January 29, 2014 / 12:00 AM / 4 years ago

U.S. Steel seeks electric arc furnace at Alabama plant to cut costs

Jan 28 (Reuters) - United States Steel Corp said on Tuesday it was applying for permits to build an electric arc furnace at its Alabama steelmaking plant to replace a blast furnace, a move by the loss making company to cut costs and revamp one of its older, less efficient operations.

U.S. Steel Chief Executive Officer Mario Longhi declined to say what the new furnace at its Fairfield Works operation would cost but said it would have a steel production capacity of about 1.1 million net tons per year.

The Pittsburgh-based company, faced with a market weighed down by excess steelmaking capacity and weakening demand, plans to cut costs over several years.

Electric arc furnaces melt steel scrap, rather than iron ore, to make high-quality steel and would reduce the company’s cost of transporting raw materials such as iron ore and coke to the Fairfield operation and reduce its exposure to the merchant coal market.

Electric arc furnaces form the backbone of steelmaking operations at Nucor Corp., U.S. Steel’s profitable rival.

“The business case for this project as we see it today is strong enough, which is why we’re filing for the permits now and we have started the basic engineering for the new facility,” Longhi said on a conference call with company analysts and investors.

Permitting is expected to take up to a year after which construction of the furnace could begin in the third quarter of 2015 with the project completed in mid-2017.

U.S. Steel reported a wider fourth quarter loss on Monday as total steel shipments declined compared to last year.

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