Production halts at U.S. Steel's two largest mills could dent what is usually a good quarter for the Pittsburgh steelmaker and lead to higher steel prices.
On Wednesday, U.S. Steel informed customers of its Gary, Ind., mill that it was curtailing blast furnace and steelmaking operations at that plant because icy conditions on the Great Lakes are delaying shipments of iron ore from its Minnesota mines. The letter gave no word on how long those delays could last but was hopeful that shipments will improve with warming temperatures.
"It is possible that our ability to timely fill your orders will be temporarily impacted," the company wrote, adding that it is trying to mitigate any impact of customers.
The announcement follows an incident last week at U.S. Steel's Great Lakes mill near Detroit that forced the company to halt steel production there. Media reports indicate a large pipe damaged the roof covering one of its steelmaking furnaces.
Spokeswoman Courtney Boone declined to comment on the specifics of the incident at the Great Lakes mill or how long it will be before steelmaking resumes at either plant.
"Between the two of them, this is a serious issue," said New York-based industry analyst Charles Bradford.
He added that if the outages last long enough, they could make the second quarter - typically the company's best - a disappointment.
The Gary plant is capable of producing 7.5 million tons of steel annually, while the Great Lakes mill can produce 3.8 million tons. Both mills serve primarily the auto industry, according to John Tumazos, an industry analyst based in Holmdel, N.J. He said that, depending on how long the outages last, they could create problems for motor vehicle producers.
According to U.S. Steel's website, the company's next largest plant, the Mon Valley Works, supplies automotive customers, as well as the appliance and construction industries.
U.S. steel producers recently announced a price increase and their chances of customers going along have increased because of U.S. Steel's production issues, said Morningstar analyst Andrew Lane.
"These U.S. Steel outages will help that stick and could lead to another hike," he said.
Bradford concurred. He's heard other producers are having problems because of conditions on the Great Lakes and that a furnace outage at AK Steel, a West Chester, Ohio, producer, has also crimped steel supplies. If the outages do cause prices to jump, the increases would last for a month or until supply catches up with demand, he said.
In an emailed statement, AK Steel said it has received enough iron ore to meet its needs, but that icy conditions on the Great Lakes "continue to make transportation difficult."
Separately, U.S. Steel announced several personnel changes, the latest in a sweeping overhaul of the steel producer's top management.
The Pittsburgh steelmaker said Thursday that David L. Britten, 53, has been named to the new position of chief technology officer. He was formerly in charge of the steel producer's tubular operations. He joined U.S. Steel in 2011 from Swedish steel producer SSAB.
Britten will be replaced by David J. Rintoul, 56, who currently is responsible for the company's efficiency and cost-cutting campaign, which has been dubbed the Carnegie Way. Former Caterpillar executive Geoff M. Turk, 50, will take on the Carnegie Way responsibilities as the company's vice president, transformation.
Additionally, U.S. Steel said longtime executive Anthony R. Bridge, 59, currently vice president of engineering and technology, will retire in May. He joined the company in 1998.
The management overhaul began last year when former Alcoa executive Mario Longhi was promoted to president and CEO. Since then, Chairman, President and CEO John P. Surma; longtime CFO Gretchen R. Haggerty; general counsel James Garraux; and senior vice president David Lohr have retired.
Haggerty, who had been CFO since 2003, was replaced by former Caterpillar CFO David Burritt.