Building the Future: Inside the New Hot Strip Mill (Part 1)

Speaker A: Welcome to Steel Stories by US Steel. In this podcast, we go beyond the headlines, bringing you insights, ideas and stories shaping how steel is made, used, and reimagined. Through conversations with industry leaders and innovators, we explore what it takes to keep forging the future of America.

Speaker B: Welcome to Steel Stories. This is your host, Ethan Epstein. And I am, um, pleased to be joined today by Keith Watson, who has a unpronounceable mouthful of a title, but we can say he's Head of Engineering, VP Engineering, VP Capital Projects at US Steel. Is that right, Keith?

Speaker C: That's correct, Ethan. Yes.

Speaker B: You are an engineer?

Speaker C: I am. Um, yes, I are an engineer. You are.

Speaker B: And why is you an engineer? How did that happen?

Speaker C: Yeah, so it's kind of a long story, but my father passed away when I was 16, and one of the last things he said to me was, do something with your life. He was worried. He was at the ripe old age of 45, and he wanted me to do something and be successful and not be just a bum on the street. So he said, be an engineer. And that stuck with me my whole life. It stuck with me. And I really like math, and I have an affinity towards math, and for some reason I like calculus. Nobody likes calculus. Nobody on this world likes calculus, but I like math. And so that's kind of honed my focus for my whole career is to be good at being an engineer.

Speaker B: And how did steel come about then? So, you know, there's all sorts of engineering. Uh, how did you end up in steel?

Speaker C: So I'm an electrical engineer, and I know a little bit about electricity and computers. And when you come from Pittsburgh and you grew up in Pittsburgh, there's not many options at that time. When I graduated engineering school, so I joined the steel industry and I worked for an engineering company that we worked on. Actually, one of my very first job was to do research on, uh, strip mills. And so we did a lot of studies, a lot of engineering studies and calculations on the design and a layout of hard strip mills. So that's where I started. So I've been in steel my whole life.

Speaker B: So let's put a pan in hot strip mills, because I have a feeling not to do any spoilers here to our audience, I have a feeling we're going to talk about them later.

Speaker C: Yes.

Speaker B: You know, we're at a really momentous moment for U.S. steel, I guess you could say, and you've spent your career as an engineer. When you look at this moment where we are, how does it compare to any other time you've had in your career as an engineer.

Speaker C: It's completely unprecedented. Uh, the size and scale of this is just enormous. I've been involved in a couple of, say, large Greenfield projects, like $4 billion Greenfield projects that were very, very big and very, very complex. This is bigger and by far than that and more challenging than.

Speaker B: Right. Since we have an obligation to spend just about $11 billion by the end of 2028, isn't that right?

Speaker C: That's correct, yes.

Speaker B: And then 14 billion through 2030.

Speaker C: Yeah, 14 billion overall, yeah.

Speaker B: Overall, yeah. And obviously that encompasses multiple projects as opposed to just, uh, just one big one.

Speaker C: Yeah.

Speaker B: Understanding that. Let's talk for a little while, just about 1, which is the hot strip mill. And I would never presume the audience of steel stories or novices when it comes to steel, but let's presume I am. So what is a hot strip mill? What does it do?

Speaker C: So in short, you have like liquid steel that you cast into a slab. So you think of just a big chunk of hot steel. The hot mill takes that slab and converts it into a very light gauge coil. And that coil then can then be stamped into a hood for your car with further processing, could be rolled into a pipe, could be made into a dishwasher. So there's a number of applications, but you got to take that thick slab of steel and you're going to roll it to a very, very thin gauge in a coil that then can be made into a part.

Speaker B: And is that always done in house by steel companies or can you outsource, like hot strip mill stuff?

Speaker C: It's something that pretty much every steel company does in house. It's a major piece of equipment that you normally would keep in house.

Speaker B: And what's wrong with the one we have now in Long Valley?

Speaker C: It was built in 1938, so it's a little bit old and it's time for an upgrade. I mean, we have some new competitors coming into the market with newer, higher technology and we need to keep pace with them.

Speaker B: So will a new one will have better capabilities? Will it like, be less prone to breaking down, more efficient, or like all the above?

Speaker C: All the above, certainly. I mean, first and foremost, it'll be more environmentally friendly. And that's the key thing. The second thing is it'll be higher productivity, better quality, lower cost, lower cost of operation, lower cost of maintenance. And of course we're going to have state of the art automation and AI packages on it. So it'll be a very, very advanced mill.

