 3 million/st year mini-mill at the same location, scheduled to begin operations in 2024. The new steel production facility is expected to feature two EAFs, an endless casting and rolling line and advanced finishing capabilities.

At the same time, other US flat-rolled steelmakers are also expanding EAF production, increasing demand for raw material inputs like prime scrap and pig iron.

US Steel CEO David Burritt said the company is strategically investing in its raw materials supply to increase its self-sufficiency, address sustainability demands of its customers, and simplify global supply chains.

US Steel announced plans in October 2021 to build 500,000 st/year of pig iron capacity at its Gary Works integrated steel operations in Indiana to feed its mini-mill division. Pig iron production at Gary is expected to start up in the first half of 2023 and will provide 50% of Big River's ore-based metallic needs, US Steel said.

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