UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||||
For the Fiscal Year Ended December 31, 20192022
Or
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||||
For the transition period from to .
Commission file number 1-16811
United States Steel CorporationCorporation
(Exact name of registrant as specified in its charter)
| Delaware | 25-1897152 | |||||||
| (State of Incorporation) | (I.R.S. Employer Identification No.) | |||||||
600 Grant Street,, Pittsburgh,, PA15219-2800
(Address of principal executive offices)
Tel. No. (412) (412) 433-1121
Securities registered pursuant to Section 12 (b) of the Act:
| Title of Each Class | Trading Symbol | Name of Exchange on which Registered | ||||||
| United States Steel Corporation Common Stock, par value $1.00 | X | New York Stock Exchange | ||||||
| United States Steel Corporation Common Stock, par value $1.00 | X | Chicago Stock Exchange | ||||||
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ☑ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No þ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days. Yes þ☑ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ☑ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definition of “large accelerated filer,” “accelerated filer," “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | Emerging growth company | ☐ | ||||||||||||||||||||
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ___ | ☐ | ||||||||||||||||||||||||||||
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☑No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
Aggregate market value of Common Stock held by non-affiliates as of June 28, 201930, 2022 (the last business day of the registrant’s most recently completed second fiscal quarter): $2.6$4.3 billion. The amount shown is based on the closing price of the registrant’s Common Stock on the New York Stock Exchange composite tape on that date. Shares of Common Stock held by executive officers and directors of the registrant are not included in the computation. However, the registrant has made no determination that such individuals are “affiliates” within the meaning of Rule 405 under the Securities Act of 1933.
There were 170,047,076226,603,781 shares of United States Steel Corporation Common Stock outstanding as of February 10, 2020.January 30, 2023.
Documents Incorporated By Reference:
Portions of the Proxy Statement for the 20202023 Annual Meeting of Stockholders are incorporated into Part III.
INDEX
| Item 1. | ||||||||||
| Item 1A | ||||||||||
| Item 1B | ||||||||||
| Item 2. | ||||||||||
| Item 3. | ||||||||||
| Item 4. | ||||||||||
| Item 5. | ||||||||||
| Item 6. | ||||||||||
| Item 7. | ||||||||||
| Item 7A | ||||||||||
| Item 8. | ||||||||||
| Item 9. | ||||||||||
| Item 9A | ||||||||||
| Item 9B | ||||||||||
| Item 9C | ||||||||||
| Item 10. | ||||||||||
| Item 11. | ||||||||||
| Item 12. | ||||||||||
| Item 13. | ||||||||||
| Item 14. | ||||||||||
| Item 15. | ||||||||||
| Item 16. | ||||||||||
FORWARD-LOOKING STATEMENTS
This report contains information that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in those sections. Generally, we have identified such forward-looking statements by using the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “target,” “forecast,” “aim,” “should,” “will”"plan," "goal," "future," “will,” "may" and similar expressions or by using future dates in connection with any discussion of, among other things, the construction or operation of new or existing facilities or operating capabilities, the timing, size and form of share repurchase transactions, operating or financial performance, trends, events or developments that we expect or anticipate will occur in the future, statements relating to volume changes, share of sales and earnings per share changes, anticipated cost savings, potential capital and operational cash improvements, U. S. Steel'schanges in the global economic environment, including supply and demand conditions, inflation, interest rates, supply chain disruptions and changes in prices for our products, international trade duties and other aspects of international trade policy, statements regarding our future abilitystrategies, products and plans to take ownership of its Big River Steel joint venture as a wholly owned subsidiary,innovations, statements regarding our greenhouse gas emissions reduction goals, statements regarding existing or new regulations and statements expressing general views about future operating results. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. Forward-looking statements are not historical facts, but instead represent only the Company’s beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company’s control. It is possible that the Company’s actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Management believes that these forward-looking statements are reasonable as of the time made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. Our Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our Company's historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to the risks and uncertainties described in this report in “Item 1A. Risk Factors” and those described from time to time in our future reports filed with the Securities and Exchange Commission.
References in this Annual Report on Form 10-K to (i) "U. S. Steel," "the Company," "we," "us,""us" and "our" refer to United States Steel Corporation and its consolidated subsidiaries unless otherwise indicated by the context, (ii) "Big River Steel" refers to Big River Steel Holdings LLC and its direct and indirect subsidiaries unless otherwise indicated by the context and (iii) "Transtar" refers to Transtar LLC and its direct and indirect subsidiaries unless otherwise indicated by the context.
Non-Generally Accepted Accounting Principles (non-GAAP) Financial Measures
This report contains certainthe non-GAAP financial measures such as earnings (loss) before interest, income taxes, depreciation, depletion and amortization (EBITDA), adjusted EBITDA, adjusted net earnings (loss), adjusted net earnings (loss) per diluted share, free cash flow, net debt andmeasure cash conversion cycle.
We believe the cash conversion cycle is a useful measure in providing investors with information regarding our cash management performance and is a widely accepted measure of working capital management efficiency. The cash conversion cycle should not be considered in isolation or as an alternative to other GAAP metrics as an indicator of performance.
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Item 1. BUSINESS
United States Steel Corporation, with operations in the United States of America (U.S.) and Central Europe, is transforming itself into a customer-centric, world-competitive, Best for U. S. Steel to beAll®steelmaker by investing in the industry leadercompetitive advantages that differentiate us in delivering high-quality, value-added products and innovative solutions that address our customers' most challenging steel needs. Underlying our efforts is our belief that we must operate as a principled company committed to a code of conduct that is rooted in our Gary Principles and our core values. Our core valueseyes. We are articulated in our S.T.E.E.L. Principles - Safety First, Trust and Respect, Environmentally Friendly Activities, Ethical Behavior, and Lawful Business Conduct. These core values guide U. S. Steel and help support the economic and societal benefits associated with strong domestic manufacturing capabilities, of which steel is a foundational industry.
RECONCILIATION TO ADJUSTED NET EARNINGS (LOSS) (a) | ||||||||||||
| Year Ended December 31, | ||||||||||||
| (Dollars in millions) | 2019 | 2018 | 2017 | |||||||||
| Reconciliation to adjusted net earnings (loss) attributable to United States Steel Corporation | ||||||||||||
| Net (loss) earnings attributable to United States Steel Corporation, as reported | $ | (630 | ) | $ | 1,115 | $ | 387 | |||||
| December 24, 2018 Clairton coke making facility fire | 41 | — | — | |||||||||
Restructuring and other charges (b) | 263 | — | — | |||||||||
Big River Steel options mark to market, net (c) | 7 | — | — | |||||||||
| USW labor agreement signing bonus and related costs | — | 81 | — | |||||||||
| Granite City Works restart and related costs | — | 80 | — | |||||||||
| Tax valuation allowance | 334 | (374 | ) | — | ||||||||
Loss on shutdown of certain tubular assets (b) | — | — | 35 | |||||||||
| Gain associated with retained interest in U. S. Steel Canada Inc. | — | — | (72 | ) | ||||||||
Granite City Works temporary idling charges | — | (8 | ) | 17 | ||||||||
| (Gain) loss on equity investee transactions | — | (38 | ) | (2 | ) | |||||||
| Loss on extinguishment of debt and other related costs | — | 101 | 57 | |||||||||
| Effect of tax reform | — | — | (81 | ) | ||||||||
| Total Adjustments | 645 | (158 | ) | (46 | ) | |||||||
| Adjusted net (loss) earnings attributable to United States Steel Corporation | $ | 15 | $ | 957 | $ | 341 | ||||||
RECONCILIATION TO ADJUSTED NET EARNINGS (LOSS) PER SHARE (a) | ||||||||||||
| Year Ended December 31, | ||||||||||||
| 2019 | 2018 | 2017 | ||||||||||
| Reconciliation to adjusted diluted net earnings (loss) per share | ||||||||||||
| Diluted net (loss) earnings per share, as reported | $ | (3.67 | ) | $ | 6.25 | $ | 2.19 | |||||
| December 24, 2018 Clairton coke making facility fire | 0.23 | — | — | |||||||||
Restructuring and other charges (b) | 1.53 | — | — | |||||||||
Big River Steel options mark to market, net (c) | 0.04 | — | — | |||||||||
| USW labor agreement signing bonus and related costs | — | 0.45 | — | |||||||||
| Granite City Works restart and related costs | — | 0.45 | — | |||||||||
| Tax valuation allowance | 1.96 | (2.11 | ) | — | ||||||||
Loss on shutdown of certain tubular assets (b) | — | — | 0.20 | |||||||||
| Gain associated with retained interest in U. S. Steel Canada Inc. | — | — | (0.41 | ) | ||||||||
| Granite City Works temporary idling charges | — | (0.04 | ) | 0.10 | ||||||||
| Gain on equity investee transactions | — | (0.21 | ) | (0.01 | ) | |||||||
| Loss on extinguishment of debt and other related costs | — | 0.57 | 0.33 | |||||||||
| Effect of tax reform | — | — | (0.46 | ) | ||||||||
| Total adjustments | 3.76 | (0.89 | ) | (0.25 | ) | |||||||
| Adjusted diluted net earnings (loss) per share | $ | 0.09 | $ | 5.36 | $ | 1.94 | ||||||
| RECONCILIATION TO EBITDA AND ADJUSTED EBITDA | ||||||||||||
| Year Ended December 31, | ||||||||||||
| (Dollars in millions) | 2019 | 2018 | 2017 | |||||||||
| Reconciliation to EBITDA and Adjusted EBITDA | ||||||||||||
| Net (loss) earnings attributable to United States Steel Corporation | $ | (630 | ) | $ | 1,115 | $ | 387 | |||||
| Income tax (benefit) provision | 178 | (303 | ) | (86 | ) | |||||||
| Net interest and other financial costs | 222 | 312 | 368 | |||||||||
| Depreciation, depletion and amortization expense | 616 | 521 | 501 | |||||||||
| EBITDA | 386 | 1,645 | 1,170 | |||||||||
| December 24, 2018 Clairton coke making facility fire | 50 | — | — | |||||||||
Restructuring and other charges (a) | 275 | — | — | |||||||||
| USW labor agreement signing bonus and related costs | — | 81 | — | |||||||||
| Granite City Works restart and related costs | — | 80 | — | |||||||||
Loss on shutdown of certain tubular assets (a) | — | — | 35 | |||||||||
| Gain associated with retained interest in U. S. Steel Canada Inc. | — | — | (72 | ) | ||||||||
| Granite City Works temporary idling charges | — | (8 | ) | 17 | ||||||||
| Gain on equity investee transactions | — | (38 | ) | (2 | ) | |||||||
| Adjusted EBITDA | $ | 711 | $ | 1,760 | $ | 1,148 | ||||||
| RECONCILIATION TO FREE CASH FLOW | ||||||||||||
| Year Ended December 31, | ||||||||||||
| (Dollars in millions) | 2019 | 2018 | 2017 | |||||||||
| Reconciliation to Free Cash Flow | ||||||||||||
| Net cash provided by operating activities | 682 | 938 | 826 | |||||||||
| Capital expenditures | (1,252 | ) | (1,001 | ) | (505 | ) | ||||||
| Dividends paid | (35 | ) | (36 | ) | (35 | ) | ||||||
| Free Cash Flow | $ | (605 | ) | $ | (99 | ) | $ | 286 | ||||
| RECONCILIATION TO TOTAL DEBT AND NET DEBT | ||||||||||||
| Year Ended December 31, | ||||||||||||
| (Dollars in millions) | 2019 | 2018 | 2017 | |||||||||
| Reconciliation to Total Debt and Net Debt | ||||||||||||
| Short-term debt and current maturities of long-term debt | $ | 14 | $ | 65 | $ | 3 | ||||||
| Long-term debt, less unamortized discount and debt issuance costs | 3,627 | 2,316 | 2,700 | |||||||||
| Total Debt | 3,641 | 2,381 | 2,703 | |||||||||
| Less: Cash and cash equivalents | $ | 749 | $ | 1,000 | 1,553 | |||||||
| Net Debt | $ | 2,892 | $ | 1,381 | $ | 1,150 | ||||||
Segments
U. S. Steel has threefour reportable segments: North American Flat-Rolled (Flat-Rolled), Mini Mill, U. S. Steel Europe (USSE) and Tubular Products (Tubular). The Mini Mill segment reflects the full ownership of Big River Steel after January 15, 2021, when U. S. Steel purchased the remaining equity interest in Big River Steel that it did not previously own, and a second mini mill currently under construction in Osceola, Arkansas. Prior to the acquisition, the minority interest equity earnings of Big River Steel were included in the Other category. The Tubular segment includes the electric arc furnace at our Fairfield Tubular Operations in Fairfield, Alabama. The Other category includes results of our 49.9% ownership interestreal estate business, the previously held equity method investment in Big River Steel, and our former Transtar business. On July 28, 2021, the Company sold 100% of the equity interests in Transtar, its short-line railroad and real estate businesses that do not constitute reportable segments are combined and disclosed in the Other Businesses category.business.
Flat-Rolled
The Flat-Rolled segment includes the operating results of U. S. Steel’s integrated steel plants and equity investees in North America (except for Big River Steel, which is included in Other Businesses) involved in the production of slabs, strip mill plates, sheets and tin mill products, as well as all iron ore and coke production facilities in the United States. These operations primarily serve North American customers in the automotive, appliance, construction, container, pipe and tube, sheet converter, industrial equipment and service center conversion, transportation (including automotive), construction, container, and appliance and electrical markets.
During 2022, Flat-Rolled hashad aggregate annual raw steel production capability of 17.013.2 million tons produced at our Gary Works, Mon Valley Works, Great Lakes Works and Granite City Works facilities. In December 2021, U. S. Steel permanently idled the steelmaking operations at Great Lakes Works which reduced the Company's overall annual raw steel production capability by 3.8 million net tons. Raw steel production was 11.48.8 million tons in 2019, 11.92022, 9.9 million tons in 20182021 and 10.89.3 million tons in 2017.2020. Raw steel production averaged 67 percent of capability in 2019, 702022, 58 percent of capability in 20182021 and 6455 percent of capability in 2017. During December 20152020.
Mini Mill
The Mini Mill segment includes the Granite City Works steelmaking operations were temporarily idled.operating results of U. S. Steel's Big River Steel facility in North America and a second mini mill currently under construction in Osceola, Arkansas. The steelmaking operationsMini Mill segment produces hot-rolled, cold-rolled and hot strip mill were restarted during 2018coated sheets and 2017, respectively. If itselectrical steels. This operation primarily serves North American customers in the automotive, appliance, construction, container, pipe and tube, sheet converter, electrical, industrial equipment and service center markets.
Mini Mill has aggregate annual raw steel production capability is excluded during the temporary idle period, Flat-Rolledof 3.3 million tons at our Big River Steel facility. Raw steel production would have been 76was 2.7 million tons in 2022 and 2.7 million tons in 2021. Raw steel production averaged 80 percent of capability in 2017.2022 and 81 percent of capability in 2021.
European Operations
The USSE segment includes the operating results of U. S. Steel Košice (USSK), U. S. Steel’s integrated steel plant and coke production facilities in Slovakia, and its subsidiaries. USSE conducts its business mainly in Central and Western Europe and primarily serves customers in the European transportation (including automotive), construction, container, appliance, electrical, service center, conversion and oil, gas and petrochemical markets. USSE produces and sells slabs, strip mill plate, sheet, tin mill products and spiral welded pipe, as well as refractory ceramic materials.pipe.
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USSE has annual raw steel production capability of 5.0 million tons. USSE’s raw steel production was 3.93.8 million tons in 2019, 5.02022, 4.9 million tons in 2018,2021 and 5.13.4 million tons in 2017.2020. USSE’s raw steel production averaged 7877 percent of capability in 2019, 1002022, 99 percent of capability in 20182021 and 10267 percent of capability in 2017.2020.
Tubular
The Tubular segment includes the operating results of U. S. Steel’s tubular production facilities and an equity investee in the United States. These operations can produce and sell rounds, seamless and electric resistance welded (ERW) steel casing and tubing (commonly known as OCTG), and standard and line pipe and mechanical tubing and primarily serve customers in the oil, gas and petrochemical markets. Tubular'sThe Tubular segment has annual raw steel production capability isof 900 thousand tons. Raw steel production was 634 thousand tons in 2022, 464 thousand tons in 2021 and 16 thousand tons in 2020. Raw steel production averaged 70 percent of capability in 2022, 52 percent of capability in 2021 and 7 percent of capability in 2020. Tubular has total production capability of 1.9 million tons.
In 2020, Tubular indefinitely idled the Lone Star Tubular Operations and Lorain Tubular Operations thereby effectively reducing on-line tubular production capacity by 790 thousand and 380 thousand tons, respectively. U. S. Steel Tubular Products Inc.LLC (USSTP), a wholly owned subsidiary of U. S. Steel, continues to design and develop a range of premium and semi-premium connections to address the growing needs for technical solutions for our end users' well site production challenges. Through its wholly owned subsidiary, U. S. Steel Oilwell Services, LLC, USSTPcustomers' needs.
For further information, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 4 to the Consolidated Financial Statements.
