U.S. Steel to invest $60 million in pig iron production at Gary Works steel mill

Not every Region steel mill is being disinvested in.

U.S. Steel plans to pump capital into its flagship mill, Gary Works.

The Pittsburgh-based steelmaker, one of the largest employers in and industrial pillars of Northwest Indiana that originally founded Gary as a mill town more than a century ago, plans to invest $60 million in pig iron production at the Gary Works mill at 1 N. Broadway in downtown Gary.

U.S. Steel plans to insource pig iron capabilities at the steel mill that stretches across seven miles of Lake Michigan lakeshore in an advancement of its metallics strategy, which has been to diversify steel production between traditional blast furnaces and smaller, more nimble electric arc furnaces. Gary Works will be able to produce up to 500,000 tons a pig iron a year after the investment.

Pig iron is a crucial raw material needed for the electric arc furnaces U.S. Steel has been investing in at its southern mini-mills as it seeks to diversify beyond the integrated steelmaking that long has been its bread and butter.

The operation will supply about 50% of the ore needs at Big River Steel in Arkansas. It also will contribute $50 million in earnings before interest, taxes, depreciation and amortization and deliver a 30% internal rate of return.

The pig iron production should start in the first half of next year. U.S. Steel started the permitting process and expects to soon start construction on the project.

It plans to self-fund pig iron production instead of contracting it to manage costs more efficiently at Big River Steel and make Gary Works' blast furnaces more efficient without reducing their raw steel output.

“U.S. Steel’s low-cost iron ore is an important strategic advantage for the company,” said U.S. Steel President and CEO David B. Burritt. “Our ability to control this important steelmaking input is a valuable competitive differentiator for our growing fleet of electric arc furnaces. An investment in pig iron is an important first step to translating our low-cost iron ore advantage to our EAF footprint while driving efficiencies at Gary Works.”

U.S. Steel plans to invest about $2.3 billion in capital expenses this year and will offset the pig iron investment by shifting other costs within its capital budget for the year.