Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

An explosion at ArcelorMittal’s Indiana Harbor East on Friday has resulted in an outage of indeterminate length, possibly supporting hot-rolled coil (HRC) steel prices.


The fire—a result of a water and molten iron reaction—at the company has damaged Indiana Harbor’s #4 (IH4) steel producing basic oxygen furnace and control room at the mill on Lake Michigan in East Chicago. No injuries were reported.


The unanticipated outage may support further upside for the price of HRC—the benchmark steel product for the industry. The price reached its lowest point in October to about $510/nt ($562/mt). January HRC steel contracts are currently trading at around $590/nt and are expected to reach as high as $620-$625/nt early in 2020.


ArcelorMittal has some of the longest comparative lead times in the US sheet market currently. The company produced 5.2mn nt (4.7mn mt) of steel from its Indiana Harbor facility in 2018, less than 60pc of its estimated capacity. Production for 2019 is projected to be lower amid weak demand.


IH4 produces about 1.5mn nt of steel per year compared to about 3-3.5mn nt capacity per year, and about 3pc of US rated capacity. Its sister furnace Indiana Harbor #7 produces about 3mn nt of steel per year compared to about 4-4.5mn nt capacity per year. Indiana Harbor #3 (IH3) has an estimated capacity of 1-1.5mn nt per year. Activity at this facility was cut back in November because of which, production at IH3 has been nominal in recent months. 


A timeline for repairs and the duration of the outage is currently being assessed, according to a company spokesperson. ArcelorMittal plans to increase production at other steel shops and use its inventory position to offset any lost production from the explosion.


The company will encounter repair costs associated with the fire, as recent pictures from the local press depicted major damage, though the full financial impact has not been determined.


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