Speaker B: So you just alluded to the fact that, that hot strip mills from 1938, of course, the Mon Valley works as a complex, is even older than that.

Speaker C: Right.

Speaker B: Like Edgar Thompson's from what, 1850 years. Right. So when you think about what the impact on the longevity of Mon Valley that this new hot strip mill will have, I mean, what will that look like? First of all, how long is this next one going to last?

Speaker C: Well, I mean, you look at the last one lasted since 1938. I don't pretend that this one would last that long, but it's going to go a long time. This is not a five year endeavor. This is 30, 40 years minimum in my view.

Speaker B: And what is that going to do in terms of helping US Steel compete with other steel companies in the United States or even globally?

Speaker C: I think from my view, Ethan, this is going to be a highly, highly competitive mill on a global scale. And for a lot of reasons. I think I'd like to start with Clairton for reason number one. First of all, Clairton is super important to the US Steel organization. It's the foundation of what we do. If we don't have Coke, we can't run our facilities. And, and it's the largest coke plant in North America. And the interesting thing about its relation to the new hot strip mill is if you think about it, a hot strip mill uses a lot of electrons, uses a lot of energy. So we've met with a number of suppliers, OEMs, that make this equipment, and they all said resoundingly, you have a huge inherent advantage over pretty much every other hot strip mill in the US because you have free Coke oven gas coming from Clairton. And that's how important Clairton is to this operation. We need Clairton. We're going to get free coke oven gas that's going to make this mill highly, highly competitive. You think about free energy, how important that is.

Speaker B: We know, for example, that there's a competitor building a mill not far away in West Virginia. And because they're a mini mill, they're going to have, I guess I don't necessarily want to say advantages on cost because we'll have the Claritin situation, but they'll be a cost competitive mill, right?

Speaker C: They'll be a very cost, cost competitive mill for sure.

Speaker B: And you're saying that with the new hot strip mill with those kind of capabilities being powered by our own coke oven gas, that will be able to compete with that mill, because colloquially they're calling that the Valley killer. So do you not?

Speaker C: I don't agree with that.

Speaker B: You don't Agree with that?

Speaker C: Not, not a chance. And for a couple reasons. One, that coke oven gas, Claritin being very, very important to us. And the second kind of major thing is they're going to be thin slab casting. We're casting thick slabs and you might say, well, so what? That's a huge difference in terms of quality. The other thing that we're going to have is a very large slab sizing press. We'll be the second in North America to have that technology that gives us a really unique inherent advantage on quality. So we'll have the cost advantage, but also we're going to have the quality advantage. We're going to move this up the quality scale that they won't be able to touch.

Speaker B: Why is it better to cast thicker slabs?

Speaker C: It's a little bit technical, but you get the inclusions out. It's a much, much better surface quality. Like they won't be able to touch our surface quality. And that's super important for customers like automotive. You think about the hood of your car, you want that to be pristine. When you buy a new car, we'll be able to make that.

Speaker B: This is interesting because it sort of goes against kind of the narrative, which is that integrated steel making can't really compete with mini mills anymore. Right? Like that integrated steel making had its time and that time has passed and many mills have been sort of eating the lunch of the integrated steel makers for a long time now. Here we are making a sizable investment in integrated steel making. I mean, do you think that the case against integrated steel making has been overstated? I mean, because it's undeniable that mini mills have been taking share from integrated.

Speaker C: No question, no question. And if you look at the balance of EAF versus blast furnace steel in the U.S. it's about 70% EAF, uh, 30% blast furnace. And that trend has been that way for a long time. There's a couple things on that trend that's going to change that. 1. It can't go to 100%. You still need virgin metallics to make those ultra high quality steels. And we need to be the highest quality. And we have an absolute outstanding partner in nsc. These guys are the world leaders in high quality. They know it. The NSC dispatchers that are here, Ethan, I can't say enough about these guys. They're just great engineers. They know steelmaking, they know what they're talking about. They're driving us up that quality curve. And I have no doubts we will be the number one quality producer in the US And I think when you're number one quality, people are going to want your steel. If we're the same price as one of our competitors, but we have the better quality, you're always going to go with us.

Speaker B: And as the expression goes, you forgot more about steel than I'll ever know. So I just want to ask a little bit more about this. So if you listen to the pure mini mill operators, they will tell you that they can make any steel that a blast furnace can make. Are you saying that it's not true today, it's not true tomorrow? I mean, how is that going to play out?

