U.S. Steel Gary Works. Staff photo by John J. Watkins
Nippon Steel pledged to invest $2.7 billion into U.S. Steel's operations, including nearly $1 billion in Gary Works.
The Japan-based steelmaker promised to repair or reline four blast furnaces at U.S. Steel's flagship steel mill on Lake Michigan, around which the company town of Gary was built.
The future of blast furnaces became a flash point of debate over the controversial $14.9 billion deal the Biden administration weighed whether to allow. U.S. Steel warned that, without new ownership and an infusion of capital investment, it could end up closing the older integrated steel mills that originally made it the world's largest steelmaker and were its bread-and-butter until it acquired Big River Steel in Arkansas a few years ago.
Nippon Steel said it promised billions in investment in blast furnaces at integrated mills U.S. Steel was unlikely to make on its own.
The United Steelworkers union however expressed concerns that Nippon Steel would just continue U.S. Steel's strategy of investing billions in non-union mini-mills in the south while neglecting its union-represented integrated mills in Northwest Indiana and Western Pennsylvania under the guise of a false "Best of Both" strategy. U.S. Steel has idled legacy facilities in East Chicago, Gary, Illinois and Michigan while pouring billions into new capacity in Arkansas.
The union has asked for more long-term commitments to U.S. Steel's integrated mills like Gary Works, expressing fears it ultimately will disinvest in those facilities while shifting production to the south.
Whether or not the deal goes through, older integrated mills like Gary Works are at a crossroads. Facilities like Blast Furnace #14, which Nippon Steel targeted for a $300 million reline, face the end of their current service campaigns.
With more of the industry looking to slash their carbon emissions in the face of global regulatory pressures and increased consumer demands to tackle climate change, environmental groups are warning that big investments in blast furnaces rather than newer, greener technologies could end up dooming older integrated steel mills like Gary Works. Gary Advocates for Responsible Development or GARD is sounding the alarm that blast furnace relines instead of investments in more sustainable direct reduced iron-based production could just be a bridge to phase out blast furnace production in favor of electric arc furnace production at mini-mills, given U.S. Steel's long-term goals of cutting carbon emissions.
"They're doubling down on blast furnaces, saving the future of Gary Works is the blast furnace and relining Blast Furnace #14 when there are better technologies available for reducing emissions," GARD Senior Adviser Jack Weinberg said. "They can't go on forever with blast furnaces in the United States. The main driver is economic rather than environmental. The only reason they want to continue investing in making iron at blast furnaces is to buy 10 to 15 years to build ironmaking and steelmaking capacity elsewhere. They will run Gary Works as an intermediate and build its replacement elsewhere. Their overarching interest is in shutting it down.
Blast furnaces will eventually become obsolete, which has already been happening in Europe, Wineberg said. Government environment policies have played a role there.
But in places like the United States, the big driver will be that natural gas has gotten much cheaper than coal. Companies will eventually find it more economical and competitive to invest in direct reduced iron that will initially be produced with natural gas and potentially later with hydrogen.
"The last blast furnace in the United States was built before Ronald Reagan got elected," Weinberg said. "Since the 1980s, they've slowly been shutting them down. They've just been revamping the best of their old ones."
But a big change in the building is that steelmakers that did not used to produce their own iron started investing in direct reduction, including a Nucor facility in Louisiana, an ArcelorMittal facility in Texas and a Cleveland-Cliffs facility in Toledo. Those steelmakers all have been producing iron for new steel at those facilities without using coke, the purified form of coal that accounts for much of the carbon emissions.
"Blast furnaces still produce the highest quality, highest value steel that's especially used by the auto industry because of the chemical composition," Weinberg said. "But mini-mill steel made from recycled scrap has captured more and more of the market shares. Blast furnaces have just 20% of the market now. Direct reduction is cheaper and easier to run. You don't need the supply chain. You can operate on natural gas. You don't need iron ore pellets. You don't need coke. You don't need sinter plants. It just makes more economic sense."
Steelmakers have pledged to decarbonize the industry by 2050. Cleveland-Cliffs has invested big in direct-reduced iron for integrated mills, while U.S. Steel has been pouring money into electric arc furnaces in Arkansas.
"They haven't been investing in direct-reduced iron in Gary Works or Mon Valley," Weinberg said. "U.S. Steel seems to be interested in running Gary Works and Mon Valley as long as they have to until that can get out of there. Nippon is buying into that. GARD's view is that Gary Works is a perfectly good steel mill that could become a highly competitive steel mill with the right investments. You have sunk capital, a workforce and the economic connections. It could be modernized very easily."
Northwest Indiana produces more than 20% of the nation's steel, including most of the nation's high-quality steel that's used in automaking. But it likely will not continue to indefinitely do that with century-old blast furnace, the oldest two of which date back to the 1910s.
"Relines cost of a lot of money. They're big investments," Weinberg said. "The steelmakers that are going green are more motivated by economic rather than environmental considerations. It's business competition. Your competitors are moving that way and the auto industry is going to start looking at carbon intensity."
The United States used to have 80 blast furnaces in the 1980s. That number has shrunk to around 15, with about nine concentrated in Northwest Indiana.
"It's a dying technology," he said. "There's every reason is the world direct reduction will replace it pretty rapidly."
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