October 25, 2014

Elyria
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U.S. Steel, Republic engage in joint project

LORAIN — The fracking boom continues to be good for business for Republic Steel and U.S. Steel’s Lorain operations.

Fracking — the process by which chemically-laced water and sand is blasted underground to break rock and release oil and natural gas — and the rebound of the American auto industry were the primary reasons cited for the approximately $85 billion dollar electric arc furnace project under way at Republic.

Increased fracking in the Utica and Marcellus Shale formations in New York, Pennsylvania and eastern Ohio was cited as the impetus for a new project at U.S. Steel and a separate venture with Republic that was announced Tuesday.

U.S. Steel CEO John Surma, in a Tuesday conference call with industry analysts, said “high demand” from a “growing customer base” prompted the project. It increases the production of a 6-inch diameter steel casing used to drill for natural gas and oil.

“We believe this project will allow for increased utilization of what is already a highly productive asset,” Surma said in a company-provided call transcript.

Environmentalists are calling for less fracking, formally known as hydraulic fracturing, because of concerns of increased global warming due to methane gas releases; the possibility of well water contamination; and possible earthquakes triggered by underground disposal of waste water that is a byproduct from the process.

There is a moratorium on fracking in New York due to environmental concerns.

The casing also will be used for oil drilling in the Gulf of Mexico. Drilling there has picked up since a year-long drilling moratorium ended in 2011. The moratorium was in response to the 2010 BP Deep Water Horizon oil rig explosion that killed 11 workers and the subsequent spill that dumped millions of gallons of oil into the ocean.

The Republic collaboration restarts an effort that ended when Republic shuttered its blast furnace in 2008 in response to the Great Recession, which crashed the auto industry.

Semi-finished steel that would’ve been rolled into bars by Republic and sold will be shipped to U.S. Steel for use in tubular goods, according to Mark Huemme, Republic marketing director.

The semi-finished steel will go to Lorain Tubular Operations adjacent to the Republic plant at 1827 E. 28th St.

“When we took the blast furnace down, then we lost that ability to supply the U.S., so we’re getting back into that again,” Huemme said Wednesday. “This is kind of a semi-finished product for us, but it’s what the U.S. needs for producing their tubular goods.”

The announcements came as U.S. Steel said earlier this week that it lost $73 million in the first quarter after fourth-quarter losses of about $50 million.

Bloomberg News attributed much of the losses to an overall drop in demand for tubing from gas and oil drillers.

The losses left Surma vowing to “significantly” reduce purchasing, maintenance and repair costs and increase efficiency at the $19 billion corporation. Surma didn’t say how much the Pittsburgh-based company is aiming to save.

“Our spending in these areas is in the billions of dollars annually and a small percentage reduction would be very meaningful to our results,” he said.

Contact Evan Goodenow at 329-7129 or egoodenow@chroniclet.com.