Speaker C: So if you look at, say, one particular market segment, which would be critical exposed automotive. So you think about the hood of your car. They can't make that now because of a multiple reasons. But EAF by itself, you cannot get the impurities out of it. When you start scrapping parts and putting them into an eaf, you're going to get copper. And when you have copper in the mix, it's really bad. There's a lot of techniques to try to get that copper out, and they are coming better with that. Uh, what's going to be a challenge for them is not scrap. Scrap will always be available. Prime scrap is going to get really expensive. And that scrap that doesn't have any impurities like copper, and it's going to get very expensive. Now, you can mitigate that with dri, which we're doing at Big river, but you still have thin slab casting, which doesn't get you the surface quality. We are also going to have the ability to scarf slabs. So if you think about you're going to cast a slab and then you're just going to clean that surface ultra, ultra clean. So the mini mill philosophy is very, very good. I've done a lot of work with many mills and those guys know what they're doing for sure. But we will be a step ahead of them in terms of quality.

Speaker B: Well, we also have an advantage because we have access to our own iron ore. Yeah. And like a new core steel SDI doesn't.

Speaker C: They do not. They have good access to scrap, both of them, but neither of them have that iron ore. And we have very high quality iron ore. Yeah, The Vines up in Minnesota are some of the best in the world in terms of their percent iron content. So it's very, very competitive for that.

Speaker B: It's almost like we have the best of both. The coin of phrase.

Speaker C: That's.

Speaker B: Yes.

Speaker C: Yes, that's correct.

Speaker B: Yeah, let's copyright that.

Speaker C: Yeah.

Speaker B: All right. Let's sort of zoom out a bit and think about how you manage. I don't want to call it a project, but a series of projects of this size. So $14 billion. What's it going to take to deliver that?

Speaker C: Uh, people. We need good people. We need boots on the ground, we need people at the sites, at the plants. We need engineers. We have very, very good engineers coming from nsc. We have very, very good engineers on our team now, but we need more. We need some very good, not necessarily seasoned, but 5, 10 year experience engineers that can come in and look at different designs and help us manage OEM quality. We need cost control people, we need project schedulers, we need construction managers. So we really need, and we're getting tremendous help from our HR group on bringing people in, but it does take time. You want to find the right people, the right chemistry, the right skill set. So, uh, people is by far the most important part of that equation.

Speaker B: And does that extend to people in the trades too, that we're going to need to put these projects together?

Speaker C: Yes, I mean, there's a lack of skilled trades in this country already and particularly when you look at electricians, uh, a lot of data centers going in and that is just sucking up all the electricians. And if you look at some of our sites like et, where we putting the new Hotmail, we're going to need up to probably 1500 to maybe 2000 trades per day. So it'll be a challenge to get those trades and get them in and working correctly, safely and doing the right job.

Speaker B: Now, our CEO, Dave Burritt likes to point out that projects of this size rarely, or perhaps he says, never actually are accomplished on time, on budget. So not to discourage you or anything because you're obviously going to break the streak here. But what goes wrong? I mean, there's probably a lot, but I guess what, uh, are the top causes of failure to achieve these projects on time and on budget?

Speaker C: There's a multitude of reasons, but one that comes to mind is like, scope creep, and engineers like to make things better. And you're constantly thinking, how can I improve things? How can I make this a little bit better? And we have great partners in operations and maintenance and they are helping tremendously on all these projects. But when you get a group of people in a room and say, hey, here's the scope, we're going through this and it's like, well, it'd be nice to have this little bit of extra to it, and everybody in the room agrees and it's very Hard to quantify that every step of the way. It's like, yeah, that's a better solution. That's a better solution. That's. And these things tend to snowball on you. And, and that's why we need really good cost control people and schedule people. Because sometimes schedule is the other part of the equation where it's like, yeah, that's gonna take another month to get that. And people don't recognize it's a better solution. Let's go for it. And you need a scheduler sitting right there, a cost control person sitting right there and said, wait a minute, it's a great idea. It's another hundred dollars. Hold on. You know.

Speaker B: Now personally, I want the people that are making the bridges, I'm driving cost to be perfectionists. Like, like, you know, it's okay if I write a speech, I'm like, okay, that's good enough. I think that's fine. But I don't want the bridge builders. And that's good enough.

Speaker C: Yeah.

Speaker B: So that's a good personality trait for engineers to have.

Speaker C: Yes. And we're not shortcutting. Yes, of course, of course. But we don't want to gold plated.

Speaker B: Either. Yeah, yeah. Uh, when you're managing people, how do you sort of find that happy middle between the nice to have the must have? I mean, that must be a big part of what you're doing, Right.