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Steel Shipments by Market and Segment
The following table, except whereas noted in (1)Footnote 1 below, does not include shipments to end customers by joint ventures and other equity investees of U. S. Steel. Shipments of materials to these entities are included in the “Further Conversion – Joint Ventures” market classification. No single customer accounted for more than 10 percent of gross annual revenue.revenue for the three consecutive years ended December 31, 2022.
| (Thousands of Tons) | Flat-Rolled | USSE | Tubular | Total | (Thousands of Tons) | Flat-Rolled | Mini Mill | USSE | Tubular | Total | ||||||||||||||||||||||||||||||||||
| Major Market – 2019 | ||||||||||||||||||||||||||||||||||||||||||||
| Major Market – 2022 | Major Market – 2022 | |||||||||||||||||||||||||||||||||||||||||||
| Steel Service Centers | 1,902 | 740 | — | 2,642 | Steel Service Centers | 1,128 | 1,080 | 839 | — | 3,047 | ||||||||||||||||||||||||||||||||||
| Further Conversion – Trade Customers | 2,823 | 214 | — | 3,037 | Further Conversion – Trade Customers | 2,163 | 772 | 289 | — | 3,224 | ||||||||||||||||||||||||||||||||||
– Joint Ventures (1) | 819 | — | — | 819 | – Joint Ventures (1) | 256 | — | — | — | 256 | ||||||||||||||||||||||||||||||||||
Transportation and Automotive (1) | 2,620 | 676 | — | 3,296 | Transportation and Automotive (1) | 2,611 | 20 | 619 | — | 3,250 | ||||||||||||||||||||||||||||||||||
| Construction and Construction Products | 1,076 | 1,048 | 44 | 2,168 | Construction and Construction Products | 922 | 310 | 1,052 | 30 | 2,314 | ||||||||||||||||||||||||||||||||||
| Containers and Packaging | 652 | 440 | — | 1,092 | Containers and Packaging | 693 | 13 | 423 | — | 1,129 | ||||||||||||||||||||||||||||||||||
| Appliances and Electrical Equipment | 570 | 220 | — | 790 | Appliances and Electrical Equipment | 416 | 93 | 225 | — | 734 | ||||||||||||||||||||||||||||||||||
| Oil, Gas and Petrochemicals | — | — | 725 | 725 | Oil, Gas and Petrochemicals | — | — | 3 | 494 | 497 | ||||||||||||||||||||||||||||||||||
| All Other | 238 | 252 | — | 490 | All Other | 183 | — | 309 | — | 492 | ||||||||||||||||||||||||||||||||||
| TOTAL | 10,700 | 3,590 | 769 | 15,059 | TOTAL | 8,372 | 2,288 | 3,759 | 524 | 14,943 | ||||||||||||||||||||||||||||||||||
Major Market – 2018 (2) | ||||||||||||||||||||||||||||||||||||||||||||
| Steel Service Centers | 1,904 | 799 | — | 2,703 | ||||||||||||||||||||||||||||||||||||||||
| Further Conversion – Trade Customers | 2,273 | 287 | — | 2,560 | ||||||||||||||||||||||||||||||||||||||||
– Joint Ventures (1) | 810 | — | — | 810 | ||||||||||||||||||||||||||||||||||||||||
Transportation & Automotive (1) | 2,874 | 728 | — | 3,602 | ||||||||||||||||||||||||||||||||||||||||
| Construction and Construction Products | 953 | 1,637 | 38 | 2,628 | ||||||||||||||||||||||||||||||||||||||||
| Containers and Packaging | 768 | 439 | — | 1,207 | ||||||||||||||||||||||||||||||||||||||||
| Appliances and Electrical Equipment | 599 | 261 | — | 860 | ||||||||||||||||||||||||||||||||||||||||
| Oil, Gas and Petrochemicals | — | 11 | 742 | 753 | ||||||||||||||||||||||||||||||||||||||||
| All Other | 329 | 295 | — | 624 | ||||||||||||||||||||||||||||||||||||||||
| TOTAL | 10,510 | 4,457 | 780 | 15,747 | ||||||||||||||||||||||||||||||||||||||||
Major Market – 2017 (2) | ||||||||||||||||||||||||||||||||||||||||||||
| Major Market – 2021 | Major Market – 2021 | |||||||||||||||||||||||||||||||||||||||||||
| Steel Service Centers | 1,953 | 761 | — | 2,714 | Steel Service Centers | 1,539 | 1,121 | 995 | — | 3,655 | ||||||||||||||||||||||||||||||||||
| Further Conversion – Trade Customers | 1,738 | 284 | — | 2,022 | Further Conversion – Trade Customers | 1,701 | 684 | 314 | — | 2,699 | ||||||||||||||||||||||||||||||||||
– Joint Ventures (1) | 715 | — | — | 715 | – Joint Ventures (1) | 490 | — | — | — | 490 | ||||||||||||||||||||||||||||||||||
Transportation and Automotive (1) | 2,982 | 708 | — | 3,690 | Transportation and Automotive (1) | 2,355 | 17 | 590 | — | 2,962 | ||||||||||||||||||||||||||||||||||
| Construction and Construction Products | 910 | 1,831 | 41 | 2,782 | Construction and Construction Products | 1,224 | 282 | 1,346 | 18 | 2,870 | ||||||||||||||||||||||||||||||||||
| Containers and Packaging | 715 | 438 | — | 1,153 | Containers and Packaging | 942 | 17 | 449 | — | 1,408 | ||||||||||||||||||||||||||||||||||
| Appliances and Electrical Equipment | 594 | 247 | — | 841 | Appliances and Electrical Equipment | 570 | 109 | 266 | — | 945 | ||||||||||||||||||||||||||||||||||
| Oil, Gas and Petrochemicals | — | �� | 10 | 647 | 657 | Oil, Gas and Petrochemicals | — | — | 8 | 426 | 434 | |||||||||||||||||||||||||||||||||
| All Other | 280 | 306 | — | 586 | All Other | 197 | — | 334 | — | 531 | ||||||||||||||||||||||||||||||||||
| TOTAL | 9,887 | 4,585 | 688 | 15,160 | TOTAL | 9,018 | 2,230 | 4,302 | 444 | 15,994 | ||||||||||||||||||||||||||||||||||
| Major Market – 2020 | Major Market – 2020 | |||||||||||||||||||||||||||||||||||||||||||
| Steel Service Centers | Steel Service Centers | 1,450 | — | 690 | — | 2,140 | ||||||||||||||||||||||||||||||||||||||
| Further Conversion – Trade Customers | Further Conversion – Trade Customers | 2,063 | — | 202 | — | 2,265 | ||||||||||||||||||||||||||||||||||||||
– Joint Ventures (1) | – Joint Ventures (1) | 415 | — | — | — | 415 | ||||||||||||||||||||||||||||||||||||||
Transportation and Automotive (1) | Transportation and Automotive (1) | 2,012 | — | 517 | — | 2,529 | ||||||||||||||||||||||||||||||||||||||
| Construction and Construction Products | Construction and Construction Products | 1,261 | — | 775 | 34 | 2,070 | ||||||||||||||||||||||||||||||||||||||
| Containers and Packaging | Containers and Packaging | 913 | — | 435 | — | 1,348 | ||||||||||||||||||||||||||||||||||||||
| Appliances and Electrical Equipment | Appliances and Electrical Equipment | 497 | — | 194 | — | 691 | ||||||||||||||||||||||||||||||||||||||
| Oil, Gas and Petrochemicals | Oil, Gas and Petrochemicals | — | — | 5 | 430 | 435 | ||||||||||||||||||||||||||||||||||||||
| All Other | All Other | 100 | — | 223 | — | 323 | ||||||||||||||||||||||||||||||||||||||
| TOTAL | TOTAL | 8,711 | — | 3,041 | 464 | 12,216 | ||||||||||||||||||||||||||||||||||||||
(1) PRO-TEC automotive substrate shipments are included in the Transportation and Automotive category.
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Steel Industry Background and Competition
The global steel industry is cyclical, highly competitive and has historically been reclassified to onecharacterized by global overcapacity.
U. S. Steel's competitive position may be affected by, among other things, differences among U. S. Steel's and its competitors' cost structure, labor costs, environmental remediation and compliance costs, global capacity, achievement of innovations in new technologies and sustainable products and the other categories to which they relate.existence and magnitude of government support.
U. S. Steel competes with many North American and international steel producers. Competitors include 1) integrated producers, which use iron ore and coke as the primary raw materials for steel production, 2) Electric Arc Furnace (EAF) producers, which primarily use steel scrap and other iron-bearing feedstocks as raw materials and 3) slab re-rollers, who purchase mostly imported, but some domestic, semi-finished products and convert them into sheet products. In addition, other materials, such as aluminum, plastics and composites, compete with steel in several applications. According to worldsteel Association, global steel production in 2022 declined compared to 2021, decreasing by 4 percent, or approximately 80 million metric tons, to 1.88 billion metric tons. Steel production generally decreased across the world, with the global decline primarily being driven by the top five steel producing countries and Ukraine, which collectively represents approximately 60 percent of the total global decline. Among the top five steel producing countries, production decreased in China by 22 million metric tons, or 2 percent; Japan by 7 million metric tons, or 7 percent; the U.S. by 5 million metric tons, or 6 percent; and Russia by 6 million metric tons, or 7 percent. These declines were partially offset however by India, which increased crude steel production by 7 million metric tons, or 5 percent, from 2021. Steel production in Ukraine decreased by 15 million metric tons, or 71 percent, from 2021 as a result of the Russian invasion and the impact of the ongoing conflict. The top five steel producing countries accounted for 73 percent of the world's steel production in 2022.
See "International Trade" below for a discussion of global overcapacity and the Company's efforts to mitigate the competitive impact.
EAF producers typically require lower capital expenditures for construction and operation of facilities and may have lower total employment costs. Some EAF producers utilize thin slab casting technology to produce flat-rolled products and are increasingly able to compete directly with integrated producers in many flat-rolled product applications previously produced only by integrated steelmakers. Slab re-rollers do not incur the cost of melting steel; their input costs are largely driven by the market price of slabs.
U. S. Steel provides defined benefit pension and/or other post-employment benefits to approximately 65,000 current employees, retirees and their beneficiaries. Many of our competitors do not have comparable retiree obligations. Participation in U. S. Steel's main defined benefit pension plan was closed to new entrants on July 1, 2003 and benefit accruals for all non-represented participants were frozen effective December 31, 2015. Participation in U. S. Steel’s retiree medical and life insurance programs for United Steelworkers (USW)-represented employees were closed to employees hired or rehired (except in limited circumstances) on or after January 1, 2016. For non-represented employees, retiree medical benefits were eliminated December 31, 2017, and retiree life insurance benefits for non-represented employees were eliminated for those who retired after December 31, 2017.
We believe that our major North American and many European integrated steel competitors are confronted with substantially similar environmental regulatory conditions and therefore do not believe that our relative position with regard to such competitors will be materially affected by the impact of environmental laws and regulations. However, if future regulations do not recognize that the integrated steel process involves a series of chemical reactions involving carbon that create carbon dioxide (CO2) emissions without linking these emissions to steel scrap as well, the competitive position of our integrated operations will be adversely impacted compared to mini mills. Our competitive position compared to producers in developing nations such as China, Russia, Brazil and India will be harmed unless such nations require commensurate reductions in CO2 emissions or there are policies to adjust for the carbon emissions disparities. Competing materials such as plastics may not be similarly impacted. The specific impact on each competitor will vary depending on a number of factors, including the age and location of its operating facilities and its production methods. U. S. Steel is also responsible for remediation costs related to former and present operating locations and disposal of environmentally sensitive materials. Many of our competitors, including North American producers, or their successors, that have been the subject of bankruptcy relief have no or substantially lower liabilities for such environmental remediation matters.
In 2023, we expect additional steelmaking capacity will enter the domestic steel market as competitors' growth projects come on-line or ramp up to full production in North America throughout the year.
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Business Strategy
We are executing on our customer-centric Best for All® strategy to provide customers with profitable steel solutions for people and planet. Our strategy is focused on developing quality products and customer process solutions by investing where we have distinct cost or capability competitive advantages. We are expanding our competitive advantages in low-cost iron ore, mini mill steelmaking, and best-in-class finishing assets with innovative solutions and commercial acumen. These competitive advantages are built on a foundation of research, innovation and deep customer relationships. In executing our strategy, we aim to enhance our earnings profile, deliver long-term cash flow through industry cycles and reduce our cost, capital, and carbon intensity. By offering the product capabilities, including the more sustainable steels (steels made with lower greenhouse gas emissions) our customers are increasingly demanding, we can achieve more competitive positioning in strategic, high-margin end markets, and deliver high-quality, sustainable, value-added products and innovative solutions.
Our strategy is informed by our critical success factors, which are the bedrock of the Best for All® strategy: (1) Win in Strategic Markets; (2) Move Up the Talent Curve; and (3) Move Down the Cost Curve. We are enhancing our competitive advantage in low-cost iron ore by expanding this advantage to serve our growing fleet of EAF producers (EAFs). We are currently investing in pig iron capability to enhance the efficiencies of our blast furnace operations as well as reduce the cost structure and reduce the global supply chain risk of our EAFs by increasingly feeding them with internally-produced pig iron. In the future, we may plan to further expand our low-cost iron ore advantage by incorporating in direct reduced iron (DRI) or hot briquetted iron (HBI) capabilities into our internal supply chain. We recently took an important step in this direction by investing in direct reduced (DR)-grade pellet capabilities to produce the feedstock for a potential future investment in DRI/HBI. We are alsoinvesting in new technologies to improve our cost position and increase our capabilities, including our mini mill steelmaking and best-in-class finishing capabilities. We will focus on strategic markets, where there is the greatest opportunity to provide differentiated, innovative and value-added solutions that will help our customers succeed. We know that to accomplish our objectives, we also need to continue to move up the talent curve. We are investing in our employees and providing the training and resources they need to succeed. This will help us reinforce a culture of caring, where accountability, fairness and respect are foundational, and high performance and inclusion in all its forms are valued and celebrated. See "Human Capital Management" below for additional information on our talent attraction, development, and retention initiatives.
U. S. Steel will continue to evaluate potential strategic and organizational opportunities, which may include the acquisition, divestiture or consolidation of assets. Given the cyclicality of our industry, we are focused on strategically deploying our capital, in-line with our capital allocation framework, in order to invest in areas consistent with the execution of our Best for All strategy and are considering various possibilities, including exiting lines of business and the sale of certain assets, that we believe would ultimately result in greater stockholder value. The Company will pursue opportunities based on its long-term strategy that is aligned with what is in the best interests of the Company's stockholders.
Strategic Projects, Technology Investments andOperating Configuration Adjustments
Throughout 2022, the Company continued to advance its Best for All strategy. On January 11, 2022, the Company announced Osceola, Arkansas as the site of a new sustainable and technologically advanced steel mill. The planned mini mill is expected to have about 3 million tons per year of steelmaking capability, and will combine two state-of-the-art EAFs with differentiated steelmaking and finishing technology, including endless casting and rolling equipment and a planned advanced high-strength steel (AHSS) finishing line. The Company is working with the same technical advisors and engineers who were instrumental in the successful construction of the adjacent Big River Steel facilities. Upon completion, we expect that this project will apply to become LEED® certified. We believe that the continued adoption of mini mill technology will expand our ability to produce the next generation of proprietary sustainable steel solutions, including AHSS. The project is expected to be completed in 2024.
In the second quarter 2022, the Company began the construction of a pig iron caster at our Gary Works facility. The approximately $60 million capital investment will produce up to 500,000 tons of pig iron annually and provide a critical raw material input for the Company's EAFs. The Gary Works pig iron project is expected to provide nearly 50 percent of Big River Steel’s ore-based metallics needs and deliver an internal rate of return in excess of 30 percent. Pig iron production at Gary Works and shipments to Big River Steel began in the fourth quarter 2022.
In the third quarter 2022, the Company began construction of a DR grade pellet facility at its Keetac ore operations. The approximately $150 million investment is expected to be operational in 2024. In addition to producing DR-grade pellets to ultimately feed EAFs with DRI or HBI, the production facility will maintain flexibility to continue producing blast furnace grade pellets. Upon completion, the Company could also sell the DR-grade pellets to third-party DRI or HBI producers. The DR-grade pellets produced will be a new product line for U. S. Steel.
In August 2021, the Company commenced construction on a non-grain oriented (NGO) electrical steel line at Big River Steel. The Company expects this $450 million investment to make Big River Steel a leader in NGO electrical steels by delivering product capabilities in this growing market. The 200 thousand ton NGO electrical steel line is expected to deliver first coil in September 2023 and be available to meet the growing electric vehicle demand expected in North America over the coming years.
In the third quarter 2021, the Company also began construction on a 325 thousand ton galvanize/Galvalume® line at Big River Steel. This $280 million investment is expected to grow the Company’s best-in-class finishing capabilities, by expanding the
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Company’s presence in value-added construction applications and enhancing Big River Steel’s product mix. This finishing line is expected to begin production in second quarter 2024.
As the Company advances and expands its mini mill capability, it seeks to become better, not bigger and will adjust its footprint accordingly by re-evaluating cost and capability advantages within its evolving footprint. In December 2021 and June 2022, the Company permanently idled the steelmaking and ironmaking operations, respectively, at its Great Lakes Works facility. In addition, in March 2022, the Company permanently idled the finishing facilities at its East Chicago Tin operations, which had been idled on an indefinite basis during 2019. The coil finishing process at Great Lakes Works continues to operate and remains a component of the Company's operating plans. In December 2022, we the Company indefinitely idled the majority of tin operations at our Gary Works facility.
Commercial Strategy
Our commercial strategy is focused on providing customer-centric solutions with differentiated and value-added steel products, which includes advanced high strength steels such as our newer grades of generation 3 (GEN3) steel, coated sheets for the automotive and appliance industries, electrical steel sheets for the manufacture of motors and electrical equipment, both bare and prepainted galvanized and Galvalume® sheets for construction, heavy gauge hot rolled coils used in the production of construction and agricultural-related heavy machinery as well as skelp for line pipe used for energy transmission as well as extraction, tin mill products for the packaging industry and OCTG pipe, connections, accessories and rig site services for use in drilling for oil and gas. In addition, our portfolio of customers serves a variety of different traditional and emerging industries meeting the needs of numerous markets.
