Final Thoughts

Granite City and the Golden Share

Most of you know the background on Granite City. It’s located in southern Illinois, just across the state line from St. Louis. U.S. Steel announced earlier this month that it would stop sending slabs to the mill and would stop production by the end October. We learned on Friday that the Pittsburgh-based steelmaker had reversed that decision. Granite City would instead continue to receive slabs to run at its hot strip mill.

Our understanding – and the United Steelworkers (USW) union alluded to it in a letter too – was that U.S. Steel and Nippon Steel came under political pressure about their decision to stop production at Granite City. Namely, the Trump administration invoked its “golden share” in U.S. Steel. And as we all know, that golden share was a prerequisite for the Trump administration approving Nippon Steel’s nearly $15-billion acquisition of U.S. Steel.

We’ve seen a lot of semantics about how U.S. Steel wasn’t technically idling Granite City. There would be no layoffs, etc. Still, I found it hard to avoid the conclusion that it amounted to idling, even if no jobs were lost and even if U.S. Steel was careful not to use the word “idle”.

Being paid to do nothing, or not much, might sound nice. But there’s not much dignity in work like that. And it’s no doubt good news for the workers at Granite City that they’ll continue to have meaningful jobs going forward.

What about the blast furnaces?

I think the big question now is how often and to what extent President Trump might invoke his “golden share” in U.S. Steel. And, related to that, could we see not only hot strip mill operations continue at Granite City but also the mill’s blast furnaces restarted?

The USW, in its letter, said it would “keep the pressure” on U.S. Steel to restart the idled blast furnaces at Granite City. I’m not going to predict the odds of that happening. But if the USW was indeed able to lobby the Trump administration to keep Granite City’s hot strip mill running, well, let’s just say the odds are a lot higher than those of a new blast furnace being built in the Mon Valley.

And maybe none of this should come as a surprise. We all saw how Nippon Steel’s acquisition of U.S. Steel became a political football. But it’s not like USS – smaller by output but as iconic as ever in the public imagination – hasn’t been a political football before.

Rewind to 2018

Let’s take a hot melt time machine back to 2018.

President Donald Trump, then in his first term, announced Section 232 tariffs of 25% on March 1, 2018. Shortly afterward, on March 7, U.S. Steel President and CEO David Burritt said the company would restart the ‘B’ blast furnace at Granite City. Burritt cited Section 232 tariffs as a key reason behind the move. And the company in June 2018 said it would restart the ‘A’ furnace as well. By October 2018, it had done just that.

It was big news at the time for steel. And there were plenty of photo ops and news clips featuring Trump, Burritt, Granite City, and USW workers. It was theatrical proof – maybe the kind Trump likes best – that his signature tariff policy was paying off.

And 2018 inarguably marked a big turnaround from December 2015, when USS idled Granite City’s furnaces in response to truly difficult market conditions. Just how bad were things in late 2015? SMU’s price assessment for hot-rolled coil dropped to as low as $360 per short ton (st) – or a little less than the price of prime scrap today, according to SMU’s interactive pricing tool.

No future?

But good times rarely last forever. USS re-idled the ‘A’ furnace at Granite City in the spring of 2020 as the pandemic swept across the US. And it idled the ‘B’ blast furnace in the fall of 2023. The stated reason: a United Auto Workers (UAW) union strike had hurt demand. But anyone familiar with Granite City knows that it ships few tons to the automotive industry compared to Gary Works.

And it’s also no secret that Granite City doesn’t appear set to play a big role in U.S. Steel’s long-term future. Under terms of the golden share, Granite City can be idled after June 2027. Other USS mills are protected until June 2035.

Another indicator: Look at the billions Nippon Steel plans to invest in U.S. Steel.

Nippon has earmarked $3.1 billion for Indiana. That’s the home state of Gary Works, whose No. 14 blast furnace is slated to be relined next year. There is $3 billion for Arkansas, the home of Big River Steel. Another $2.4 billion will go to Pennsylvania. That’s the home of Mon Valley Works, where a new hot strip mill is expected to be installed.

Then there’s rough $800 million for Minnesota, where the company’s iron ore mines and pellet plants are. And $500 million for Alabama, where USS operates an EAF seamless pipe mill. Nippon also plans to spend $4 billion for a new mill in the US – maybe at Big River Steel?

I could be missing something. But I don’t see hundreds of millions or billions earmarked for Illinois, the home of Granite City Works.

Granite City has a long, illustrious history. The mill dates to 1878, according to the Belleville News-Democrat. And I’ve been told that as recently as the early 2000s, it was among the most profitable mills in U.S. Steel’s footprint.

But a lot has changed from just 10 years ago, let alone 20 years ago. Namely, billions of dollars have been spent to add millions of tons of new EAF sheet capacity to the North American market – and more is on the way. Does Granite City have a long-term history in such a vastly transformed domestic steel landscape?

Or back to the future?

A free market might dictate that Granite City could meet the same fate of other union-represented mills that date to the 19th century. The former Bethlehem Steel mill in Sparrows Point, Md., comes to mind. More recently, Cliffs’ rail mill in Steelton, Pa. And how would it make economic sense to restart the blast furnaces at Granite City and potentially run them for less than two years?

But, for better or worse, there is not a major political party championing unfettered free markets. While Democrats and Republicans don’t agree on much, both have cheered tariffs on steel. And so if you’re going to handicap any future decision on Granite City’s operations, including its blast furnaces, you might want to factor in politics at least as much as economics.