Speaker C: It's a discipline and it's just having that discipline and rigor every day because these challenges, these ideas come up nonstop every day. And you just have to have that discipline and rigor to say, and not that they're not good ideas and that we shouldn't do them. It just needs to be okay, how much is that? And let's think about that and let's make a decision, not just go for it. So you really have to have that good team in place that has that discipline and rigor.

Speaker B: And obviously we've now talked quite a bit about how you need good people. Our CEO again talks a lot about how using AI tools can amplify the work of good people. Are you seeing that in managing these projects?

Speaker C: Yeah, we've had some really good success, Ethan, with AI. We rolled out the Synthropic Claude AI package about maybe two months ago, six weeks ago, something like that. We started with about eight of our lead project managers and it was really a big success. And we've since rolled it out to about 30 of our engineering team. Probably more than that actually, because the numbers keep growing but everybody is using it. Everybody's looking at it and it is so helpful. It's very, very powerful. Reason we chose Anthropic Claude is because of the power it has to analyze data. And so we've started connecting it right to our SharePoint folders and saying, hey, here's a list of drawings. Can you estimate the cost of this for me? And it does, and it's pretty accurate. And can you give me an update on the schedule? If you think about schedules like we're working on blast furnace 14 right now it's 100 day outage. We have that outage down to the hour and contractors are submitting schedules every day. Here's what we did today. Here's what we did today. It analyzes those schedules for us in five minutes and we know what changed. So it's really, really helpful.

Speaker B: And do you have to then go back and check what it gives you or.

Speaker C: 100%. I'm not an AI deep expert, but it does hallucinate and sometimes it'll get in a loop and come back with not good data. The other thing that's really, really important to A.I. uh, we find is that garbage in, garbage out, you have to have good data going in or you're going to get mixed results.

Speaker B: And talking about some of this older equipment we have at Mon Valley, for example, does the hot strip mill produce good, the current one, the 1938, does that produce good data for us?

Speaker C: It's mixed, but we don't really need that for the new hot mill.

Speaker B: Okay, so you're not, you don't need to take data from the old stuff?

Speaker C: No, no, we have good plan for the new Haas drip mill and we know what we want to do with it. We know what markets we want to be in. And so it's not like we really need old data. We do need data on costs and schedule and things like that and the technology that we're implementing.

Speaker B: And by the way, is this new hot strip mill going to have higher throughput?

Speaker C: Yes.

Speaker B: Yes. So does that mean we'll be blast furnace will also be making more steel?

Speaker C: It could be. I mean we may bring slabs from Gary, so there's a couple different options there, but uh, yes, the hot mill will be 3.5 tons a year, rated nameplate capacity, which is higher than the old 1938 Ottman.

Speaker B: Right. So what keeps you up at night besides calls from Dave Burra?

Speaker C: Yeah, I mean keeping things on cost and on schedule and full time. It keeps me up almost every night. Yeah, it's a challenge, but I just love it. I mean, this is an opportunity for me personally to help reshape this company. Even if I'm involved in a small way. I love it. Um, I'm enthusiastic about it. What's interesting for me is the level of enthusiasm you get when you go to the plant M. People are so excited about this. It's like a rebirth of this company. It's going to change the manufacturing industry in the United States. And to even be a small part of that is just a wonderful feeling for me personally.

Speaker B: Yeah, it's a privilege. But there's a lot riding on your shoulders. Of course.

Speaker C: Yes.

Speaker B: Was your hair, like, fully brown a few months ago?

Speaker C: Four kids, three daughters. So that explains. Yes. Yes.

Speaker B: All right, all right, wait. You've probably got a lot of people that are learning from you on the job. You know, I won't say younger project, newer project managers. What's a lesson that you learned, let's say the hard way, that you've tried to impart to them?

Speaker C: I learned a lot of hard lessons. There's nobody who's made more mistakes than me. And a lot of advice across the board. I'm not sure anybody would really want to listen to it, but there's a lot of mistakes I've made that. And that's where you really learn. And you learn being out on the job site, putting this equipment in, starting it up, commissioning it. Uh, for me, probably one of the biggest things I would recommend to younger people coming in is to keep that focus and clarity. There is so much noise when you get to a, uh, project of this size that's coming at you from all directions every day. Construction manager walks in your office and says, we don't have enough rebar. And it's like a crisis. Right. You have to keep that focus and that clarity on I gotta get this done on time and on budget. When somebody comes in and says, hey, I think we ought to gold plate this, you gotta say, love that idea. Let's evaluate it on a cost basis. So you really gotta keep that focus on what's my goal on time and on budget. And you gotta keep those two goals, and you gotta keep clarity because there is so much noise.