U. S. Steel is committed to leveraging our Best for All strategy to develop and commercialize our low-carbon footprint and advanced high-strength steels for our current and future customers. Over the next five years, U. S. Steel plans to develop and commercialize numerous differentiated grades of low-carbon footprint, high rate of recycled-content steels, providing compelling new options for customers in automotive, appliance, industrial equipment, construction, renewable energy and other markets to enhance the sustainability of their products. For example, in April 2021, we announced a new sustainable steel product line, verdeXTM, which is made with up to 90% recycled steel content and a reduced carbon footprint - as much as 70-80% smaller than traditional integrated steelmaking methods. After launching our verdeXTM brand of sustainable steel products in 2021, we worked closely with customers on their own sustainability goals. In 2022, we reached agreements with multiple customers on the sale of verdeXTM products moving forward in industries such as automotive, construction, and distribution, setting the stage for increased sales of verdeXTM in these and other industries in 2023 and beyond. In addition, we continue to work with customers in numerous industries to help them implement AHSS solutions in the products they manufacture. While the automotive industry has been most active in the application of these products in new vehicle platforms, and it continues to accelerate the deployment of AHSS solutions in new vehicle launches, U. S. Steel is successfully introducing AHSS in other industries as well. Our collaboration with Greenbrier and Norfolk-Southern generated new AHSS sales into the railcar market in 2022, and we also commenced new projects in other industries such as appliance, construction, and in the renewable energy sector to create stronger, lightweight, cost-effective AHSS applications.
We are responsive to our customers' changing needs by developing new steel products and uses for steel that meet their evolving markets and regulatory demands. We have research centers in Munhall, Pennsylvania, Košice, Slovakia, and Houston, Texas, as well as a technology center in Troy, Michigan. The focus of these centers is to engineer new products and to co-create innovative solutions that meet our customers' toughest challenges to reduce carbon emissions, increase strength, improve longevity and serve the needs of their customers. In the fourth quarter 2022, we continued to invest in our talent by hiring a Chief Technology Officer to provide overall enterprise leadership, focusing on driving innovation and product development, as well as enhancing our manufacturing capability.
For automotive customers leveraging advanced high strength steels, we commissioned a first of its kind GEN3 hot dipped galvanize line at our PRO-TEC Coating Company (PRO-TEC) joint venture in 2020, and have embedded application engineers at original equipment manufacturers (OEMs) to demonstrate how to best utilize the high strength, highly formable, cost effective material in body design to meet passenger safety requirements while significantly reducing weight to meet future vehicle fuel efficiency standards.
In our tubular markets, we continue development of premium and semi-premium tubular connections designed for our customers that operate in challenging drilling environments. These connections optimize well construction activities and provide outstanding sealing capabilities for onshore and offshore oil and gas drilling in North America. An example is the USS-TALON HTQ™, which was introduced in 2020 for customers that are constructing onshore natural gas and oil wells with long laterals requiring best-in-class torque capacity and optimized well-bore clearances.
Commercial Sales of Product
U. S. Steel characterizes sales as contract sales if sold pursuant to an agreement with a defined volume and pricing and a duration of longer than three months, and as spot if sold without a defined volume and pricing agreement, typically three months or less. In 2022, approximately 76 percent, 61 percent, 48 percent and 78 percent of sales by Flat-Rolled, Mini Mill, USSE and Tubular, respectively, were contract sales. Some contract pricing agreements include fixed prices while others are adjusted periodically based upon published prices of steel products or cost components.
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Human Capital Management
At U. S. Steel, we are focused on attracting and retaining the top talent needed to support our strategic transformation and meet our customers’ evolving needs as a sustainable steel solutions provider. The support and development of our people is foundational to achieving our Best for All strategy. We refer to this strategic talent pillar as “Moving Up the Talent Curve.”
Our focus on people extends to our current and future employees. We aim to have an engaged and diverse workforce to promote new ideas and innovation, reflect the communities where we operate, and deliver exceptional customer service. We seek to build an inclusive environment where people feel free to bring their professional selves to work. To achieve the Best for All strategy, we must have the “Best from All.”
| Active Employees as of December 31, 2022 | |||||
| North America | 14,487 | ||||
| Slovakia | 8,253 | ||||
| Total | 22,740 | ||||
Ethics & Compliance
Our culture is based on our S.T.E.E.L. Principles: Safety First; Trust and Respect; Environmental Stewardship; Excellence and Accountability; and Lawful and Ethical Conduct. We expect our employees and members of our board of directors to take personal responsibility to “do what’s right,” and our Code of Ethical Business Conduct serves as the foundation for the actions of our employees and directors. To further ensure that employees understand the Company’s expectations and all applicable rules, we provide annual formal ethics and compliance training to our employees and have frequent communications with information about key compliance topics, which include messages from senior management underscoring the importance of doing business with integrity. Employees also receive summaries of current events that demonstrate the need to do business lawfully and ethically that include reminders of the company’s expectations for all employees. In addition, through our annual policy certification process, employees of USSK, non-represented employees in the United States, and members of our board of directors certify their ongoing compliance with our Code of Ethical Business Conduct.
Employee Health & Safety
At U. S. Steel, we have a long-standing commitment to the safety and health of the men and womenevery person who workworks in our facilities. Safety is our primary core value. Every employee deserves to return home safely at the end of every day, and we are working to eliminate all injuries and incidents atincidents. In addition, the psychological safety of all employees is important to us. We have combined physical safety and psychological safety into the construct of our facilities.360° safety. Ensuring a safe workplace also improves productivity, quality, reliability and financial performance. By making safety and health a personal responsibility, our employees are making a daily commitment to follow safe work practices, look out for the safety of co-workers and ensure safe working conditions for everyone. A “Safety First” mindset is as essential to our success as the tools and technologies we rely on to do business.
Our objective is to attain a sustainable zero harm culture supported by leadership and owned by an engaged and highly skilled workforce, empowered with the capabilities and resources needed to assess, reduce and eliminate workplace risks and hazards. In support of these objectives, we have developed an enhanced Safety Management System, initiated new safety communication methods and enhanced contractor safety processes.
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For 2022, we had a corporate DAFW rate of 0.05, which is 86%18 times better than the U.S. Bureau of Labor Statistics for Iron & Steel rate of 0.70 and 68% better than AmericanStatistics' Iron and Steel Institutebenchmark DAFW rate of 0.31. Notably, 0.100.90.
Diversity, Equity, & Inclusion
Attracting, developing, and retaining a workforce of talented, diverse people is essential to having high-performing teams that drive results for our Company’s stakeholders. As part of our commitment to cultivating a new Company recordculture of caring, we have inclusive benefits available for our U.S. non-represented workforce, including expanded parental leave, back-up dependent care, infertility coverage, gender reassignment coverage and healthcare continuation for the families of employees who suffered work-related or military service fatalities. We also support several employee resource groups (ERGs) to enhance employee engagement, promote a culture of belonging, foster diversity in the workplace, and raise awareness related to issues of identity and intersectionality. Our ERGs also provide training and education, mentorship and networking opportunities for their members.
Talent Attraction, Development and Retention
We believe that could not have been accomplished without the dedicationattraction, development and retention of talent is essential to our success, especially in today’s competitive labor market. We offer internship programs, partner with universities, community colleges and technical schools, and collaborate with community employment centers and economic development nonprofit organizations to build strong and diverse internal and external sources of potential employees and opportunities for our existing employee's growth and development.
Once at U. S. Steel, we seek to provide opportunities for continuous learning and development. All of our employees at a director-level and strong partnershipabove have a formal professional development plan that is assessed at least annually. In addition, we proactively monitor our attrition rates and take targeted actions to ensure our highest potential and performing employees are motivated to remain with the Company. Over the past five years, our regrettable voluntary turnover rate has been at or below 5 percent.
We offer a competitive total rewards package of compensation and benefits that we regularly evaluate and benchmark across the manufacturing industry to ensure that we position U. S. Steel as an employer of choice.
At the onset of the pandemic in early 2020, we quickly transitioned our corporate and administrative employees, approximately 10% of our workforce, to a work-from-home environment. We’ve invested in technology to maintain this virtual community and found that our employees are more productive and have more flexibility and autonomy in managing their workload in a way that best fits their situation. We plan to maintain a virtual / hybrid working option for these employees in order to promote workplace flexibility and attract and retain highly qualified employees across the country.
Labor Relations
Approximately 80% of our employees in North America and Slovakia are covered by collective bargaining agreements. We work closely with union representatives to provide safe and productive workplaces that enable our employees to deliver high-quality products and meet the needs of our customers. Our relationship with the United Steelworkers.Steelworkers (USW) includes not only a
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commitment to safety programs, but also a common approach to combating the unfairly traded imports that threaten our industry, our company and ultimately the jobs of our employees.
Certain hourly employees of U. S. Steel’s flat-rolled, tubular, cokemaking and iron ore operations in the United States are covered by collective bargaining agreements with the USW entered into effective September 1, 2022, (the 2022 Labor Agreements) that expire on September 1, 2026. The 2022 Labor Agreements include a signing bonus for each eligible USW-represented employee and annual 5% wage increases effective September 1, 2022, 2023, 2024 and 2025. The 2022 Labor Agreements also provide for certain increases to pension and retirement benefits, including increases in our defined benefit pension plan, retiree healthcare contributions, and to the contribution rate to the Steelworkers Pension Trust from $3.50 to $4.00 per hour, effective January 1, 2023. During the fourth quarter of 2022, U. S. Steel recorded a charge of approximately $67 million for the 2022 Labor Agreements signing bonus and related costs.
In addition, as part of the collective bargaining process, U. S. Steel and the USW agreed to leverage the overfunded OPEB plans to support the benefits provided to active represented employees. The OPEB plans were modified to allow the Company to utilize a certain amount of surplus assets to pay additional legally permissible benefits previously paid by the Company. The arrangement permits the Company to utilize a target of $75 million annually for active and retiree employee benefits, with an annual minimum of $50 million, beginning in 2023 and continuing through December 31, 2026. For additional information, see Note 18 to the Consolidated Financial Statements in Part II Item 8 of this Form 10-K.
Capital Structure, Liquidity and Capital Allocation
Our Best for All strategy's primary financial goal is to enhance stockholder value by utilizing our capital structure, liquidity and enhanced capital allocation priorities to advance the Company's strategic objectives, generate long-term value and reward stockholders. Our cash deployment strategy is aligned with our corporate strategy and includes: executing on strategic projects and portfolio moves; maintaining a strong balance sheet and a healthy pension plan; and delivering sustainable growth with a focus on core values such as safety and environmental stewardship and rewarding stockholders for the continued progress we make. Cash deployment is also performed with a customer-centric focus on improving safety, our environment, quality, delivery and cost.
Our liquidity supports our ability to satisfy short-term obligations, fund working capital requirements and provides a foundation to execute key strategic priorities. We are focused on maintaining a strong balance sheet and may proactively refinance or repay our debt from time to time to protect our capital structure from unforeseen external events and re-financing risks.
On May 27, 2022, U. S. Steel entered into the Sixth Amended and Restated Credit Facility Agreement (Credit Facility Agreement) to replace the existing Fifth Amended and Restated Credit Facility Agreement (Fifth Credit Facility Agreement). The Credit Facility Agreement has substantially the same terms as the Fifth Credit Facility Agreement, except the Credit Facility Agreement references the Secured Overnight Financing Rate instead of the London Interbank Offered Rate, adjusts the individual lenders' commitments, and renews the five-year maturity to May 27, 2027, and the financial impact from replacing the Fifth Credit Facility Agreement was immaterial. The Credit Facility Agreement also adjusts the threshold for the fixed charge coverage ratio. The total availability under the facility remained the same at $1,750 million. Consistent with the Fifth Credit Facility Agreement, the Credit Facility Agreement is secured by first-priority liens on certain accounts receivable and inventory and includes targets related to greenhouse gas emissions intensity reduction, safety performance and facility certification by ResponsibleSteel™.
On September 6, 2022, U. S. Steel closed on an offering of $290 million aggregate principal amount of 5.450% Environmental Improvement Revenue Bonds due 2052 (2052 ADFA Green Bonds). U. S. Steel received net proceeds of approximately $287 million after fees of approximately $3 million related to the underwriting and third-party expenses. The net proceeds from the issuance of the 2052 ADFA Green Bonds will be used to partially fund work related to U. S. Steel's solid waste disposal facilities, including two EAFs and other equipment facilities at its new technologically-advanced flat rolled steel making facility, BR2, currently under construction near Osceola, Arkansas.
In 2022, we repurchased approximately $365 million in debt, and we ended the year with $5.9 billion of total liquidity.
On July 25, 2022, following the completion of previously authorized $800 million share repurchase programs, the Board of Directors authorized a new share repurchase program for the repurchase of up to $500 million of the Company's outstanding common stock from time to time in the open market or privately negotiated transactions at the discretion of management. The Company's share repurchase program does not obligate it to acquire any specific number of shares.
U. S. Steel repurchased 37.6 million shares of common stock for approximately $849 million under these programs during the year ended December 31, 2022, and there is approximately $301 million remaining under the current stock repurchase authorization. In addition, the Board of Directors declared quarterly dividends of five cents per common share for each of the quarters in 2022.
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Facilities and Locations as of December 31, 2022
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Flat-Rolled
The three year performanoperating results of all U. S. Steel's domestic-integrated steel and sheet plants, coke and iron ore operations and ore and sheet production joint ventures are included in Flat-Rolled. Also, included within Flat-Rolled is a research and technology center located in Munhall, Pennsylvania (near Pittsburgh) and a technology center in Troy, Michigan. The research and technology center carries out a wide range of applied research, development and technical support functions. The technology center brings automotive sales, service, distribution and logistics services, product technology and applications research into one location and much of U. S. Steel’s work in developing new grades of steel to meet the demands of automakers for high-strength, light-weight and formable materials is carried out at this location.
| Flat-Rolled Operations Table | ||||||||
| Operations, (Property Location) | Annual Production Capability | Principal Products and/or Services | ||||||
Gary Works, (Gary, Indiana)(a) | 7.5 million tons of raw steel | strip mill plate in coil; hot-rolled, cold-rolled and coated sheets; and tin mill products | ||||||
Midwest, (Portage, Indiana) | finishing facility | hot-rolled, cold-rolled and coated sheets; and tin mill products | ||||||
Great Lakes Works(b), (Ecorse, River Rouge and Dearborn, Michigan) | finishing facility | cold-rolled and coated sheets | ||||||
Mon Valley Works (c): Edgar Thompson, (Braddock, Pennsylvania), Irvin, (West Mifflin, Pennsylvania), Fairless, (Fairless Hills, Pennsylvania), and Clairton, (Clairton, Pennsylvania) | 2.9 million tons of raw steel and 4.3 million tons of coke | hot-rolled, cold-rolled and coated sheets; and coke and coke by-products | ||||||
Granite City Works (d), (Granite City, Illinois) | 2.8 million tons of raw steel | slabs and hot-rolled, cold-rolled and coated sheets | ||||||
Granite City Works, (Granite City, Illinois); Gateway Energy and Coke Company LLC (Gateway) | coke supply agreement | not applicable | ||||||
USS-UPI, LLC (UPI)(e), (Pittsburg, California) | finishing facility | cold-rolled and coated sheets; tin mill products | ||||||
Fairfield Works,(Fairfield, Alabama) | finishing facility | coated sheets | ||||||
Minnesota Ore Operations: Minntac, (Mt. Iron, Minnesota) and Keetac, (Keewatin, Minnesota) | 22.4 million tons of iron ore pellets | iron ore pellets | ||||||
(a) The majority of tin operations were indefinitely idled as of December 31, 2022. | ||||||||
(b) The steel and ironmaking production facilities were permanently idled in December of 2021 and June of 2022, respectively. Great Lakes Works' pickle line, cold mill and CGL continue to operate, while the DESCO and electrolytic galvanizing lines are indefinitely idled. | ||||||||
(c) From time to time, we may swap coke with other domestic steel producers or sell on the open market. Coke by-products are sold to the chemicals and raw materials industries. | ||||||||
(d) In March 2020, one of the blast furnaces at Granite City Works was indefinitely idled. | ||||||||
(e) In February 2020, UPI was added with the purchase of the remaining 50% ownership interest from POSCO. | ||||||||
Joint Ventures Within Flat-Rolled
U. S. Steel participates in a number of joint ventures that are included in Flat-Rolled, most of which are conducted through subsidiaries. All of these joint ventures are accounted for under the equity method. The significant joint ventures and other investments are described below.
