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U.S. Steel outlines 'difficult but necessary’ response to Covid-19, layoffs will occur

March 27, 2020 - U.S. Steel Corp. will take a series of aggressive and meaningful actions to provide greater certainty on the company’s response to impacts from the coronavirus (COVID-19) and the sudden, significant changes in global oil and gas markets.

These actions strengthen the company’s ability to serve customers, partner with suppliers, create long-term value for investors and ensure a more secure future for employees and the communities where we work and live. By prioritizing cash and liquidity, the company will maintain strategic flexibility in order to be well prepared for when the global economy ultimately recovers from the current situation.

“In this unprecedented and rapidly changing situation, our first priority remains the safety and well-being of our employees. As an essential part of our critical infrastructure, our employees have embraced the special responsibility to continue making the steel society needs, including the packaging for our food supply during the COVID-19 pandemic response,” says President and CEO David B. Burritt. “I am confident in the resilience of our employees, the strength of our customer relationships, and the reliability of our regional supply chain."

The company outlined its plans:

North American Flat-rolled: The company will idle the No. 4 blast furnace at Gary Works immediately to begin a planned outage. This outage was originally planned to begin in April and last for 48 days. The scope of the current outage has been reduced and the remainder of the Gary No. 4 blast furnace outage is being delayed.  The company expects the Gary No. 4 blast furnace to remain idled until market conditions improve.  In addition, the company will temporarily idle blast furnace “A” at Granite City Works, effective immediately. The company will also complete the indefinite idling of the iron and steelmaking facilities at Great Lakes Works.  U.S. Steel will continue to monitor the impacts of the coronavirus on its orderbook and will regularly assess the footprint required to support its customers’ needs.    

Tubular Operations: Beginning in late May, U.S. Steel will idle all or most of Lone Star Tubular Operations and Lorain Tubular Operations for an indefinite period of time in response to weak tubular market conditions, including continued high levels of imports and decreased demand driven by a sudden, significant drop in oil prices. The company has issued Worker Adjustment and Retraining Notification (WARN) Act notices to employees at both facilities.

Revised Capital Spending for 2020: The will reduce capital spending in 2020 by $125 million. The company now expects 2020 capital spending to be $750 million. Impacts to strategic projects are as follows:

Endless Casting and Rolling and Cogeneration Investments at Mon Valley: U.S. Steel will delay construction of the endless casting and rolling line and cogeneration facility at its Mon Valley Works. On March 23, the Allegheny County Health Department (ACHD) announced, after consultation with the company, that a temporary pause in the permitting process is appropriate given the challenges posed to the public comment process while COVID-19 public health orders are in effect in Allegheny County. Groundbreaking for this project will be delayed until market conditions become more certain.  The company now expects 2020 capital spending for the project to be approximately $85 million. The company will continue to assess the project timeline and remaining budget.    

Electric Arc Furnace (EAF) at Tubular: U.S. Steel  expects to complete the EAF melt shop at Tubular as planned, with first arc anticipated in the second half of 2020. The expected 2020 capital spending budget for the EAF project is unchanged at $150 million.

Gary Hot Strip Mill (HSM) Investments: The company has paused planned upgrades and will continue to evaluate the pace and timeline for completing the remaining investments in the HSM.

Dynamo Line at USSE: The investment in a new non-grain oriented electrical steel line at USSE remains delayed.

As a precautionary measure, the company increased its borrowings under its Revolving Credit Facility by $800 million in order to increase its cash position and preserve financial flexibility. This action safeguards the business, as well as the company’s customers, suppliers, workforce and investors and ensures the company will maintain the cash and balance sheet strength required to navigate the current environment.

The company expects a meaningful reduction in demand for the full fiscal year. According to Burrett, “The short-term actions announced today are difficult but necessary. Our focus on cash and liquidity will ultimately position us to achieve our longer-term goals as a stronger organization.”

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