Speaker B: What do you think are the sort of personality traits that a person in your role or that any kind of engineering role need to have to succeed?

Speaker C: To succeed? Yeah. I mean, you have to be disciplined. You have to be able to say, no, you're not going to please anybody or everybody. I, uh, should say, and probably in my case, I don't please anybody. But you have to be able to say no and keep driving, keep driving that project Jeep, driving it for, keep that focus on what's the next step, what am I going to do tomorrow, what are we going to do the next day, where are we going to be in a month from now? And just keep pushing that.

Speaker B: I guess you also have to be masochistic enough to like calculus.

Speaker C: Yeah, that's definitely true. Not many people like it. Uh, I can assure you that.

Speaker B: Yeah, you know, I'm thinking about. We've been calling these investments sort of multi generational because you alluded to it like the last hot Strip Mill, 1938 to today.

Speaker C: Right.

Speaker B: If you're looking back on what you've done five, ten years from now, what would the measure of success be?

Speaker C: That we executed the majority of these projects on time. I mean, I'm not naive enough to say that we're going to execute them all on time and on budget. I'd like to be able to say we did it safely. First and foremost. I'd like to be able to say that we did it. The majority of them were very successful projects and they reshaped U.S. steel for the long term future, multi generational, like you say, and reshape the US manufacturing base. I mean, this is so important to the us, even national security. Like we need to make things here and making steel is right at the heart of that.

Speaker B: And how has the Nippon Partnership changed our future trajectory?

Speaker C: I mean, first of all, the size of the scale, I think 14 billion 10.8 by 2028. That's huge. That's a lot of capital. That's a lot of projects that have to get done. I think without Nippon Steel we would have survived and we would have done a lot of different things, smaller projects and we would have kept incrementally moving ahead. But this is just a game changer. And the technology and the people that Nippon bring to the table. I would encourage anybody who has met any of the NSC dispatchers to reach out to them, work with them. Um, they're just great to work with. And when you marry that with our people, like one of the things that's enjoyable to me about USDL most enjoyable is the people. Like I said, when you go to the facilities, people are so enthusiastic. They want to see this happen, they want it to happen quickly. And so it's a really good fit between us and nsc, I think.

Speaker B: Well, these are definitely exciting times for you, exciting times for us. I mean, is there anything else that you think the audience should know about Sort of the scale, scope, importance of what you're working on.

Speaker C: Um, well, I do think a lot of people right now are saying, what's going on? Like, I don't see a building going up, I don't see a new piece of equipment on a truck pulling up to our plant. We are doing so much engineering and we're trying to get that right. So that engineering just takes time. And we're making drawings, we're making calculations and we have procured some equipment. But it takes time for that engineering to get completed until we're really into construction and getting equipment on site. So be a little bit patient with us. It's coming, it's coming and it's coming in a big way.

Speaker B: That's a really good, like how much of it is sort of. I assume you want it all pre engineered versus changes. You have to make things you discover as you're building a project. Like how does that percentage work usually?

Speaker C: I mean in a perfect world, 100 to 0.

Speaker B: In a perfect world.

Speaker C: Perfect world, you want to do all the engineering and stop and look it over and review it and then you go to the next step. Yeah, we unfortunately don't have that luxury because of the time crunch. Yeah. So we're trying to get as much engineering done as we can up front and get that correct. But we're running with scissors. We're trying to do it all at once. But we got a great team, we got great help from nsc, we got great part engineering companies that we work with, great partners and everybody is committed to make this work.

Speaker B: So Keith Watson, disproving the stereotype that engineers are inarticulate. Thank.

Speaker C: We're not open headed nerds. Although I am one. But yeah, you got the pocket protector? Yeah, no, I just yet.

Speaker B: So yeah, he's in costume.

Speaker C: Yeah.

Speaker B: No, but thanks so much for joining us today.

Speaker C: Thank you.

Speaker B: I learned a lot. I'm sure the audience will too as well.

Speaker C: Thank you, Ethan. It's been a real pleasure to be here today. Thank you very much.

Speaker A: Steel Stories is produced by US Steel. The views expressed by our guests are their own and do not necessarily reflect those of US Steel. To learn more about our people, our capabilities and where steel is headed next, visit us steel dot com. You can find Steel Stories on Apple Podcasts, Spotify or wherever you listen. And be sure to subscribe so you don't miss what's ahead. Thanks for listening.