Joint Ventures (a) Within Flat-Rolled Table | ||||||||
| Joint Venture, (Property Location) | U. S. Steel's Ownership Percentage | Annual Production Capability | ||||||
Hibbing Taconite Company (Hibbing); (Hibbing, Minnesota) | 14.7% | 9 million tons of which U. S. Steel's share is 1.3 million tons | ||||||
PRO-TEC Coating Company (PRO-TEC), (Leipsic, Ohio) | 50.0% | 2.0 million tons (b) | ||||||
Double G Coatings Company (Double G) (c); Jackson, Mississippi | 50.0% | 315 thousand tons | ||||||
Worthington Specialty Processing (Worthington) (d) | 49.0% | not applicable | ||||||
Chrome Deposit Corporation (CDC), (six locations near major steel plants) | 50.0% | not applicable | ||||||
(a) See further information about our equity investees in Note 12 to the Consolidated Financial Statements. | ||||||||
(b) U. S. Steel's domestic production facilities supply PRO-TEC with cold-rolled sheets and U. S. Steel markets all of PRO-TEC's products. | ||||||||
(c) Each partner supplies its own steel to Double G and markets what is processed by Double G. | ||||||||
(d) In 2022, Worthington Specialty Processing sold its remaining manufacturing facilities. The joint venture is expected to be dissolved in 2023. | ||||||||
Mini Mill
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The operations of Big River Steel are included in Mini Mill. Big River Steel, located in Osceola, Arkansas, is an EAF sheet steel production facility.
| Mini Mill Operations Table | ||||||||
| Operations, (Property Location) | Annual Production Capability | Principal Products and/or Services | ||||||
Big River Steel, (Osceola, Arkansas) | 3.3 million tons of raw steel | hot-rolled, cold-rolled and coated sheets; and electrical steels | ||||||
USSE
USSE operates in Košice, Slovakia an integrated facility and a research laboratory, which, in conjunction with our Research and Technology Center, supports efforts in coke making, electrical steels, and design and instrumentation.
| USSE Operations Table | ||||||||
| Operations, (Property Location) | Annual Production Capability | Principal Products and/or Services | ||||||
U. S. Steel Košice, (Košice, Slovakia) | 5.0 million tons of raw steel | coke; slabs; strip mill plate: hot, cold and coated sheets; tin mill products; and spiral welded pipe | ||||||
Tubular
Tubular manufactures seamless and welded OCTG, standard pipe, line pipe and mechanical tubing.
| Tubular Operations Table | ||||||||
| Operations, (Property Location) | Production Capability | Principal Products and Services | ||||||
Fairfield Tubular Operations, (Fairfield, Alabama) | 0.9 million tons of raw steel (a) and 750 thousand tons of tubular | seamless tubular pipe | ||||||
Lorain Tubular Operations (b), (Lorain, Ohio) | 380 thousand tons of tubular | seamless tubular pipe | ||||||
Lone Star Tubular(b), (Lone Star, Texas) | #1 electric-weld pipe mill (EWPM) 400 thousand tons and #2 EWPM 380 thousand tons of tubular | welded tubular pipe | ||||||
Wheeling Machine Products(c), (Pine Bluff, Arkansas and Hughes Springs, Texas) | not applicable | tubular couplings | ||||||
Offshore Operations, (Houston, Texas) | not applicable | tubular threading, inspection, accessories and storage services and premium connections | ||||||
Tubular Processing (d), (Houston, Texas) | not applicable | tubular processing | ||||||
(a) Based on the rounds caster capacity which is its constraining production unit. | ||||||||
(b) In April 2020, the Lorain Tubular and Lone Star Tubular operations were temporarily idled for an indefinite period of time. | ||||||||
(c) In April 2020, the Wheeling Machine Products at Hughes Springs, Texas was temporarily idled for an indefinite period of time. | ||||||||
(d) Tubular Processing has been temporarily idled since 2015. | ||||||||
Joint Ventures (a) Within Tubular Table | |||||||||||
| Operations, (Property Location) | U. S. Steel's Ownership Percentage | Production Capability | Principal Products and/or Services | ||||||||
Patriot Premium Threading Services, (Midland, Texas) | 50% | not applicable | Tubular threading, accessories and premium connections | ||||||||
(a)See further information about our equity investees in Note 12 to the Consolidated Financial Statements. | |||||||||||
Other
U. S. Steel’s Other category includes the operating results relating to our real estate operations, the previously held equity method investment in Big River Steel, and our former railroad business. The Company owns approximately 45,000 acres of real estate assets, either held for development or managed, in Alabama, Illinois, Michigan, Minnesota and Pennsylvania.
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Raw Materials and Energy
As a predominantly integrated producer, U. S. Steel’s primary raw materials are iron units in the form of iron ore pellets and sinter ore, carbon units in the form of coal and coke (which is produced from coking coal) and steel scrap. For our EAF production, our primary raw material is scrap. U. S. Steel’s raw materials supply strategy consists of acquiring and expanding captive sources of certain primary raw materials and entering into flexible supply contracts for certain other raw materials at competitive market prices that are subject to fluctuations based on market conditions at the time.
The amounts of such raw materials needed to produce a ton of steel will fluctuate based upon the specifications of the final steel products, the quality of raw materials and, to a lesser extent, differences among steel producing equipment. In broad terms, the Company's integrated steel process consumes approximately 1.4 tons of coal to produce one ton of coke and then it consumes approximately 0.3 tons of coke, 0.3 tons of steel scrap (approximately 60 percent of which is internally generated) and 1.3 tons of iron ore pellets to produce one ton of raw steel. In addition, we consume approximately 10 mmbtu’s of natural gas per ton produced. Generally, the Company's mini mill operations consumes approximately 0.8 tons of steel scrap, 0.3 tons of pig iron, and 0.1 tons of HBI to produce one ton of raw steel. In addition, the mini mill operations consume approximately 0.6 MKWH of electricity per ton of raw steel produced. While we believe that these estimated consumption amounts are useful for planning purposes, and are presented to give a general sense of raw material and energy consumption related to steel production, substantial variations may occur.
Iron Ore
(cea) Includes our share of production from Hibbing through December 31, 2022.
The iron ore facilities at Minntac and Keetac contain approximately 900 million short tons of indicated resources and probable reserves and our share of recoverable reserves at the Hibbing joint venture is approximately 4 million short tons. Refer to Mining Properties in Item 2 of this Form 10-K for additional information. Recoverable reserves are defined as the tons of product that can be used internally or delivered to a customer after considering mining and beneficiation or preparation losses. Minntac and Keetac’s annual capability and our share of annual capability for the Hibbing joint venture total approximately 23 million tons. We have iron ore pellet production capability that exceeds our steelmaking capability in the U.S.
We historically have sold iron ore pellets to third parties, including in 2022, 2021 and 2020. The Company has agreements to supply iron ore pellets to third-party customers over the next several years.
Substantially all of USSE’s iron ore requirements are purchased from outside sources, primarily Ukrainian and Brazilian mining companies. Prices are determined in long-term contracts with strategic suppliers or as spot prices negotiated monthly or quarterly. USSE also has received iron ore from U. S. Steel’s iron ore facilities in North America. We believe that supplies of iron ore adequate to meet USSE’s needs are available at competitive market prices.
Coking Coal
All of U. S. Steel’s coal requirements for our key safety measure Days Away From Work ratescokemaking facilities are shownpurchased from outside sources. Pricing for Flat-Rolled's coking coal contracts are typically negotiated on a yearly basis, and from time to time we have entered into multi-year agreements for a portion of our coking coal requirements.
Prices for European contracts are negotiated quarterly, annually or determined as index-based prices.
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We believe that supplies of coking coal adequate to meet our needs are available from outside sources at competitive market prices. The main source of coking coal for Flat-Rolled is the United States, and sources for USSE include Poland, Ukraine, Canada, Australia and the United States.
Coke
In North America, the Flat-Rolled segment operates a cokemaking facility at the Clairton Plant of Mon Valley Works. At our Granite City Works, we have a 15-year coke supply agreement with Gateway that expires on December 31, 2024. Blast furnace injection of coal, and self-generated coke oven gas is also used to reduce coke usage.
With Flat-Rolled’s cokemaking facilities and the Gateway long-term supply agreement, it has the capability to be nearly self-sufficient with respect to its annual coke requirements at normal operating levels. Coke from time to time has been purchased from, sold to, or swapped with suppliers and other end-users to adjust for production needs and reduce transportation costs.
In Europe, the USSE segment operates cokemaking facilities at USSK. While USSE is self-sufficient for coke at normal operating levels, it periodically purchases coke from Polish and Czech coke producers to meet production needs. Volume and price are negotiated quarterly.
Steel Scrap and Other Materials
We believe that supplies of steel scrap and alloys that are adequate to meet our needs are readily available from outside sources at competitive market prices for the Flat-Rolled, Mini Mill and USSE segments. Generally, approximately 38 percent of our steel scrap requirements were internally generated through normal operations for these segments.
Limestone
All of Flat-Rolled’s limestone requirements and USSE's lime and limestone requirements are purchased from outside sources. We believe that supplies of limestone and lime adequate to meet our needs are readily available from outside sources at competitive market prices.
Zinc and Tin
We believe that supplies of zinc and tin required to fulfill the requirements for Flat-Rolled, Mini Mill and USSE are available from outside sources at competitive market prices. For Flat-Rolled and Mini Mill the main sources of zinc are Canada, Mexico and the United States and the main sources of tin are Bolivia, Brazil and Peru. For USSE, the main sources of zinc are Finland, Poland, the Netherlands, Germany and Slovakia and the main sources of tin are Peru, Indonesia, China and Bolivia.
During 2022, Flat-Rolled protected approximately 40 percent and 75 percent of its operation's zinc and tin purchases, respectively, with financial swap derivatives to manage exposure to zinc and tin price fluctuations. During 2022, USSE protected approximately 16 percent of its operation's zinc purchases with forward physical contracts to manage our exposure to zinc price fluctuations and protected approximately 68 percent of its operation's tin purchases with financial swaps to manage our exposure to tin price fluctuations. For further information, see Note 16 to the Consolidated Financial Statements.
Natural Gas
All of U. S. Steel’s natural gas requirements are purchased from outside sources.
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We believe that adequate supplies to meet Flat-Rolled’s, Mini Mill's and Tubular's needs are available at competitive market prices. For 2022, approximately 70 percent of our natural gas purchases in Flat-Rolled were based on bids solicited on a monthly basis from various vendors; the remainder were made daily or with term agreements.
We believe that adequate natural gas supplies to meet USSE’s needs are available at competitive market prices. During 2022, we routinely executed fixed-price forward physical purchase contracts for natural gas to partially manage our exposure to natural gas price increases. For 2022, approximately 48 percent of our natural gas purchases in USSE were made with fixed-price forward physical purchase contracts; the remainder were based on bids solicited on a quarterly or monthly basis.
Flat-Rolled and USSE use self-generated coke oven and blast furnace gas to reduce consumption of natural gas. USSE uses self-generated coke oven, converter and blast furnace gas to reduce consumption of natural gas and steam coal that results in lower CO2 the following graph.emissions production.
Additionally, Russian supply of natural gas to Europe has decreased significantly in response to enacted sanctions. However, Slovakia has natural gas storage and access to additional supply from countries including Norway, the U.S. and Africa. Together, these sources are enough to support the country's expected consumption through the 2023 winter season, which includes demand for natural gas for our USSE segment operations.
Industrial Gases
U. S. Steel purchases industrial gas in the U.S. under long-term contracts with various suppliers. USSE owns and operates its own industrial gas facility, but also may purchase industrial gases from time to time from third parties.
International Trade
U. S. Steel continues to face import competition, much of which is unfairly traded and fueled by massive global steel overcapacity, currently estimated to be over 500 million metric tons per year—more than five times the entire U.S. steel market and over seventeen times total U.S. steel imports. These imports and overcapacity negatively impact the Company’s operational and financial performance. U. S. Steel continues to lead efforts to address these challenges that threaten the Company, our workers, our stockholders and our country’s national and economic security.
As of the date of this filing, pursuant to a series of Presidential Proclamations issued in accordance with Section 232 of the Trade Expansion Act of 1962, U.S. imports of certain steel products are subject to a 25 percent tariff, except imports from: (1) Argentina, Brazil, and South Korea, which are subject to restrictive quotas; (2) the European Union (EU), Japan and the United Kingdom (UK) that are melted and poured in the EU/Japan/UK, within quarterly tariff-rate quota (TRQ) limits; (3) Canada and Mexico, which are not subject to tariffs or quotas, but tariffs could be re-imposed on surging product groups after consultations; (4) Ukraine, which are exempt from tariffs until June 1, 2023; and (5) Australia, which are not subject to tariffs, quotas or an anti-surge mechanism.
The U.S. Department of Commerce (DOC) is managing a process in which U.S. companies may request and/or oppose temporary product exclusions from the Section 232 tariffs and quotas. U. S. Steel opposes exclusion requests for imported products that are the same as, or substitutes for, products manufactured by U. S. Steel.
Multiple legal challenges to the Section 232 action continue before the U.S. Court of International Trade (CIT) and the U.S. Court of Appeals for the Federal Circuit (CAFC), the latter which has consistently rejected constitutional and statutory challenges to the Section 232 action.
Since its implementation in March 2018, the Section 232 action has supported the U.S. steel industry’s and U. S. Steel’s investments in advanced steel production capabilities, technology and skills, strengthening U.S. national and economic security. The Company continues to actively defend the Section 232 action.
In February 2019, the European Commission (EC) implemented a definitive safeguard on global steel imports in the form of TRQs that impose 25 percent tariffs on steel imports that exceed the TRQ limit, effective through June 2024. In December 2022, the EC initiated a fourth review of the safeguard.
Antidumping duties (AD) and countervailing duties (CVD or antisubsidy duties) apply in addition to the Section 232 tariffs, quotas, TRQs and the EC’s safeguard, and AD/CVD orders may continue beyond the Section 232 action and the EC’s safeguard. U. S. Steel continues to actively defend and maintain the 61 U.S. AD/CVD orders and 14 EU AD/CVD orders covering U. S. Steel products in multiple proceedings before the DOC, U.S. International Trade Commission (ITC), CIT, CAFC, the EC and European courts, and the World Trade Organization (WTO).
In July 2022, the ITC voted to continue the AD/CVD orders on corrosion-resistant steel from China, India, Italy, South Korea and Taiwan and cold-rolled steel from China, India, Japan, South Korea and the UK for another five years, but voted to revoke the AD/CVD orders on cold-rolled steel from Brazil. In October 2022, the ITC voted to continue the AD/CVD orders on hot-rolled
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steel from Australia, Japan, Korea, Netherlands, Russia, Turkey and the United Kingdom for another five years, but voted to revoke the AD/CVD orders on hot-rolled steel from Brazil. Also, in October 2022, the ITC voted to impose new AD/CVD orders on imports of OCTG from Argentina, Mexico, Korea and Russia.
In August 2022, the EC imposed definitive AD measures on imports of hot-dipped galvanized steel from Russia and Turkey and announced the continuation of AD measures on imports of cold-rolled steel from China and Russia for another five years. The EC is conducting five-year reviews of the AD/CVD orders on hot-rolled steel from five countries with a decision expected in 2023.
In April 2022, the U.S. suspended normal trade relations with Russia and Belarus, resulting in higher than normal tariffs on imports from Russia and Belarus, including steel and raw materials. In June, President Biden announced additional tariff increases on certain products from Russia, including certain steel products and ferroalloys, effective August 1, 2022.
Additional tariffs of 7.5 to 25 percent continue to apply to certain U.S. imports from China, including certain raw materials used in steel production, semi-finished and finished steel products, and downstream steel-intensive products, pursuant to Section 301 of the Trade Act of 1974. The Office of the United States Trade Representative (USTR) is currently conducting a statutory review of the Section 301 tariffs.
The United States and EU are currently negotiating a global sustainable steel arrangement to restore market-oriented conditions and address carbon intensity that is targeted for completion by the end of 2023.
U. S. Steel will continue to execute a broad, global strategy to maximize opportunities and navigate challenges presented by imports, global steel overcapacity, and international trade law and policy developments.
Our commercial strategy is focused on providing customer-centric solutions with differentiated and value-added steel products, which includes advanced high strength steels such as our newer grades of generation 3 (GEN3) steel, coated sheets for the automotive and appliance industries, electrical steel sheets for the manufacture of motors and electrical equipment, both bare and prepainted galvanized and Galvalume® sheets for construction, heavy gauge hot rolled coils used in the production of construction and agricultural-related heavy machinery as well as skelp for line pipe used for energy transmission as well as extraction, tin mill products for the packaging industry and OCTG pipe, connections, accessories and rig site services for use in drilling for oil and gas. In addition, our portfolio of customers serves a variety of different traditional and emerging industries meeting the needs of numerous markets.
U. S. Steel is committed to effective environmental stewardship. We have implemented and continueleveraging our Best for All strategy to develop business practices that are environmentally effective. We believe part of being a good corporate citizen requires a dedicated focus on howand commercialize our industry affectslow-carbon footprint and advanced high-strength steels for our current and future customers. Over the environment. U. S. Steel's environmental expenditures totaled $376 million in 2019, $350 million in 2018 and $255 million in 2017. Overall, environmental compliance expenditures represent approximately 2 percent of U. S. Steel’s total costs and expenses. For further information, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Environmental Matters.” We have taken the actions described below in furtherance of that goal.
next five years, U. S. Steel plans to achieve its greenhouse gas emissions intensity reduction goal throughdevelop and commercialize numerous differentiated grades of low-carbon footprint, high rate of recycled-content steels, providing compelling new options for customers in automotive, appliance, industrial equipment, construction, renewable energy and other markets to enhance the executionsustainability of their products. For example, in April 2021, we announced a new sustainable steel product line, verdeXTM, which is made with up to 90% recycled steel content and a reduced carbon footprint - as much as 70-80% smaller than traditional integrated steelmaking methods. After launching our verdeXTM brand of sustainable steel products in 2021, we worked closely with customers on their own sustainability goals. In 2022, we reached agreements with multiple initiatives. These includecustomers on the usesale of EAF steelmaking technology at U. S. Steel’s Fairfield WorksverdeXTM products moving forward in industries such as automotive, construction, and at Big River Steel (once fully acquired bydistribution, setting the Company), the first LEED-certified steel millstage for increased sales of verdeXTM in these and other industries in 2023 and beyond. In addition, we continue to work with customers in numerous industries to help them implement AHSS solutions in the nation. EAF steelmaking relies on scrap recyclingproducts they manufacture. While the automotive industry has been most active in the application of these products in new vehicle platforms, and it continues to produceaccelerate the deployment of AHSS solutions in new steel products, leveraging the ability to continuously recycle steel. Further carbon intensity reductions are expected to come from the Company’s introduction of state-of-the-art endless rolling and casting technology and construction of a cogeneration facility at its Mon Valley Works, as well as implementation of ongoing energy efficiency measures, continued use of renewable energy sources and other process improvements to be developed.
