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U.S. Steel (X) Launches $150M Pellet Production Facility

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United States Steel Corporation (X - Free Report) officially launched its new direct reduced (DR)-grade pellet production facility at the Keetac Plant in Minnesota. The facility, which commenced its first shipments, is set to produce around four million tons of pellets annually. This $150-million investment marks a significant move in the company’s metallics strategy, aimed at supplying the tight DR-grade pellet market with low-cost iron ore while enhancing its ability to meet customer demands.

The Keetac facility boasts production flexibility, capable of manufacturing DR-grade and blast furnace iron ore pellets, enabling U.S. Steel to adjust to changing market conditions. The company proudly stated the project's success, which was completed ahead of schedule, under budget and safely. The project generated 250 construction jobs and 33 full-time union and management positions, marking a significant achievement for the Keetac team and the company.

The new pellet facility represents a wise investment in the people and potential of the Iron Range. This project is a win-win, creating jobs, reducing emissions and bolstering the strength of Minnesota’s iron ore industry for future generations.

Construction of the DR-grade pellet facility commenced in August 2022 and concluded in December 2023. U.S. Steel’s Minnesota Ore Operations currently employs nearly 2,000 workers.

The stock has rallied 65.4% in the past year compared with the industry’s 16.9% rise.

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U.S. Steel anticipates a stronger second quarter, with adjusted EBITDA projected in the range of $425-$475 million, driven by improved performance in the Flat-Rolled unit. However, the Mini Mill segment is expected to face challenges due to lower average selling prices and the U.S. Steel Europe segment will likely continue to encounter commercial headwinds. Results in the Tubular segment are expected to moderate due to declining selling prices.

In its first-quarter call, X stated that it is making progress toward completing its merger with Nippon Steel Corporation. Shareholders approved the proposed merger — a key milestone — with the transaction expected to be completed in the second half of 2024, pending the fulfillment of remaining customary closing conditions.


Zacks Rank & Key Picks

U.S. Steel currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Basic Materials space are Carpenter Technology Corporation (CRS - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and ATI Inc. (ATI - Free Report) and Ecolab Inc. (ECL - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CRS’ earnings beat the Zacks Consensus Estimate in three of the last four quarters while matching it once, with the average earnings surprise being 15.1%. The company’s shares have soared 139% in the past year.

ATI’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, with the earnings surprise being 8.34%, on average. The company’s shares have surged 72.9% in the past year.

The Zacks Consensus Estimate for Ecolab's current-year earnings is pegged at $6.59, indicating a year-over-year rise of 26.5%. The Zacks Consensus Estimate for ECL’s current-year earnings has been going up in the past 30 days. ECL beat the consensus estimate in each of the last four quarters, with the earnings surprise being 1.3%, on average. The stock has rallied nearly 40.4% in the past year.

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