Final Thoughts

Final thoughts

Written by Michael Cowden


As 2023 draws to a close, I wanted to look back on some of the key events and themes of the year.

But I’m going to hold off on that idea because we were – as of Sunday afternoon – still waiting on news about arguably the biggest event of the year, the potential sale of U.S. Steel.

The board of the Pittsburgh-based steelmaker was scheduled to meet over the weekend to discuss bids for the company, according to CNBC. Recall that CNBC also reported that the board had met on Wednesday for the same reason.

Perhaps there will be news late on Sunday. Perhaps next week. Or perhaps not until over the holidays. Heck, maybe not until 2024.

How much is U.S. Steel worth?

At this point, I’m not going to call it. But I think it’s fair to say that a deal is getting closer and that it could be an eye-wateringly expensive one.

Case in point: I’ve heard from some of you that Big River Steel alone could be worth as much as $6 billion. If that’s the case, I can see why U.S. Steel balked at Cleveland-Cliffs’ initial offer for the company in mid-August for a reported value of $7.3 billion.

Recall that Big River Steel is comprised of two mills: Big River Steel 1 (BRS1) and Big River Steel 2 (BRS2). BRS1 made its first coil in December 2016 – making it one of the newest EAF sheet mills in the US. It has since doubled its capacity to 3 million tons per year.

BRS2 is not simply a mirror of BRS1. Yes, BRS2 will be another 3 million tons per year of EAF sheet capacity once it is completed. But it also features some bells and whistles that BRS1 does not have. Among them: Advanced “endless” casting and rolling technology originally slated for Mon Valley Works, a heavy-gauge hot-rolled pickled substrate coating line, and an advance high-strength steel (AHSS) cold-rolling and coating line.

In other words, if BRS1 and BRS2 are indeed worth ~$6 billion, could the valuation of BRS2 be higher than $3 billion? That question aside, U.S. Steel’s market cap is now approximately $8.77 billion. Does that mean any deal for the entire company would value it at $9 billion, $10 billion, or more?

Planespotting

Speculation about which company or companies might acquire U.S. Steel is rampant.

Does Cleveland-Cliffs acquire U.S. Steel? Does Luxembourg-based ArcelorMittal instead prove to be the winning bidder? Perhaps Charlotte, N.C.-based Nucor is back in the mix, looking to buy one or both of Big Rivers? Also, is it possible that U.S. Steel will continue to operate independently in some form or fashion?

We’re looking for scraps of information at this point. This is why a story on Dec. 13 about a U.S. Steel plane flying into Charlotte – where Nucor is headquartered – got so much attention.

Again, I don’t know what the outcome of all this will be. But my guess is that cash will be king. And to say it could be transformational for the domestic flat-rolled steel industry is almost an understatement.

The U.S. Steel aura

U.S. Steel was created in 1901 when a group headed by Elbert Gary, the company’s first chairman, and J.P. Morgan, bought Andrew Carnegie’s steel company. They combined Carnegie’s mills with Federal Steel and other holdings to form what would become the “nucleus” of U.S. Steel, according to the company’s website.

You might say it’s cliché to describe U.S. Steel as an iconic American steelmaker. However, just look at those names – each one an icon.

It’s also hard to overstate the company’s impact on western Pennsylvania – even as it has grown well beyond the area.

I’m from Pittsburgh. U.S. Steel was everywhere growing up. Your dad, uncles, or grandfathers had worked there or at competing mills. If you had a big occasion, it might have been celebrated with a dinner at “The Top of the Triangle” – the restaurant at the top of the U.S. Steel Tower. The UPMC logo is now at the top of the building. But for folks like me, it will always be the “Steel Building.”

Let’s not forget the Steelers’ logo, which is based on the American Iron and Steel Institute’s “Steelmark.” The three diamonds – officially “hypocycloids” – in the logo represent steelmaking raw materials: coal, iron ore, and scrap. How awesomely nerdy is that?

U.S. Steel made its mark on Hollywood too. Just one example: The Godfather II when Hyman Roth wants to describe to Michael Corleone the scale of the Mafia’s operations: “Michael, we’re bigger than U.S. Steel.

But back to the Steeler’s logo. According to the AISI website, Cleveland-based Republic Steel suggested in 1962 that the Steelers use the Steelmark on their helmet. I was surprised to learn that. When I was growing up, the Pittsburgh-Cleveland football rivalry was intense.

Is that rivalry the past, a sign of things to come, or might any future logo suggestions come from well beyond western Pa. and Ohio? Also – and let me geek out for a minute – how important and expensive might the blue diamond, scrap, become as more and more EAF capacity comes online?

Michael Cowden

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We’ve all heard a lot about mill “discipline” following a wave of consolidation over the last few years. That discipline is often evident when prices are rising, less so when they are falling. I remember hearing earlier this year that mills weren’t going to let hot-rolled (HR) coil prices fall below $1,000 per short ton (st). Then not below $900/st. Now, some of you tell me that HR prices in the mid/high-$800s are the “1-800 price” – widely available to regular spot buyers. So what comes next, and will mills “hold the line” in the $800s?