We are responsive to our customers' changing needs by developing new steel enables automakers to manufacture lighter weight vehiclesproducts and uses for steel that meet federal Corporate Average Fuel Economy (CAFE) standards with reduced carbon emissions. As parttheir evolving markets and regulatory demands. We have research centers in Munhall, Pennsylvania, Košice, Slovakia, and Houston, Texas, as well as a technology center in Troy, Michigan. The focus of these centers is to engineer new products and to co-create innovative solutions that meet our innovation efforts, we continuecustomers' toughest challenges to look at new steelmaking technologies including those that can further reduce carbon emissions, increase strength, improve longevity and serve the needs of their customers. In the fourth quarter 2022, we continued to invest in our talent by hiring a Chief Technology Officer to provide overall enterprise leadership, focusing on driving innovation and product development, as those technologies mature.well as enhancing our manufacturing capability.
For automotive customers leveraging advanced high strength steels, we commissioned a first of its kind GEN3 hot dipped galvanize line at our PRO-TEC Coating Company (PRO-TEC) joint venture in 2020, and have embedded application engineers at original equipment manufacturers (OEMs) to demonstrate how to best utilize the high strength, highly formable, cost effective material in body design to meet passenger safety requirements while significantly reducing weight to meet future vehicle fuel efficiency standards.
Commercial Sales of Product
U. S. Steel intocharacterizes sales as contract sales if sold pursuant to an agreement with a world-competitive, “bestdefined volume and pricing and a duration of both”longer than three months, and as spot if sold without a defined volume and pricing agreement, typically three months or less. In 2022, approximately 76 percent, 61 percent, 48 percent and 78 percent of sales by Flat-Rolled, Mini Mill, USSE and Tubular, respectively, were contract sales. Some contract pricing agreements include fixed prices while others are adjusted periodically based upon published prices of steel company. By bringing togetherproducts or cost components.
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Human Capital Management
At U. S. Steel, we are focused on attracting and retaining the besttop talent needed to support our strategic transformation and meet our customers’ evolving needs as a sustainable steel solutions provider. The support and development of our people is foundational to achieving our Best for All strategy. We refer to this strategic talent pillar as “Moving Up the integrated steelmaking model with the best of the mini mill steelmaking model, we will transformTalent Curve.”
Our focus on people extends to our business to drive long-term cash flow through industry cycles.current and future employees. We aim to offerhave an unparalleled product platformengaged and diverse workforce to serve customers, achieve world-competitive positioning in strategic, high-margin end markets,promote new ideas and innovation, reflect the communities where we operate, and deliver high-quality, value-added productsexceptional customer service. We seek to build an inclusive environment where people feel free to bring their professional selves to work. To achieve the Best for All strategy, we must have the “Best from All.”
| Active Employees as of December 31, 2022 | |||||
| North America | 14,487 | ||||
| Slovakia | 8,253 | ||||
| Total | 22,740 | ||||
Ethics & Compliance
Our culture is based on our S.T.E.E.L. Principles: Safety First; Trust and innovative solutionsRespect; Environmental Stewardship; Excellence and Accountability; and Lawful and Ethical Conduct. We expect our employees and members of our board of directors to take personal responsibility to “do what’s right,” and our Code of Ethical Business Conduct serves as the foundation for the actions of our employees and directors. To further ensure that address our customers' most challenging steel needs. To become a “best of both” company,employees understand the Company’s expectations and all applicable rules, we are enhancing our focus on operationalprovide annual formal ethics and commercial excellence and promoting technological innovation, so we can establish a more competitive cost structure and enhance our capabilities … two key drivers for our strategy.
Employee Health & Safety
At U. S. Steel, we have a long-standing commitment to the safety and health of every person who works in our facilities. Every employee deserves to return home safely at the end of every day, and we are working to eliminate all injuries and incidents. In addition, the psychological safety -of all employees is important to us. We have combined physical safety and psychological safety into the construct of 360° safety. Ensuring a safe workplace also improves productivity, quality, reliability and financial performance. By making safety and health a personal responsibility, our employees are making a daily commitment to follow safe work practices, look out for the safety of co-workers and ensure safe working conditions for everyone. A “Safety First” mindset is as essential to our employees,success as the tools and technologies we rely on to do business.
Our objective is to attain a sustainable zero harm culture supported by leadership and owned by an engaged and highly skilled workforce, empowered with the capabilities and resources needed to assess, reduce and eliminate workplace risks and hazards. In support of these objectives, we have developed an enhanced Safety Management System, initiated new safety communication methods and enhanced contractor safety processes. One of our environment,most important safety protocols is our communitiesfatality prevention audit program. These proactive assessments of the processes and protocols we have in place, and adherence to them, to avoid fatalities and severe injuries are conducted annually at the enterprise level and more frequently at each of our facilities. We assess our safety performance through a variety of lagging and leading indicators, including OSHA Days Away From Work (DAFW). This measurement allows us to evaluate the frequency of injuries sustained at our facilities requiring an employee to stay at home for more than one day. U. S. Steel has achieved record-safety performance in this measurement in the last several years, routinely achieving performance better than industry benchmarks.
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For 2022, we had a corporate DAFW rate of 0.05, which is 18 times better than the U.S. Bureau of Labor Statistics' Iron and equipment - has served us wellSteel benchmark DAFW rate of 0.90.
Diversity, Equity, & Inclusion
Attracting, developing, and retaining a workforce of talented, diverse people is essential to having high-performing teams that drive results for muchour Company’s stakeholders. As part of our history and our commitment to it remainscultivating a culture of caring, we have inclusive benefits available for our U.S. non-represented workforce, including expanded parental leave, back-up dependent care, infertility coverage, gender reassignment coverage and healthcare continuation for the families of employees who suffered work-related or military service fatalities. We also support several employee resource groups (ERGs) to enhance employee engagement, promote a culture of belonging, foster diversity in the workplace, and raise awareness related to issues of identity and intersectionality. Our ERGs also provide training and education, mentorship and networking opportunities for their members.
Talent Attraction, Development and Retention
We believe that attraction, development and retention of talent is essential to our success, especially in today’s competitive labor market. We offer internship programs, partner with universities, community colleges and technical schools, and collaborate with community employment centers and economic development nonprofit organizations to build strong and diverse internal and external sources of potential employees and opportunities for our existing employee's growth and development.
Once at U. S. Steel, we seek to provide opportunities for continuous learning and development. All of our employees at a director-level and above have a formal professional development plan that is assessed at least annually. In addition, we proactively monitor our attrition rates and take targeted actions to ensure our highest potential and performing employees are motivated to remain with the Company. Over the past five years, our regrettable voluntary turnover rate has been at or below 5 percent.
We offer a competitive total rewards package of compensation and benefits that we regularly evaluate and benchmark across the manufacturing industry to ensure that we position U. S. Steel as strong asan employer of choice.
At the products we make every day.
found that our employees are more productive and have more flexibility and autonomy in managing their workload in a way that best fits their situation. We continuously aimplan to move down the cost curve. Leading up to 2019, we improved our balance sheetmaintain a virtual / hybrid working option for these employees in order to increase investmentpromote workplace flexibility and attract and retain highly qualified employees across the country.
Labor Relations
Approximately 80% of our employees in keyNorth America and Slovakia are covered by collective bargaining agreements. We work closely with union representatives to provide safe and productive workplaces that enable our employees to deliver high-quality products and meet the needs of our customers. Our relationship with the United Steelworkers (USW) includes not only a
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commitment to safety programs, but also a common approach to combating the unfairly traded imports that threaten our industry, our company and ultimately the jobs of our employees.
Certain hourly employees of U. S. Steel’s flat-rolled, tubular, cokemaking and iron ore operations in the United States are covered by collective bargaining agreements with the USW entered into effective September 1, 2022, (the 2022 Labor Agreements) that expire on September 1, 2026. The 2022 Labor Agreements include a signing bonus for each eligible USW-represented employee and annual 5% wage increases effective September 1, 2022, 2023, 2024 and 2025. The 2022 Labor Agreements also provide for certain increases to pension and retirement benefits, including increases in our defined benefit pension plan, retiree healthcare contributions, and to the contribution rate to the Steelworkers Pension Trust from $3.50 to $4.00 per hour, effective January 1, 2023. During the fourth quarter of 2022, U. S. Steel recorded a charge of approximately $67 million for the 2022 Labor Agreements signing bonus and related costs.
In addition, as part of the collective bargaining process, U. S. Steel and the USW agreed to leverage the overfunded OPEB plans to support the benefits provided to active represented employees. The OPEB plans were modified to allow the Company to utilize a certain amount of surplus assets to pay additional legally permissible benefits previously paid by the Company. The arrangement permits the Company to utilize a target of $75 million annually for active and retiree employee benefits, with an annual minimum of $50 million, beginning in 2023 and continuing through December 31, 2026. For additional information, see Note 18 to the Consolidated Financial Statements in Part II Item 8 of this Form 10-K.
Capital Structure, Liquidity and Capital Allocation
Our Best for All strategy's primary financial goal is to enhance stockholder value by utilizing our capital structure, liquidity and enhanced capital allocation priorities to advance the Company's strategic objectives, generate long-term value and reward stockholders. Our cash deployment strategy is aligned with our corporate strategy and includes: executing on strategic projects and portfolio moves; maintaining a strong balance sheet and a healthy pension plan; and delivering sustainable growth with a focus on core values such as safety and environmental stewardship and rewarding stockholders for the Gary Works hot strip mill. These investments were made to reduce costscontinued progress we make. Cash deployment is also performed with a customer-centric focus on improving safety, our environment, quality, delivery and increase capability. Our improved financial position has also enabled investment in strategic projects, such as the EAF at our Tubular Operations in Fairfield, Alabama. The EAF is expected to reduce cost by $90 per ton as the Company becomes self-sufficient in its rounds supply.cost.
Our liquidity supports our ability to satisfy short-term obligations, fund working capital requirements and provides a foundation to execute key strategic priorities. We are focused on maintaining a strong balance sheet and may proactively refinance or repay our debt from time to time to protect our capital structure from unforeseen external events and re-financing risks.
On May 27, 2022, U. S. Steel entered into the Sixth Amended and Restated Credit Facility Agreement (Credit Facility Agreement) to replace the existing Fifth Amended and Restated Credit Facility Agreement (Fifth Credit Facility Agreement). The Credit Facility Agreement has substantially the same terms as the Fifth Credit Facility Agreement, except the Credit Facility Agreement references the Secured Overnight Financing Rate instead of the London Interbank Offered Rate, adjusts the individual lenders' commitments, and renews the five-year maturity to May 27, 2027, and the financial impact from replacing the Fifth Credit Facility Agreement was immaterial. The Credit Facility Agreement also adjusts the threshold for the fixed charge coverage ratio. The total availability under the facility remained the same at $1,750 million. Consistent with the Fifth Credit Facility Agreement, the Credit Facility Agreement is secured by first-priority liens on certain accounts receivable and inventory and includes targets related to greenhouse gas emissions intensity reduction, safety performance and facility certification by ResponsibleSteel™.
On September 6, 2022, U. S. Steel closed on an offering of $290 million aggregate principal amount of 5.450% Environmental Improvement Revenue Bonds due 2052 (2052 ADFA Green Bonds). U. S. Steel received net proceeds of approximately $287 million after fees of approximately $3 million related to the underwriting and third-party expenses. The net proceeds from the issuance of the 2052 ADFA Green Bonds will be used to partially fund work related to U. S. Steel's solid waste disposal facilities, including two EAFs and other equipment facilities at its new technologically-advanced flat rolled steel making facility, BR2, currently under construction near Osceola, Arkansas.
In 2022, we repurchased approximately $365 million in strategic marketsdebt, and we ended the year with $5.9 billion of total liquidity.
On July 25, 2022, following the completion of previously authorized $800 million share repurchase programs, the Board of Directors authorized a customer-focused business model with an emphasis on creating differentiated, innovativenew share repurchase program for the repurchase of up to $500 million of the Company's outstanding common stock from time to time in the open market or privately negotiated transactions at the discretion of management. The Company's share repurchase program does not obligate it to acquire any specific number of shares.
U. S. Steel repurchased 37.6 million shares of common stock for approximately $849 million under these programs during the year ended December 31, 2022, and value-added solutions that will help our customers succeed. As partthere is approximately $301 million remaining under the current stock repurchase authorization. In addition, the Board of this effort,Directors declared quarterly dividends of five cents per common share for each of the quarters in 2020 we implemented an enhanced2022.
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Facilities and Locations as of December 31, 2022
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Flat-Rolled
The operating modelresults of all U. S. Steel's domestic-integrated steel and organizational structure to accelerate the company’s strategic transformationsheet plants, coke and better serve its customers.iron ore operations and ore and sheet production joint ventures are included in Flat-Rolled. Also, included within Flat-Rolled is a research and technology center located in Munhall, Pennsylvania (near Pittsburgh) and a technology center in Troy, Michigan. The realignmentresearch and technology center carries out a wide range of applied research, development and technical support functions. The technology center brings automotive sales, service, distribution and logistics services, product technology and applications research into one location and much of U. S. Steel’s leadership team around work in developing new grades of steel to meet the demands of automakers for high-strength, light-weight and formable materials is carried out at this location.
| Flat-Rolled Operations Table | ||||||||
| Operations, (Property Location) | Annual Production Capability | Principal Products and/or Services | ||||||
Gary Works, (Gary, Indiana)(a) | 7.5 million tons of raw steel | strip mill plate in coil; hot-rolled, cold-rolled and coated sheets; and tin mill products | ||||||
Midwest, (Portage, Indiana) | finishing facility | hot-rolled, cold-rolled and coated sheets; and tin mill products | ||||||
Great Lakes Works(b), (Ecorse, River Rouge and Dearborn, Michigan) | finishing facility | cold-rolled and coated sheets | ||||||
Mon Valley Works (c): Edgar Thompson, (Braddock, Pennsylvania), Irvin, (West Mifflin, Pennsylvania), Fairless, (Fairless Hills, Pennsylvania), and Clairton, (Clairton, Pennsylvania) | 2.9 million tons of raw steel and 4.3 million tons of coke | hot-rolled, cold-rolled and coated sheets; and coke and coke by-products | ||||||
Granite City Works (d), (Granite City, Illinois) | 2.8 million tons of raw steel | slabs and hot-rolled, cold-rolled and coated sheets | ||||||
Granite City Works, (Granite City, Illinois); Gateway Energy and Coke Company LLC (Gateway) | coke supply agreement | not applicable | ||||||
USS-UPI, LLC (UPI)(e), (Pittsburg, California) | finishing facility | cold-rolled and coated sheets; tin mill products | ||||||
Fairfield Works,(Fairfield, Alabama) | finishing facility | coated sheets | ||||||
Minnesota Ore Operations: Minntac, (Mt. Iron, Minnesota) and Keetac, (Keewatin, Minnesota) | 22.4 million tons of iron ore pellets | iron ore pellets | ||||||
(a) The majority of tin operations were indefinitely idled as of December 31, 2022. | ||||||||
(b) The steel and ironmaking production facilities were permanently idled in December of 2021 and June of 2022, respectively. Great Lakes Works' pickle line, cold mill and CGL continue to operate, while the DESCO and electrolytic galvanizing lines are indefinitely idled. | ||||||||
(c) From time to time, we may swap coke with other domestic steel producers or sell on the open market. Coke by-products are sold to the chemicals and raw materials industries. | ||||||||
(d) In March 2020, one of the blast furnaces at Granite City Works was indefinitely idled. | ||||||||
(e) In February 2020, UPI was added with the purchase of the remaining 50% ownership interest from POSCO. | ||||||||
Joint Ventures Within Flat-Rolled
U. S. Steel participates in a number of joint ventures that are included in Flat-Rolled, most of which are conducted through subsidiaries. All of these joint ventures are accounted for under the equity method. The significant joint ventures and other investments are described below.
Joint Ventures (a) Within Flat-Rolled Table | ||||||||
| Joint Venture, (Property Location) | U. S. Steel's Ownership Percentage | Annual Production Capability | ||||||
Hibbing Taconite Company (Hibbing); (Hibbing, Minnesota) | 14.7% | 9 million tons of which U. S. Steel's share is 1.3 million tons | ||||||
PRO-TEC Coating Company (PRO-TEC), (Leipsic, Ohio) | 50.0% | 2.0 million tons (b) | ||||||
Double G Coatings Company (Double G) (c); Jackson, Mississippi | 50.0% | 315 thousand tons | ||||||
Worthington Specialty Processing (Worthington) (d) | 49.0% | not applicable | ||||||
Chrome Deposit Corporation (CDC), (six locations near major steel plants) | 50.0% | not applicable | ||||||
(a) See further information about our equity investees in Note 12 to the Consolidated Financial Statements. | ||||||||
(b) U. S. Steel's domestic production facilities supply PRO-TEC with cold-rolled sheets and U. S. Steel markets all of PRO-TEC's products. | ||||||||
(c) Each partner supplies its own steel to Double G and markets what is processed by Double G. | ||||||||
(d) In 2022, Worthington Specialty Processing sold its remaining manufacturing facilities. The joint venture is expected to be dissolved in 2023. | ||||||||
Mini Mill
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The operations of Big River Steel are included in Mini Mill. Big River Steel, located in Osceola, Arkansas, is an EAF sheet steel production facility.
| Mini Mill Operations Table | ||||||||
| Operations, (Property Location) | Annual Production Capability | Principal Products and/or Services | ||||||
Big River Steel, (Osceola, Arkansas) | 3.3 million tons of raw steel | hot-rolled, cold-rolled and coated sheets; and electrical steels | ||||||
USSE
USSE operates in Košice, Slovakia an integrated facility and a research laboratory, which, in conjunction with our Research and Technology Center, supports efforts in coke making, electrical steels, and design and instrumentation.
| USSE Operations Table | ||||||||
| Operations, (Property Location) | Annual Production Capability | Principal Products and/or Services | ||||||
U. S. Steel Košice, (Košice, Slovakia) | 5.0 million tons of raw steel | coke; slabs; strip mill plate: hot, cold and coated sheets; tin mill products; and spiral welded pipe | ||||||
Tubular
Tubular manufactures seamless and welded OCTG, standard pipe, line pipe and mechanical tubing.
| Tubular Operations Table | ||||||||
| Operations, (Property Location) | Production Capability | Principal Products and Services | ||||||
Fairfield Tubular Operations, (Fairfield, Alabama) | 0.9 million tons of raw steel (a) and 750 thousand tons of tubular | seamless tubular pipe | ||||||
Lorain Tubular Operations (b), (Lorain, Ohio) | 380 thousand tons of tubular | seamless tubular pipe | ||||||
Lone Star Tubular(b), (Lone Star, Texas) | #1 electric-weld pipe mill (EWPM) 400 thousand tons and #2 EWPM 380 thousand tons of tubular | welded tubular pipe | ||||||
Wheeling Machine Products(c), (Pine Bluff, Arkansas and Hughes Springs, Texas) | not applicable | tubular couplings | ||||||
Offshore Operations, (Houston, Texas) | not applicable | tubular threading, inspection, accessories and storage services and premium connections | ||||||
Tubular Processing (d), (Houston, Texas) | not applicable | tubular processing | ||||||
(a) Based on the rounds caster capacity which is its constraining production unit. | ||||||||
(b) In April 2020, the Lorain Tubular and Lone Star Tubular operations were temporarily idled for an indefinite period of time. | ||||||||
(c) In April 2020, the Wheeling Machine Products at Hughes Springs, Texas was temporarily idled for an indefinite period of time. | ||||||||
(d) Tubular Processing has been temporarily idled since 2015. | ||||||||
Joint Ventures (a) Within Tubular Table | |||||||||||
| Operations, (Property Location) | U. S. Steel's Ownership Percentage | Production Capability | Principal Products and/or Services | ||||||||
Patriot Premium Threading Services, (Midland, Texas) | 50% | not applicable | Tubular threading, accessories and premium connections | ||||||||
(a)See further information about our equity investees in Note 12 to the Consolidated Financial Statements. | |||||||||||
Other
U. S. Steel’s Other category includes the operating results relating to our real estate operations, the previously held equity method investment in Big River Steel, and our former railroad business. The Company owns approximately 45,000 acres of real estate assets, either held for development or managed, in Alabama, Illinois, Michigan, Minnesota and Pennsylvania.
