Sat, Aug 30, 2014, 1:04 AM EDT - U.S. Markets closed

Recent

% | $
Quotes you view appear here for quick access.

Linn Energy, LLC (LINE) Message Board

  • rlp2451 rlp2451 Jan 2, 2013 8:32 AM Flag

    Billions to be spent on new steel plants, due to low NG prices in US

    More investments despite some here saying it wouldn't happen:

    The U.S. shale-gas revolution, which has revitalized chemical companies and prompted talk of domestic energy self-sufficiency, is attracting a wave of investment that may revive profits in the steel industry.

    Austrian steelmaker Voestalpine said last month that it may construct a $661 million factory in the United States to benefit from cheap gas. Charlotte-based Nucor, the most valuable U.S. steelmaker, plans to start up a $750 million Louisiana project in mid-2013. They’re among at least five U.S. plants under consideration or being built that would use gas instead of coal to purify iron ore, the main ingredient in steel.

    “That technology has been around 30 years, but for 29 years gas prices in the United States were so high that the technology was not economical,” said Michelle Applebaum, managing partner at consulting firm Steel Market Intelligence in Chicago. “This is how steel will be built moving forward.”

    The new capacity may signal a turnaround for an industry that has suffered from overcapacity since the financial crisis and collapse in commodity prices four years ago. U.S. steelmakers have struggled to stay profitable amid sluggish domestic demand, depressed prices and competition from Chinese imports. While global steel output has grown by 14 percent since 2008, U.S. production has shrunk 3.4 percent.

    The newest group of steel projects are so-called direct- reduced iron plants, which account for the first stage of steelmaking. DRI technology produces iron for about $324 a ton, Nucor said in a November presentation. That’s $82 a ton, or 25 percent, cheaper than using a conventional blast furnace, according to Nucor.

    Foreign competitors are now following Nucor’s lead. A joint venture between Australia’s Bluescope Steel and commodity trader Cargill plans to build a DRI plant in Ohio, according to a Barclays analysts report Dec. 18. India’s Essar Global plans one for Minnesota, Barclays said.

    Nucor may announce a second DRI plant as soon as 2013, bringing the company’s domestic iron-making capacity to 5 million tons per year, said Aldo Mazzaferro, a steel analyst at Macquarie Capital USA in New York. Nucor agreed last month to pay Canadian energy company Encana $3 billion over two decades for a joint venture that will develop gas wells to supply its DRI capacity.

    Hydraulic fracturing of shale rock formations from Texas to West Virginia has boosted supplies of gas and sent prices plunging by as much as half in the past two years. Gas futures reached a decade low of $1.91 per million British thermal units in April in New York trading.

    “The shale revolution is triggering an avalanche of industrial expansion plans,” said Biliana Pehlivanova and Shiyang Wang, analysts at Barclays.

    “Other companies from around the world that consume gas may be attracted to move their facilities to the U.S. market, which would then provide even more steel consumption and manufacturing capacity,” Mazzaferro said. “It could result in a re-industrialization of the United States.”

    Still, gas may not get much cheaper. Prices are up 82 percent from their April low and will average $3.70 per million British thermal units next year, or about 31 percent more than in 2012, according to the median of 21 estimates compiled by Bloomberg.

    That price trend may continue if the United States starts exports. A study Dec. 5 by NERA Economic Consulting found that the country would benefit more from shipping liquefied natural gas than using it all domestically. Sempra Energy and Exxon Mobil are among energy companies seeking export permits.

    Iron is the largest component of steel. While it’s the fourth most abundant element in the earth’s crust, iron is rarely found in its elemental form and must instead be separated from other minerals, or “reduced” in steel industry terminology.

    For steelmakers, the process typically occurs in a blast furnace, in which coal heats and reduces iron ore.

    While Nucor will use DRI iron in Louisiana at its electric arc furnaces, the final stage of its steelmaking process, the company will still get most of its raw material from scrap steel. The DRI iron doesn’t just provide a cost advantage, it also helps to make smoother, blemish-free steel that’s stronger and more ductile. Recycling steel is vulnerable to swings in scrap supply and quality.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
 
LINE
31.72+0.27(+0.86%)Aug 29 3:59 PMEDT

Trending Tickers

i
Trending Tickers features significant U.S. stocks showing the most dramatic increase in user interest in Yahoo Finance in the previous hour over historic norms. The list is limited to those equities which trade at least 100,000 shares on an average day and have a market cap of more than $300 million.