The Rising Influence of Rising Affluence

[winchem21]

Another Classic LG Earnings Call and Vision Today.

LG makes it clear that today’s US Steel industry has substantively changed into one focused on profitability and not production. They all have LG to thank for the consolidation that has transformed the industry.

The transformation of CLF steel production processes focused on blast furnaces upgraded with HBI, NG, and use of scrap in BOFs lowers emissions for high quality steel that can only be produced in blast furnaces. These transformations have been years in the making. As LG noted at the end of the call:

This is not a one quarter business. This is a long-term business, and I strategize multiyear.

Another great comment from the end of the call:

Lourenco Goncalves
Yes. At this point, we have -- give or take, we are consuming 1.7 billion tons -- million tons of -- 1.7 million tons of HBI in our blast furnace and more or less 300,000 tons in our EAFs. We do have EAFs at this point. You know that.

If and when we put more EAFs, at that point, we are going to have more scrap because FPT continues to get a new sources of scrap, including prime scrap on the stamping plants that we’re doing closed loop with -- among our automotive clients. So, because we continue to rely on FPT, we don’t believe that we’re going to need more HBI. We can be selective, we can keep our HBI for our blast furnaces, continue to use a portion in our EAFs, and even when we have more EAFs, we will grow these EAFs with scrap, not with HBI.

Remember, these EAFs will be for lower specs. So, scrap is good. The most environmentally-friendly type of operation in the steel business is an EAF to produce rebar. It’s very low emissions when you melt scrap for rebar because it’s pretty much it.

You melt scrap, you produce rebar, as simple as that. When you start to complicate it and you start to go up in the food chain, and you get to flat roll, then you need pig iron from Russia, from Ukraine, from places that are very peaceful. And it’s good to have a strategy to count on Ukraine or Russia at this point, or HBI that they don’t have. So it will be fun to watch going forward.