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Raw Materials and Energy
As a predominantly integrated producer, U. S. Steel’s primary raw materials are iron units in the form of iron ore pellets and sinter ore, carbon units in the form of coal and coke (which is produced from coking coal) and steel scrap. For our EAF production, our primary raw material is scrap. U. S. Steel’s raw materials supply strategy consists of acquiring and expanding captive sources of certain primary raw materials and entering into flexible supply contracts for certain other raw materials at competitive market prices that are subject to fluctuations based on market conditions at the time.
The amounts of such raw materials needed to produce a ton of steel will fluctuate based upon the specifications of the final steel products, the quality of raw materials and, to a lesser extent, differences among steel producing equipment. In broad terms, the Company's integrated steel process consumes approximately 1.4 tons of coal to produce one ton of coke and then it consumes approximately 0.3 tons of coke, 0.3 tons of steel scrap (approximately 60 percent of which is internally generated) and 1.3 tons of iron ore pellets to produce one ton of raw steel. In addition, we consume approximately 10 mmbtu’s of natural gas per ton produced. Generally, the Company's mini mill operations consumes approximately 0.8 tons of steel scrap, 0.3 tons of pig iron, and 0.1 tons of HBI to produce one ton of raw steel. In addition, the mini mill operations consume approximately 0.6 MKWH of electricity per ton of raw steel produced. While we believe that these estimated consumption amounts are useful for planning purposes, and are presented to give a general sense of raw material and energy consumption related to steel production, substantial variations may occur.
Iron Ore
(a) Includes our share of production from Hibbing through December 31, 2022.
The iron ore facilities at Minntac and Keetac contain approximately 900 million short tons of indicated resources and probable reserves and our share of recoverable reserves at the Hibbing joint venture is approximately 4 million short tons. Refer to Mining Properties in Item 2 of this Form 10-K for additional information. Recoverable reserves are defined as the tons of product that can be used internally or delivered to a customer after considering mining and beneficiation or preparation losses. Minntac and Keetac’s annual capability and our share of annual capability for the Hibbing joint venture total approximately 23 million tons. We have iron ore pellet production capability that exceeds our steelmaking capability in the U.S.
We historically have sold iron ore pellets to third parties, including in 2022, 2021 and 2020. The Company has agreements to supply iron ore pellets to third-party customers over the next several years.
Substantially all of USSE’s iron ore requirements are purchased from outside sources, primarily Ukrainian and Brazilian mining companies. Prices are determined in long-term contracts with strategic suppliers or as spot prices negotiated monthly or quarterly. USSE also has received iron ore from U. S. Steel’s iron ore facilities in North America. We believe that supplies of iron ore adequate to meet USSE’s needs are available at competitive market prices.
Coking Coal
All of U. S. Steel’s coal requirements for our cokemaking facilities are purchased from outside sources. Pricing for Flat-Rolled's coking coal contracts are typically negotiated on a yearly basis, and from time to time we have entered into multi-year agreements for a portion of our coking coal requirements.
Prices for European contracts are negotiated quarterly, annually or determined as index-based prices.
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We believe that supplies of coking coal adequate to meet our needs are available from outside sources at competitive market prices. The main source of coking coal for Flat-Rolled is the United States, and sources for USSE include Poland, Ukraine, Canada, Australia and the United States.
Coke
In North America, the Flat-Rolled segment operates a cokemaking facility at the Clairton Plant of Mon Valley Works. At our Granite City Works, we have a 15-year coke supply agreement with Gateway that expires on December 31, 2024. Blast furnace injection of coal, and self-generated coke oven gas is also used to reduce coke usage.
With Flat-Rolled’s cokemaking facilities and the Gateway long-term supply agreement, it has the capability to be nearly self-sufficient with respect to its annual coke requirements at normal operating levels. Coke from time to time has been purchased from, sold to, or swapped with suppliers and other end-users to adjust for production needs and reduce transportation costs.
In Europe, the USSE segment operates cokemaking facilities at USSK. While USSE is self-sufficient for coke at normal operating levels, it periodically purchases coke from Polish and Czech coke producers to meet production needs. Volume and price are negotiated quarterly.
Steel Scrap and Other Materials
We believe that supplies of steel scrap and alloys that are adequate to meet our needs are readily available from outside sources at competitive market prices for the Flat-Rolled, Mini Mill and USSE segments. Generally, approximately 38 percent of our steel scrap requirements were internally generated through normal operations for these segments.
Limestone
All of Flat-Rolled’s limestone requirements and USSE's lime and limestone requirements are purchased from outside sources. We believe that supplies of limestone and lime adequate to meet our needs are readily available from outside sources at competitive market prices.
Zinc and Tin
We believe that supplies of zinc and tin required to fulfill the requirements for Flat-Rolled, Mini Mill and USSE are available from outside sources at competitive market prices. For Flat-Rolled and Mini Mill the main sources of zinc are Canada, Mexico and the United States and the main sources of tin are Bolivia, Brazil and Peru. For USSE, the main sources of zinc are Finland, Poland, the Netherlands, Germany and Slovakia and the main sources of tin are Peru, Indonesia, China and Bolivia.
During 2022, Flat-Rolled protected approximately 40 percent and 75 percent of its operation's zinc and tin purchases, respectively, with financial swap derivatives to manage exposure to zinc and tin price fluctuations. During 2022, USSE protected approximately 16 percent of its operation's zinc purchases with forward physical contracts to manage our exposure to zinc price fluctuations and protected approximately 68 percent of its operation's tin purchases with financial swaps to manage our exposure to tin price fluctuations. For further information, see Note 16 to the Consolidated Financial Statements.
Natural Gas
All of U. S. Steel’s natural gas requirements are purchased from outside sources.
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We believe that adequate supplies to meet Flat-Rolled’s, Mini Mill's and Tubular's needs are available at competitive market prices. For 2022, approximately 70 percent of our natural gas purchases in Flat-Rolled were based on bids solicited on a monthly basis from various vendors; the remainder were made daily or with term agreements.
We believe that adequate natural gas supplies to meet USSE’s needs are available at competitive market prices. During 2022, we routinely executed fixed-price forward physical purchase contracts for natural gas to partially manage our exposure to natural gas price increases. For 2022, approximately 48 percent of our natural gas purchases in USSE were made with fixed-price forward physical purchase contracts; the remainder were based on bids solicited on a quarterly or monthly basis.
Flat-Rolled and USSE use self-generated coke oven and blast furnace gas to reduce consumption of natural gas. USSE uses self-generated coke oven, converter and blast furnace gas to reduce consumption of natural gas and steam coal that results in lower CO2 emissions production.
Additionally, Russian supply of natural gas to Europe has decreased significantly in response to enacted sanctions. However, Slovakia has natural gas storage and access to additional supply from countries including Norway, the U.S. and Africa. Together, these sources are enough to support the country's expected consumption through the 2023 winter season, which includes demand for natural gas for our USSE segment operations.
Industrial Gases
U. S. Steel purchases industrial gas in the U.S. under long-term contracts with various suppliers. USSE owns and operates its own industrial gas facility, but also may purchase industrial gases from time to time from third parties.
International Trade
U. S. Steel continues to face import competition, much of which is unfairly traded and fueled by massive global steel overcapacity, currently estimated to be over 500 million metric tons per year—more nimblethan five times the entire U.S. steel market and efficient executive functions, notably to sharpen focus onover seventeen times total U.S. steel imports. These imports and overcapacity negatively impact the Company’s operational and commercial excellencefinancial performance. U. S. Steel continues to lead efforts to address these challenges that threaten the Company, our workers, our stockholders and promote technological innovation, will enableour country’s national and economic security.
As of the companydate of this filing, pursuant to establish a more competitive cost structureseries of Presidential Proclamations issued in accordance with enhanced capabilitiesSection 232 of the Trade Expansion Act of 1962, U.S. imports of certain steel products are subject to serve customersa 25 percent tariff, except imports from: (1) Argentina, Brazil, and South Korea, which are subject to restrictive quotas; (2) the European Union (EU), Japan and the United Kingdom (UK) that are melted and poured in strategic markets.the EU/Japan/UK, within quarterly tariff-rate quota (TRQ) limits; (3) Canada and Mexico, which are not subject to tariffs or quotas, but tariffs could be re-imposed on surging product groups after consultations; (4) Ukraine, which are exempt from tariffs until June 1, 2023; and (5) Australia, which are not subject to tariffs, quotas or an anti-surge mechanism.
Multiple legal challenges to our strategythe Section 232 action continue before the U.S. Court of International Trade (CIT) and the U.S. Court of Appeals for the Federal Circuit (CAFC), the latter which has consistently rejected constitutional and statutory challenges to the Section 232 action.
Since its implementation in March 2018, the Section 232 action has supported the U.S. steel industry’s and U. S. Steel’s investments in advanced steel production capabilities, technology and skills, strengthening U.S. national and economic security. The Company continues to actively defend the Section 232 action.
In February 2019, the European Commission (EC) implemented a definitive safeguard on global steel imports in the form of TRQs that impose 25 percent tariffs on steel imports that exceed the TRQ limit, effective through June 2024. In December 2022, the EC initiated a fourth review of the safeguard.
Antidumping duties (AD) and countervailing duties (CVD or antisubsidy duties) apply in addition to the Section 232 tariffs, quotas, TRQs and the EC’s safeguard, and AD/CVD orders may continue beyond the Section 232 action and the EC’s safeguard. U. S. Steel continues to actively defend and maintain the 61 U.S. AD/CVD orders and 14 EU AD/CVD orders covering U. S. Steel products in multiple proceedings before the DOC, U.S. International Trade Commission (ITC), CIT, CAFC, the EC and European courts, and the World Trade Organization (WTO).
In July 2022, the ITC voted to continue the AD/CVD orders on corrosion-resistant steel from China, India, Italy, South Korea and Taiwan and cold-rolled steel from China, India, Japan, South Korea and the UK for another five years, but voted to revoke the AD/CVD orders on cold-rolled steel from Brazil. In October 2022, the ITC voted to continue the AD/CVD orders on hot-rolled
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steel from Australia, Japan, Korea, Netherlands, Russia, Turkey and the United Kingdom for another five years, but voted to revoke the AD/CVD orders on hot-rolled steel from Brazil. Also, in October 2022, the ITC voted to impose new AD/CVD orders on imports of OCTG from Argentina, Mexico, Korea and Russia.
In August 2022, the EC imposed definitive AD measures on imports of hot-dipped galvanized steel from Russia and Turkey and announced the continuation of AD measures on imports of cold-rolled steel from China and Russia for another five years. The EC is moving upconducting five-year reviews of the talent curveAD/CVD orders on hot-rolled steel from five countries with a decision expected in 2023.
In April 2022, the U.S. suspended normal trade relations with Russia and Belarus, resulting in higher than normal tariffs on imports from Russia and Belarus, including steel and raw materials. In June, President Biden announced additional tariff increases on certain products from Russia, including certain steel products and ferroalloys, effective August 1, 2022.
Additional tariffs of 7.5 to 25 percent continue to apply to certain U.S. imports from China, including certain raw materials used in steel production, semi-finished and finished steel products, and downstream steel-intensive products, pursuant to Section 301 of the Trade Act of 1974. The successOffice of our businessthe United States Trade Representative (USTR) is drivencurrently conducting a statutory review of the Section 301 tariffs.
The United States and EU are currently negotiating a global sustainable steel arrangement to restore market-oriented conditions and address carbon intensity that is targeted for completion by the effortsend of our hard-working employees. We know that we must work to identify, attract and retain best-in-class diverse talent. Our goal is to build a pipeline mapping the right people to the right value-driving roles. This includes providing the training and resources they need to succeed and fostering a culture where accountability, fairness and respect are foundational, and high performance and diversity in all its forms are valued and celebrated. This type of environment incentivizes the right behavior and allows for a best talent wins environment to help us achieve our “best of both” strategy.2023.
U. S. Steel will continue to evaluate potential strategic and organizational opportunities, which may include the acquisition, divestiture or consolidation of assets. Given the cyclicality of our industry, we are focused on strategically maintaining and spending cash, in order to invest in areas consistent with the execution of our "best of both" strategy, such as sustainable steel technologies, and are considering various possibilities, including exiting lines of business and the sale of certain assets, that we believe would ultimately result in greater stockholder value. The Company will pursue opportunities based on its long-term strategy, and what the Board of Directors determines to be in the best interests of the Company's stockholders at the time.
Commercial Strategy
Our commercial strategy is focused on providing customer focusedcustomer-centric solutions with differentiated and value-added steel products, which includes advanced high strength steels such as our newly developednewer grades on Gen3of generation 3 (GEN3) steel, coated sheets for the automotive and appliance industries, electrical steel sheets for the manufacture of motors and electrical equipment, both bare and prepainted galvanized and Galvalume® sheets for construction, heavy gauge hot rolled skelpcoils used in the production of energy transmittingconstruction and agricultural-related heavy machinery as well as skelp for line pipe heavy gauge-wide hot rolled coils,used for energy transmission as well as extraction, tin mill products for the packaging industry and OCTG pipe, connections, accessories and rig site services for use in drilling for oil and gas. In addition, our portfolio of customers serves a variety of different traditional and emerging industries meeting the needs of numerous markets.
U. S. Steel is committed to leveraging our Best for All strategy to develop and commercialize our low-carbon footprint and advanced high-strength steels for our current and future customers. Over the next five years, U. S. Steel plans to develop and commercialize numerous differentiated grades of low-carbon footprint, high rate of recycled-content steels, providing compelling new options for customers in automotive, appliance, industrial equipment, construction, renewable energy and other markets to enhance the sustainability of their products. For example, in April 2021, we announced a new sustainable steel product line, verdeXTM, which is made with up to 90% recycled steel content and a reduced carbon footprint - as much as 70-80% smaller than traditional integrated steelmaking methods. After launching our verdeXTM brand of sustainable steel products in 2021, we worked closely with customers on their own sustainability goals. In 2022, we reached agreements with multiple customers on the sale of verdeXTM products moving forward in industries such as automotive, construction, and distribution, setting the stage for increased sales of verdeXTM in these and other industries in 2023 and beyond. In addition, we continue to work with customers in numerous industries to help them implement AHSS solutions in the products they manufacture. While the automotive industry has been most active in the application of these products in new vehicle platforms, and it continues to accelerate the deployment of AHSS solutions in new vehicle launches, U. S. Steel is successfully introducing AHSS in other industries as well. Our collaboration with Greenbrier and Norfolk-Southern generated new AHSS sales into the railcar market in 2022, and we also commenced new projects in other industries such as appliance, construction, and in the renewable energy sector to create stronger, lightweight, cost-effective AHSS applications.
We are responsive to our customers' changing needs by developing new steel products and uses for steel that meet thetheir evolving marketmarkets and regulatory demands imposed on them. In connection with this commitment, wedemands. We have research centers in Pittsburgh,Munhall, Pennsylvania, and Košice, Slovakia, an automotiveand Houston, Texas, as well as a technology center in Troy, Michigan and a Research and Development Laboratory and Test Facility for Tubular products in Houston, Texas.Michigan. The focus of these centers is to developengineer new products and to collaborate with our customers to better provideco-create innovative solutions that meet our customers' toughest challenges to reduce carbon emissions, increase strength, improve longevity and serve the needs of their needs.customers. In the fourth quarter 2022, we continued to invest in our talent by hiring a Chief Technology Officer to provide overall enterprise leadership, focusing on driving innovation and product development, as well as enhancing our manufacturing capability.
