WCI STEEL Coke shortage forces price rise

WCI's supplier cannot fulfill its orders because of a fire at a coal mine.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
WARREN -- WCI Steel will be charging its customers a $40-per-ton surcharge on its steel products starting Monday because of a problem with its sole supplier of blast furnace coke.
The price increase is necessary, said WCI spokesman Tim Roberts, because Pittsburgh-based U.S. Steel has announced it is unable to deliver its usual, contractual supply of coke, a raw material used in steel production.
WCI will replace the coke by increasing its use of natural gas in its steel production, he said.
The change will increase production costs because the company will have to buy the gas on the spot market, and the surcharge will help to offset that increase.
The surcharge takes effect Monday on all shipments and continues through January, Roberts said. WCI will remove the surcharge whenever U.S. Steel is ready to restore its coke shipments in the quantity and quality the Warren steel producer needs.
The latest problem
For WCI, the coke shortage is one of a succession of problems to hit in recent weeks. The company has been continuing to operate as a debtor in possession after filing for Chapter 11 bankruptcy protection in September amid what officials have said is a strong order book.
In mid-November a chemical reaction and fire on WCI's blast furnace forced a weekend shutdown, as employees worked to repair the damage and get the furnace running again. Roberts said the company plans to reline the blast furnace in June, a maintenance procedure last completed in 1995.
Then, on Nov. 27, the company announced it would idle its silicon electrical line, once one of its most profitable, because many of the line's customers have moved out of the country. The closing is set for Jan. 31, but the company hasn't decided how it will affect 50 workers on the line.
And this week, U.S. Steel secured bankruptcy court approval to notify WCI that it may not continue its coke contract with the Warren company when the current pact expires Dec. 31, 2004.
Cause of shortage
U.S. Steel makes blast furnace coke from coal and other materials at a plant in Clairton, Pa. Spokesman John Armstrong said its coal supply was interrupted when a recent fire closed down operations at the Pinnacle Mine in West Virginia which produces the special grade of coal necessary for coke production.
Armstrong said U.S. Steel will use some of the coke still available for its own production needs and will allocate the rest among its other coke customers, including WCI.
U.S. Steel officials can't say how long the problem will continue.
The coal supply shortage comes at a time when coke is already in short supply worldwide, Armstrong said. China, once a major supplier of the world's coke, is now using the coke it produces for its own steel production. "The market is tight and prices are high," he said.
Coke produced at an International Steel Group plant next to WCI goes to ISG steel mills.
vinarsky@vindy.com