Steelmakers Turn More and More to Nat Gas as Cost Savings Rise (NUE) (X) (AKS)
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Steelers are higher on the session following chatter that the revolution in U.S. shale-gas procurement might spell U-P-S-I-D-E for the sector.
According to Bloomberg-compiled data, Nucor (NYSE: NUE) recently said it would be constructing a $750 million facility which would take advantage of lower nat gas prices. Australian steel giant Voestalpine Group also said it would plop down $661 million on a new U.S. plant for the same reason.
Steelmakers have seen costs go up while demand ebb since the financial crisis. Many have had to cut back and, in fact, while global steel production rose 14 percent since 2008, U.S. production is down 3.4 percent.
To offset this glut, many are shifting from coal-fired to nat gas run operations as gas prices are still expected to be pressured in the near-term on heavy stockpiles.
Savings will come from shifting the first stage of steelmaking from the traditional blast furnace to new new method called direct- reduced iron plants (DRI). Nucor recently noted hat the new method could produce iron for about $324 percent ton, resulting in a cost savings of $82 or 20 percent, per ton. In addition, DRI also works well with recycled materials, making smoother, blemish free product. This is a definite plus given the tapering availability and higher costs associated with finding raw material.
Nucor may also announce another DRI plant next year, bringing total U.S. output to 5 million tons per year.
Of course, all the investment might be for naught should domestic conditions remain on the outs. According to recent data from the American Iron and Steel Institute, U.S. steel capacity is at about 74 percent, down from 91 percent utilization ahead of the fiscal meltdown in August 2008.
Nucor is up 0.7 percent today, U.S. Steel (NYSE: X) is 0.5 percent better, ArcelorMittal (NYSE: MT) is up 1.9 percent, and AK Steel is 1.7 percent higher on the session. Notably, steelmakers are likely to form stronger partnerships with nat gas drillers as well, which, following this mornings report, would be a plus for that sector as well.
According to Bloomberg-compiled data, Nucor (NYSE: NUE) recently said it would be constructing a $750 million facility which would take advantage of lower nat gas prices. Australian steel giant Voestalpine Group also said it would plop down $661 million on a new U.S. plant for the same reason.
Steelmakers have seen costs go up while demand ebb since the financial crisis. Many have had to cut back and, in fact, while global steel production rose 14 percent since 2008, U.S. production is down 3.4 percent.
To offset this glut, many are shifting from coal-fired to nat gas run operations as gas prices are still expected to be pressured in the near-term on heavy stockpiles.
Savings will come from shifting the first stage of steelmaking from the traditional blast furnace to new new method called direct- reduced iron plants (DRI). Nucor recently noted hat the new method could produce iron for about $324 percent ton, resulting in a cost savings of $82 or 20 percent, per ton. In addition, DRI also works well with recycled materials, making smoother, blemish free product. This is a definite plus given the tapering availability and higher costs associated with finding raw material.
Nucor may also announce another DRI plant next year, bringing total U.S. output to 5 million tons per year.
Of course, all the investment might be for naught should domestic conditions remain on the outs. According to recent data from the American Iron and Steel Institute, U.S. steel capacity is at about 74 percent, down from 91 percent utilization ahead of the fiscal meltdown in August 2008.
Nucor is up 0.7 percent today, U.S. Steel (NYSE: X) is 0.5 percent better, ArcelorMittal (NYSE: MT) is up 1.9 percent, and AK Steel is 1.7 percent higher on the session. Notably, steelmakers are likely to form stronger partnerships with nat gas drillers as well, which, following this mornings report, would be a plus for that sector as well.
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