For automotive markets,customers leveraging advanced high strength steels, we are in the process of commissioning ourcommissioned a first of its kind GEN3 hot dipped galvanize line at our PRO-TEC Coating Company (PRO-TEC) joint venture in 2020, and have embedded application engineers at original equipment manufacturers (OEMs) to demonstrate how to best utilize the high strength, highly formable, cost effective material in body design to meet automobile passenger safety requirements while significantly reducing weight to meet future vehicle fuel efficiency standards.
In our tubular markets, we continue development of premium and semi-premium tubular connections designed for our customers operatingthat operate in challenging drilling environments. These connections optimize performancewell construction activities and provide outstanding sealing capabilities for onshore and offshore oil and gas drilling in North America. An example is the USS-FREEDOMUSS-TALON HTQ™, which was introduced in 20192020 for customers drilling deep, high-pressure horizontalthat are constructing onshore natural gas and oil wells with long laterals requiring superiorbest-in-class torque capacity. Pleasecapacity and optimized well-bore clearances.
Commercial Sales of Product
U. S. Steel characterizes sales as contract sales if sold pursuant to an agreement with a defined volume and pricing and a duration of longer than three months, and as spot if sold without a defined volume and pricing agreement, typically three months or less. In 2022, approximately 76 percent, 61 percent, 48 percent and 78 percent of sales by Flat-Rolled, Mini Mill, USSE and Tubular, respectively, were contract sales. Some contract pricing agreements include fixed prices while others are adjusted periodically based upon published prices of steel products or cost components.
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Human Capital Management
At U. S. Steel, we are focused on attracting and retaining the top talent needed to support our strategic transformation and meet our customers’ evolving needs as a sustainable steel solutions provider. The support and development of our people is foundational to achieving our Best for All strategy. We refer to this strategic talent pillar as “Moving Up the Talent Curve.”
Our focus on people extends to our current and future employees. We aim to have an engaged and diverse workforce to promote new ideas and innovation, reflect the communities where we operate, and deliver exceptional customer service. We seek to build an inclusive environment where people feel free to bring their professional selves to work. To achieve the Best for All strategy, we must have the “Best from All.”
| Active Employees as of December 31, 2022 | |||||
| North America | 14,487 | ||||
| Slovakia | 8,253 | ||||
| Total | 22,740 | ||||
Ethics & Compliance
Our culture is based on our S.T.E.E.L. Principles: Safety First; Trust and Respect; Environmental Stewardship; Excellence and Accountability; and Lawful and Ethical Conduct. We expect our employees and members of our board of directors to take personal responsibility to “do what’s right,” and our Code of Ethical Business Conduct serves as the foundation for the actions of our employees and directors. To further ensure that employees understand the Company’s expectations and all applicable rules, we provide annual formal ethics and compliance training to our employees and have frequent communications with information about key compliance topics, which include messages from senior management underscoring the importance of doing business with integrity. Employees also receive summaries of current events that demonstrate the need to do business lawfully and ethically that include reminders of the company’s expectations for all employees. In addition, through our annual policy certification process, employees of USSK, non-represented employees in the United States, and members of our board of directors certify their ongoing compliance with our Code of Ethical Business Conduct.
Employee Health & Safety
At U. S. Steel, we have a long-standing commitment to the safety and health of every person who works in our facilities. Every employee deserves to return home safely at the end of every day, and we are working to eliminate all injuries and incidents. In addition, the psychological safety of all employees is important to us. We have combined physical safety and psychological safety into the construct of 360° safety. Ensuring a safe workplace also improves productivity, quality, reliability and financial performance. By making safety and health a personal responsibility, our employees are making a daily commitment to follow safe work practices, look out for the safety of co-workers and ensure safe working conditions for everyone. A “Safety First” mindset is as essential to our success as the tools and technologies we rely on to do business.
Our objective is to attain a sustainable zero harm culture supported by leadership and owned by an engaged and highly skilled workforce, empowered with the capabilities and resources needed to assess, reduce and eliminate workplace risks and hazards. In support of these objectives, we have developed an enhanced Safety Management System, initiated new safety communication methods and enhanced contractor safety processes. One of our most important safety protocols is our fatality prevention audit program. These proactive assessments of the processes and protocols we have in place, and adherence to them, to avoid fatalities and severe injuries are conducted annually at the enterprise level and more frequently at each of our facilities. We assess our safety performance through a variety of lagging and leading indicators, including OSHA Days Away From Work (DAFW). This measurement allows us to evaluate the frequency of injuries sustained at our facilities requiring an employee to stay at home for more than one day. U. S. Steel has achieved record-safety performance in this measurement in the last several years, routinely achieving performance better than industry benchmarks.
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For 2022, we had a corporate DAFW rate of 0.05, which is 18 times better than the U.S. Bureau of Labor Statistics' Iron and Steel benchmark DAFW rate of 0.90.
Diversity, Equity, & Inclusion
Attracting, developing, and retaining a workforce of talented, diverse people is essential to having high-performing teams that drive results for our Company’s stakeholders. As part of our commitment to cultivating a culture of caring, we have inclusive benefits available for our U.S. non-represented workforce, including expanded parental leave, back-up dependent care, infertility coverage, gender reassignment coverage and healthcare continuation for the families of employees who suffered work-related or military service fatalities. We also support several employee resource groups (ERGs) to enhance employee engagement, promote a culture of belonging, foster diversity in the workplace, and raise awareness related to issues of identity and intersectionality. Our ERGs also provide training and education, mentorship and networking opportunities for their members.
Talent Attraction, Development and Retention
We believe that attraction, development and retention of talent is essential to our success, especially in today’s competitive labor market. We offer internship programs, partner with universities, community colleges and technical schools, and collaborate with community employment centers and economic development nonprofit organizations to build strong and diverse internal and external sources of potential employees and opportunities for our existing employee's growth and development.
Once at U. S. Steel, we seek to provide opportunities for continuous learning and development. All of our employees at a director-level and above have a formal professional development plan that is assessed at least annually. In addition, we proactively monitor our attrition rates and take targeted actions to ensure our highest potential and performing employees are motivated to remain with the Company. Over the past five years, our regrettable voluntary turnover rate has been at or below 5 percent.
We offer a competitive total rewards package of compensation and benefits that we regularly evaluate and benchmark across the manufacturing industry to ensure that we position U. S. Steel as an employer of choice.
At the onset of the pandemic in early 2020, we quickly transitioned our corporate and administrative employees, approximately 10% of our workforce, to a work-from-home environment. We’ve invested in technology to maintain this virtual community and found that our employees are more productive and have more flexibility and autonomy in managing their workload in a way that best fits their situation. We plan to maintain a virtual / hybrid working option for these employees in order to promote workplace flexibility and attract and retain highly qualified employees across the country.
Labor Relations
Approximately 80% of our employees in North America and Slovakia are covered by collective bargaining agreements. We work closely with union representatives to provide safe and productive workplaces that enable our employees to deliver high-quality products and meet the needs of our customers. Our relationship with the United Steelworkers (USW) includes not only a
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commitment to safety programs, but also a common approach to combating the unfairly traded imports that threaten our industry, our company and ultimately the jobs of our employees.
Certain hourly employees of U. S. Steel’s flat-rolled, tubular, cokemaking and iron ore operations in the United States are covered by collective bargaining agreements with the USW entered into effective September 1, 2022, (the 2022 Labor Agreements) that expire on September 1, 2026. The 2022 Labor Agreements include a signing bonus for each eligible USW-represented employee and annual 5% wage increases effective September 1, 2022, 2023, 2024 and 2025. The 2022 Labor Agreements also provide for certain increases to pension and retirement benefits, including increases in our defined benefit pension plan, retiree healthcare contributions, and to the contribution rate to the Steelworkers Pension Trust from $3.50 to $4.00 per hour, effective January 1, 2023. During the fourth quarter of 2022, U. S. Steel recorded a charge of approximately $67 million for the 2022 Labor Agreements signing bonus and related costs.
In addition, as part of the collective bargaining process, U. S. Steel and the USW agreed to leverage the overfunded OPEB plans to support the benefits provided to active represented employees. The OPEB plans were modified to allow the Company to utilize a certain amount of surplus assets to pay additional legally permissible benefits previously paid by the Company. The arrangement permits the Company to utilize a target of $75 million annually for active and retiree employee benefits, with an annual minimum of $50 million, beginning in 2023 and continuing through December 31, 2026. For additional information, see Note 18 to the Consolidated Financial Statements in Part II Item I. Business Strategy for further details8 of related strategies.this Form 10-K.
Capital Structure, Liquidity and Liquidity
Our Best for All strategy's primary financial goal is to enhance stockholder value by utilizing our capital structure, liquidity and financial flexibilityenhanced capital allocation priorities to deploy cash toadvance the Company's strategic objectives, generate stockholder value.long-term value and reward stockholders. Our cash deployment strategy is aligned with our world-competitive, “best of both”corporate strategy and includes: executing on strategic projects and portfolio moves; maintaining a strong balance sheet and a healthy pension plan; and delivering sustainable growth with a focus on core values such as safety and environmental stewardship.stewardship and rewarding stockholders for the continued progress we make. Cash deployment is also performed with a customer-centric focus on improving safety, our environment, quality, delivery and cost.
Our liquidity supports our ability to satisfy short-term obligations, fund working capital requirements and provides a foundation to execute key strategic priorities including the acquisition of our 49.9% ownership interest in Big River Steel that was completed in October 2019, the ongoing investment in the EAF within our Tubular segment and the endless casting and rolling facility at Mon Valley Works.
priorities. We are focused on maintaining a strong balance sheet and may proactively refinance or repay our debt from time to time to protect our capital structure from unforeseen external events and re-financing risks.
On September 2019, USSK drew down €150 million (approximately $165 million) from its €460 million (approximately $517 million) revolving credit facility (USSK Credit Agreement), most of which was repatriated from USSK to its parent,6, 2022, U. S. Steel. USSK entered into a supplemental agreement that amended the USSK Credit Agreement leverage covenant and pledged certain USSK trade receivables and inventory as collateral in supportSteel closed on an offering of USSK’s obligations. The USSK Credit Agreement financial covenants also include a minimum stockholders’ equity to assets ratio. We also launched offerings
In 2022, we repurchased approximately $365 million in debt, and we ended the year with $5.9 billion of total liquidity.
On July 25, 2022, following the completion of previously authorized $800 million share repurchase programs, the Board of Directors authorized a new share repurchase program for the repurchase of up to $500 million of the Company's outstanding common stock from time to time in the open market or privately negotiated transactions at the discretion of management. The Company's share repurchase program does not obligate it to acquire any specific number of shares.
U. S. Steel repurchased 37.6 million shares of common stock for approximately $849 million under these programs during the year ended December 31, 2022, and there is approximately $301 million remaining under the current stock repurchase authorization. In addition, the Board of Directors declared quarterly dividends of five cents per common share for each of the quarters in 2022.
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Facilities and Locations as of December 31, 2022
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Flat-Rolled
The operating results of all U. S. Steel's domestic-integrated steel and sheet plants, coke and iron ore operations and ore and sheet production joint ventures are included in Flat-Rolled. Also, included within Flat-Rolled is a research and technology center located in Munhall, Pennsylvania (near Pittsburgh) and a technology center in Troy, Michigan. The research and technology center carries out a wide range of applied research, development and technical support functions. The technology center brings automotive sales, service, distribution and logistics services, product technology and applications research into one location and much of U. S. Steel’s work in developing new grades of steel to meet the demands of automakers for high-strength, light-weight and formable materials is carried out at this location.
| Flat-Rolled Operations Table | ||||||||
| Operations, (Property Location) | Annual Production Capability | Principal Products and/or Services | ||||||
Gary Works, (Gary, Indiana)(a) | 7.5 million tons of raw steel | strip mill plate in coil; hot-rolled, cold-rolled and coated sheets; and tin mill products | ||||||
Midwest, (Portage, Indiana) | finishing facility | hot-rolled, cold-rolled and coated sheets; and tin mill products | ||||||
Great Lakes Works(b), (Ecorse, River Rouge and Dearborn, Michigan) | finishing facility | cold-rolled and coated sheets | ||||||
Mon Valley Works (c): Edgar Thompson, (Braddock, Pennsylvania), Irvin, (West Mifflin, Pennsylvania), Fairless, (Fairless Hills, Pennsylvania), and Clairton, (Clairton, Pennsylvania) | 2.9 million tons of raw steel and 4.3 million tons of coke | hot-rolled, cold-rolled and coated sheets; and coke and coke by-products | ||||||
Granite City Works (d), (Granite City, Illinois) | 2.8 million tons of raw steel | slabs and hot-rolled, cold-rolled and coated sheets | ||||||
Granite City Works, (Granite City, Illinois); Gateway Energy and Coke Company LLC (Gateway) | coke supply agreement | not applicable | ||||||
USS-UPI, LLC (UPI)(e), (Pittsburg, California) | finishing facility | cold-rolled and coated sheets; tin mill products | ||||||
Fairfield Works,(Fairfield, Alabama) | finishing facility | coated sheets | ||||||
Minnesota Ore Operations: Minntac, (Mt. Iron, Minnesota) and Keetac, (Keewatin, Minnesota) | 22.4 million tons of iron ore pellets | iron ore pellets | ||||||
(a) The majority of tin operations were indefinitely idled as of December 31, 2022. | ||||||||
(b) The steel and ironmaking production facilities were permanently idled in December of 2021 and June of 2022, respectively. Great Lakes Works' pickle line, cold mill and CGL continue to operate, while the DESCO and electrolytic galvanizing lines are indefinitely idled. | ||||||||
(c) From time to time, we may swap coke with other domestic steel producers or sell on the open market. Coke by-products are sold to the chemicals and raw materials industries. | ||||||||
(d) In March 2020, one of the blast furnaces at Granite City Works was indefinitely idled. | ||||||||
(e) In February 2020, UPI was added with the purchase of the remaining 50% ownership interest from POSCO. | ||||||||
Joint Ventures Within Flat-Rolled
U. S. Steel participates in a number of joint ventures that are included in Flat-Rolled, most of which are conducted through subsidiaries. All of these joint ventures are accounted for under the equity method. The significant joint ventures and other investments are described below.
Joint Ventures (a) Within Flat-Rolled Table | ||||||||
| Joint Venture, (Property Location) | U. S. Steel's Ownership Percentage | Annual Production Capability | ||||||
Hibbing Taconite Company (Hibbing); (Hibbing, Minnesota) | 14.7% | 9 million tons of which U. S. Steel's share is 1.3 million tons | ||||||
PRO-TEC Coating Company (PRO-TEC), (Leipsic, Ohio) | 50.0% | 2.0 million tons (b) | ||||||
Double G Coatings Company (Double G) (c); Jackson, Mississippi | 50.0% | 315 thousand tons | ||||||
Worthington Specialty Processing (Worthington) (d) | 49.0% | not applicable | ||||||
Chrome Deposit Corporation (CDC), (six locations near major steel plants) | 50.0% | not applicable | ||||||
(a) See further information about our equity investees in Note 12 to the Consolidated Financial Statements. | ||||||||
(b) U. S. Steel's domestic production facilities supply PRO-TEC with cold-rolled sheets and U. S. Steel markets all of PRO-TEC's products. | ||||||||
(c) Each partner supplies its own steel to Double G and markets what is processed by Double G. | ||||||||
(d) In 2022, Worthington Specialty Processing sold its remaining manufacturing facilities. The joint venture is expected to be dissolved in 2023. | ||||||||
Mini Mill
14
The operations of Big River Steel are included in Mini Mill. Big River Steel, located in Osceola, Arkansas, is an EAF sheet steel production facility.
| Mini Mill Operations Table | ||||||||
| Operations, (Property Location) | Annual Production Capability | Principal Products and/or Services | ||||||
Big River Steel, (Osceola, Arkansas) | 3.3 million tons of raw steel | hot-rolled, cold-rolled and coated sheets; and electrical steels | ||||||
USSE
USSE operates in Košice, Slovakia an integrated facility and a research laboratory, which, in conjunction with our Research and Technology Center, supports efforts in coke making, electrical steels, and design and instrumentation.
| USSE Operations Table | ||||||||
| Operations, (Property Location) | Annual Production Capability | Principal Products and/or Services | ||||||
U. S. Steel Košice, (Košice, Slovakia) | 5.0 million tons of raw steel | coke; slabs; strip mill plate: hot, cold and coated sheets; tin mill products; and spiral welded pipe | ||||||
Tubular
Tubular manufactures seamless and welded OCTG, standard pipe, line pipe and mechanical tubing.
| Tubular Operations Table | ||||||||
| Operations, (Property Location) | Production Capability | Principal Products and Services | ||||||
Fairfield Tubular Operations, (Fairfield, Alabama) | 0.9 million tons of raw steel (a) and 750 thousand tons of tubular | seamless tubular pipe | ||||||
Lorain Tubular Operations (b), (Lorain, Ohio) | 380 thousand tons of tubular | seamless tubular pipe | ||||||
Lone Star Tubular(b), (Lone Star, Texas) | #1 electric-weld pipe mill (EWPM) 400 thousand tons and #2 EWPM 380 thousand tons of tubular | welded tubular pipe | ||||||
Wheeling Machine Products(c), (Pine Bluff, Arkansas and Hughes Springs, Texas) | not applicable | tubular couplings | ||||||
Offshore Operations, (Houston, Texas) | not applicable | tubular threading, inspection, accessories and storage services and premium connections | ||||||
Tubular Processing (d), (Houston, Texas) | not applicable | tubular processing | ||||||
(a) Based on the rounds caster capacity which is its constraining production unit. | ||||||||
(b) In April 2020, the Lorain Tubular and Lone Star Tubular operations were temporarily idled for an indefinite period of time. | ||||||||
(c) In April 2020, the Wheeling Machine Products at Hughes Springs, Texas was temporarily idled for an indefinite period of time. | ||||||||
(d) Tubular Processing has been temporarily idled since 2015. | ||||||||
Joint Ventures (a) Within Tubular Table | |||||||||||
| Operations, (Property Location) | U. S. Steel's Ownership Percentage | Production Capability | Principal Products and/or Services | ||||||||
Patriot Premium Threading Services, (Midland, Texas) | 50% | not applicable | Tubular threading, accessories and premium connections | ||||||||
(a)See further information about our equity investees in Note 12 to the Consolidated Financial Statements. | |||||||||||
Other
U. S. Steel’s Other category includes the operating results relating to our real estate operations, the previously held equity method investment in Big River Steel, and our former railroad business. The Company intendsowns approximately 45,000 acres of real estate assets, either held for development or managed, in Alabama, Illinois, Michigan, Minnesota and Pennsylvania.
