UPDATE 2-U.S. Steel CEO says mulling another electric arc furnace

Tue Mar 25, 2014 1:26pm EDT

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(Adds CEO Longhi's comments on automotive industry)

By Krista Hughes

WASHINGTON, March 25 (Reuters) - United States Steel Corp could replace another one of its older blast furnaces with an electric arc furnace, Chief Executive Mario Longhi told Reuters on Tuesday.

U.S. Steel said in January that it was applying for permits to build an electric arc furnace to replace the blast furnace at its Fairfield, Alabama, facility, part of a push to cut costs.

"We are moving ahead with the first one," Longhi said. "And there is a lot of analysis going on, given the fact that we have plenty of blast furnaces, to see where, if, when the next one could be replaced by another electric arc furnace."

U.S. Steel's profitable rival Nucor Corp has long specialized in steelmaking with electric arc furnaces, often called mini-mills. U.S. Steel and Nucor are the biggest U.S.-based steelmakers.

A sustained shift towards mini-mills would be a big change in strategy for U.S. Steel, which has generally focused on maintaining its fleet of blast furnaces.

Electric arc furnaces can use steel scrap, rather than iron ore, to make steel. They can cut costs associated with transporting raw materials, and insulate steelmakers from increases in the price of iron ore and coal.

Longhi declined to name blast furnaces that could be replaced, but said there are several options: "One factor is what is the age of a certain blast furnace, when it is going to come up for a massive reline," he said.

Relining a blast furnace can cost $100 million or more.

"ASLEEP AT THE WHEEL"

On the growing use of aluminum in the automotive industry, Longhi, who earlier in his career spent 23 years at aluminum maker Alcoa Inc, was cautious.

"I would say aluminum has been very hard at work," he said. "I think steel has been somewhat asleep at the wheel."

He said the steel industry is behind on research and development, and that U.S. Steel is "intensifying" its work in the area.

Automakers' demand for aluminum, which is more expensive than conventional steel but also lighter, is growing rapidly as manufacturers push to improve fuel efficiency. (Writing by Allison Martell; Editing by Peter Galloway)

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