15
Raw Materials and Energy
As a predominantly integrated producer, U. S. Steel’s primary raw materials are iron units in the form of iron ore pellets and sinter ore, carbon units in the form of coal and coke (which is produced from coking coal) and steel scrap. For our EAF production, our primary raw material is scrap. U. S. Steel’s raw materials supply strategy consists of acquiring and expanding captive sources of certain primary raw materials and entering into flexible supply contracts for certain other raw materials at competitive market prices that are subject to usefluctuations based on market conditions at the net proceedstime.
The amounts of such raw materials needed to produce a ton of steel will fluctuate based upon the specifications of the final steel products, the quality of raw materials and, to a lesser extent, differences among steel producing equipment. In broad terms, the Company's integrated steel process consumes approximately 1.4 tons of coal to produce one ton of coke and then it consumes approximately 0.3 tons of coke, 0.3 tons of steel scrap (approximately 60 percent of which is internally generated) and 1.3 tons of iron ore pellets to produce one ton of raw steel. In addition, we consume approximately 10 mmbtu’s of natural gas per ton produced. Generally, the Company's mini mill operations consumes approximately 0.8 tons of steel scrap, 0.3 tons of pig iron, and 0.1 tons of HBI to produce one ton of raw steel. In addition, the mini mill operations consume approximately 0.6 MKWH of electricity per ton of raw steel produced. While we believe that these estimated consumption amounts are useful for planning purposes, and are presented to give a general corporate purposes,sense of raw material and energy consumption related to steel production, substantial variations may occur.
Iron Ore
(a) Includes our share of production from Hibbing through December 31, 2022.
The iron ore facilities at Minntac and Keetac contain approximately 900 million short tons of indicated resources and probable reserves and our share of recoverable reserves at the Hibbing joint venture is approximately 4 million short tons. Refer to Mining Properties in Item 2 of this Form 10-K for additional information. Recoverable reserves are defined as the tons of product that can be used internally or delivered to a customer after considering mining and beneficiation or preparation losses. Minntac and Keetac’s annual capability and our share of annual capability for the Hibbing joint venture total approximately 23 million tons. We have iron ore pellet production capability that exceeds our steelmaking capability in the U.S.
We historically have sold iron ore pellets to third parties, including without limitation,in 2022, 2021 and 2020. The Company has agreements to supply iron ore pellets to third-party customers over the next several years.
Substantially all of USSE’s iron ore requirements are purchased from outside sources, primarily Ukrainian and Brazilian mining companies. Prices are determined in long-term contracts with strategic suppliers or as spot prices negotiated monthly or quarterly. USSE also has received iron ore from U. S. Steel’s iron ore facilities in North America. We believe that supplies of iron ore adequate to meet USSE’s needs are available at competitive market prices.
Coking Coal
All of U. S. Steel’s coal requirements for previously announced strategic investmentsour cokemaking facilities are purchased from outside sources. Pricing for Flat-Rolled's coking coal contracts are typically negotiated on a yearly basis, and capital expenditures.
Prices for European contracts are negotiated quarterly, annually or determined as index-based prices.
16
We believe that supplies of coking coal adequate to meet our needs are available from outside sources at competitive market prices. The main source of coking coal for Flat-Rolled is the United States, and sources for USSE include Poland, Ukraine, Canada, Australia and the United States.
Coke
In North America, the Flat-Rolled segment operates a cokemaking facility at the Clairton Plant of Mon Valley Works. At our Granite City Works, we have a 15-year coke supply agreement with various financial institutionsGateway that expires on December 31, 2024. Blast furnace injection of coal, and self-generated coke oven gas is also used to reduce coke usage.
With Flat-Rolled’s cokemaking facilities and the Gateway long-term supply agreement, it has the capability to be nearly self-sufficient with respect to its annual coke requirements at normal operating levels. Coke from time to time has been purchased from, sold to, or swapped with suppliers and other end-users to adjust for production needs and reduce transportation costs.
In Europe, the USSE segment operates cokemaking facilities at USSK. While USSE is self-sufficient for coke at normal operating levels, it periodically purchases coke from Polish and Czech coke producers to meet production needs. Volume and price are negotiated quarterly.
Steel Scrap and Other Materials
We believe that supplies of steel scrap and alloys that are adequate to meet our needs are readily available from outside sources at competitive market prices for the purposeFlat-Rolled, Mini Mill and USSE segments. Generally, approximately 38 percent of financing equipmentour steel scrap requirements were internally generated through normal operations for these segments.
Limestone
All of Flat-Rolled’s limestone requirements and USSE's lime and limestone requirements are purchased from outside sources. We believe that supplies of limestone and lime adequate to meet our needs are readily available from outside sources at competitive market prices.
Zinc and Tin
We believe that supplies of zinc and tin required to fulfill the Mon Valley Works endless castingrequirements for Flat-Rolled, Mini Mill and rolling line. The ECA will makeUSSE are available two loan facilities, a Covered Facility notfrom outside sources at competitive market prices. For Flat-Rolled and Mini Mill the main sources of zinc are Canada, Mexico and the United States and the main sources of tin are Bolivia, Brazil and Peru. For USSE, the main sources of zinc are Finland, Poland, the Netherlands, Germany and Slovakia and the main sources of tin are Peru, Indonesia, China and Bolivia.
During 2022, Flat-Rolled protected approximately 40 percent and 75 percent of its operation's zinc and tin purchases, respectively, with financial swap derivatives to exceedmanage exposure to zinc and tin price fluctuations. During 2022, USSE protected approximately $250 million16 percent of its operation's zinc purchases with forward physical contracts to manage our exposure to zinc price fluctuations and a Commercial Facility notprotected approximately 68 percent of its operation's tin purchases with financial swaps to exceed approximately $38 million. Funding of the ECA is expectedmanage our exposure to occur during the first quarter of 2020. Seetin price fluctuations. For further information, see Note 1716 to the Consolidated Financial Statements for further details.Statements.
Natural Gas
All of U. S. Steel’s natural gas requirements are purchased from outside sources.
17
We ended 2019believe that adequate supplies to meet Flat-Rolled’s, Mini Mill's and Tubular's needs are available at competitive market prices. For 2022, approximately 70 percent of our natural gas purchases in Flat-Rolled were based on bids solicited on a monthly basis from various vendors; the remainder were made daily or with $2.3 billionterm agreements.
We believe that adequate natural gas supplies to meet USSE’s needs are available at competitive market prices. During 2022, we routinely executed fixed-price forward physical purchase contracts for natural gas to partially manage our exposure to natural gas price increases. For 2022, approximately 48 percent of total liquidity.our natural gas purchases in USSE were made with fixed-price forward physical purchase contracts; the remainder were based on bids solicited on a quarterly or monthly basis.
Flat-Rolled and USSE use self-generated coke oven and blast furnace gas to reduce consumption of natural gas. USSE uses self-generated coke oven, converter and blast furnace gas to reduce consumption of natural gas and steam coal that results in lower CO2 emissions production.
Additionally, Russian supply of natural gas to Europe has decreased significantly in response to enacted sanctions. However, Slovakia has natural gas storage and Competitionaccess to additional supply from countries including Norway, the U.S. and Africa. Together, these sources are enough to support the country's expected consumption through the 2023 winter season, which includes demand for natural gas for our USSE segment operations.
U. S. Steel competespurchases industrial gas in the U.S. under long-term contracts with many North Americanvarious suppliers. USSE owns and international steel producers. Competitors include 1) integrated producers, which, like U. S. Steel, use iron ore and coke as the primary raw materials for steel production, 2) EAF producers, which primarily use steel scrap and other iron-bearing feedstocks as raw materials and 3) slab re-rollers, whooperates its own industrial gas facility, but also may purchase mostly imported semi-finished products and convert them into sheet products. Global steel capacity has continuedindustrial gases from time to increase, with notable changes in 2018 Chinese crude steel production of 928 million metric tonnes, a 6.6% increasetime from 2017, and estimated to be more than 57 million metric tonnes above the apparent crude steel demand in China (source: worldsteel). In addition, other materials, such as aluminum, plastics and composites, compete with steel in several applications.
U. S. Steel continuesparticipates in a number of joint ventures that are included in Flat-Rolled, most of which are conducted through subsidiaries. All of these joint ventures are accounted for under the equity method. The significant joint ventures and other investments are described below.
Joint Ventures (a) Within Flat-Rolled Table | ||||||||
| Joint Venture, (Property Location) | U. S. Steel's Ownership Percentage | Annual Production Capability | ||||||
Hibbing Taconite Company (Hibbing); (Hibbing, Minnesota) | 14.7% | 9 million tons of which U. S. Steel's share is 1.3 million tons | ||||||
PRO-TEC Coating Company (PRO-TEC), (Leipsic, Ohio) | 50.0% | 2.0 million tons (b) | ||||||
Double G Coatings Company (Double G) (c); Jackson, Mississippi | 50.0% | 315 thousand tons | ||||||
Worthington Specialty Processing (Worthington) (d) | 49.0% | not applicable | ||||||
Chrome Deposit Corporation (CDC), (six locations near major steel plants) | 50.0% | not applicable | ||||||
(a) See further information about our equity investees in Note 12 to the Consolidated Financial Statements. | ||||||||
(b) U. S. Steel's domestic production facilities supply PRO-TEC with cold-rolled sheets and U. S. Steel markets all of PRO-TEC's products. | ||||||||
(c) Each partner supplies its own steel to Double G and markets what is processed by Double G. | ||||||||
(d) In 2022, Worthington Specialty Processing sold its remaining manufacturing facilities. The joint venture is expected to be dissolved in 2023. | ||||||||
Mini Mill
14
The operations of Big River Steel are included in Mini Mill. Big River Steel, located in Osceola, Arkansas, is an EAF sheet steel production facility.
| Mini Mill Operations Table | ||||||||
| Operations, (Property Location) | Annual Production Capability | Principal Products and/or Services | ||||||
Big River Steel, (Osceola, Arkansas) | 3.3 million tons of raw steel | hot-rolled, cold-rolled and coated sheets; and electrical steels | ||||||
USSE
USSE operates in Košice, Slovakia an integrated facility and a research laboratory, which, in conjunction with our Research and Technology Center, supports efforts in coke making, electrical steels, and design and instrumentation.
| USSE Operations Table | ||||||||
| Operations, (Property Location) | Annual Production Capability | Principal Products and/or Services | ||||||
U. S. Steel Košice, (Košice, Slovakia) | 5.0 million tons of raw steel | coke; slabs; strip mill plate: hot, cold and coated sheets; tin mill products; and spiral welded pipe | ||||||
Tubular
Tubular manufactures seamless and welded OCTG, standard pipe, line pipe and mechanical tubing.
| Tubular Operations Table | ||||||||
| Operations, (Property Location) | Production Capability | Principal Products and Services | ||||||
Fairfield Tubular Operations, (Fairfield, Alabama) | 0.9 million tons of raw steel (a) and 750 thousand tons of tubular | seamless tubular pipe | ||||||
Lorain Tubular Operations (b), (Lorain, Ohio) | 380 thousand tons of tubular | seamless tubular pipe | ||||||
Lone Star Tubular(b), (Lone Star, Texas) | #1 electric-weld pipe mill (EWPM) 400 thousand tons and #2 EWPM 380 thousand tons of tubular | welded tubular pipe | ||||||
Wheeling Machine Products(c), (Pine Bluff, Arkansas and Hughes Springs, Texas) | not applicable | tubular couplings | ||||||
Offshore Operations, (Houston, Texas) | not applicable | tubular threading, inspection, accessories and storage services and premium connections | ||||||
Tubular Processing (d), (Houston, Texas) | not applicable | tubular processing | ||||||
(a) Based on the rounds caster capacity which is its constraining production unit. | ||||||||
(b) In April 2020, the Lorain Tubular and Lone Star Tubular operations were temporarily idled for an indefinite period of time. | ||||||||
(c) In April 2020, the Wheeling Machine Products at Hughes Springs, Texas was temporarily idled for an indefinite period of time. | ||||||||
(d) Tubular Processing has been temporarily idled since 2015. | ||||||||
Joint Ventures (a) Within Tubular Table | |||||||||||
| Operations, (Property Location) | U. S. Steel's Ownership Percentage | Production Capability | Principal Products and/or Services | ||||||||
Patriot Premium Threading Services, (Midland, Texas) | 50% | not applicable | Tubular threading, accessories and premium connections | ||||||||
(a)See further information about our equity investees in Note 12 to the Consolidated Financial Statements. | |||||||||||
Other
U. S. Steel’s Other category includes the operating results relating to face import competition, muchour real estate operations, the previously held equity method investment in Big River Steel, and our former railroad business. The Company owns approximately 45,000 acres of real estate assets, either held for development or managed, in Alabama, Illinois, Michigan, Minnesota and Pennsylvania.
15
Raw Materials and Energy
As a predominantly integrated producer, U. S. Steel’s primary raw materials are iron units in the form of iron ore pellets and sinter ore, carbon units in the form of coal and coke (which is produced from coking coal) and steel scrap. For our EAF production, our primary raw material is scrap. U. S. Steel’s raw materials supply strategy consists of acquiring and expanding captive sources of certain primary raw materials and entering into flexible supply contracts for certain other raw materials at competitive market prices that are subject to fluctuations based on market conditions at the time.
The amounts of such raw materials needed to produce a ton of steel will fluctuate based upon the specifications of the final steel products, the quality of raw materials and, to a lesser extent, differences among steel producing equipment. In broad terms, the Company's integrated steel process consumes approximately 1.4 tons of coal to produce one ton of coke and then it consumes approximately 0.3 tons of coke, 0.3 tons of steel scrap (approximately 60 percent of which is unfairly traded, supported by foreign governments,internally generated) and fueled by massive global1.3 tons of iron ore pellets to produce one ton of raw steel. In addition, we consume approximately 10 mmbtu’s of natural gas per ton produced. Generally, the Company's mini mill operations consumes approximately 0.8 tons of steel overcapacity, currentlyscrap, 0.3 tons of pig iron, and 0.1 tons of HBI to produce one ton of raw steel. In addition, the mini mill operations consume approximately 0.6 MKWH of electricity per ton of raw steel produced. While we believe that these estimated consumption amounts are useful for planning purposes, and are presented to be over 440give a general sense of raw material and energy consumption related to steel production, substantial variations may occur.
Iron Ore
(a) Includes our share of production from Hibbing through December 31, 2022.
The iron ore facilities at Minntac and Keetac contain approximately 900 million metricshort tons per year. These imports, as wellof indicated resources and probable reserves and our share of recoverable reserves at the Hibbing joint venture is approximately 4 million short tons. Refer to Mining Properties in Item 2 of this Form 10-K for additional information. Recoverable reserves are defined as the underlying policies/practicestons of product that can be used internally or delivered to a customer after considering mining and overcapacity, impact the Company’s operationalbeneficiation or preparation losses. Minntac and financial performance. U. S. Steel continues to lead efforts to address these challenges that threaten the Company, our workers, our stockholders,Keetac’s annual capability and our country’s national and economic security.
We historically have sold iron ore pellets to third parties, including in 2022, 2021 and 2020. The Company has agreements to supply iron ore pellets to third-party customers over the next several years.
Substantially all of USSE’s iron ore requirements are currently six Section 232 challenges before the CIT. Multiple countries have challenged the Section 232 action at the World Trade Organization (WTO), imposed retaliatory tariffs, and/purchased from outside sources, primarily Ukrainian and Brazilian mining companies. Prices are determined in long-term contracts with strategic suppliers or acted to safeguard their domestic steel industriesas spot prices negotiated monthly or quarterly. USSE also has received iron ore from increased steel imports. In turn, the United States has challenged the retaliation at the WTO.
Prices for European contracts are negotiated quarterly, annually or sell ondetermined as index-based prices.
16
We believe that supplies of coking coal adequate to meet our needs are available from outside sources at competitive market prices. The main source of coking coal for Flat-Rolled is the open market. Coke by-products are sold toUnited States, and sources for USSE include Poland, Ukraine, Canada, Australia and the chemicals and raw materials industries.United States.
In North America, the Flat-Rolled segment operates a cokemaking facility at the Clairton Plant of Mon Valley Works. At our Granite City Works, located in Granite City, Illinois, has annual raw steel production capability of 2.8 million tons. Granite City’s facilities includes two blast furnaces, two steelmaking vessels, two slab casters, a hot strip mill, a pickling line, a tandem cold reduction mill, a hot dip galvanizing line and a hot dip galvanizing/Galvalume® line. Principal products include hot-rolled and coated sheets. Gateway Energy and Coke Company LLC (Gateway) constructed a coke plant to supply Granite City Works with coke underwe have a 15-year coke supply agreement with Gateway that expires on December 31, 2024. Blast furnace injection of coal, and self-generated coke oven gas is also used to reduce coke usage.
With Flat-Rolled’s cokemaking facilities and the Gateway long-term supply agreement, it has the capability to be nearly self-sufficient with respect to its annual coke requirements at normal operating levels. Coke from time to time has been purchased from, sold to, or swapped with suppliers and other end-users to adjust for production needs and reduce transportation costs.
In Europe, the USSE segment operates cokemaking facilities at USSK. While USSE is self-sufficient for coke at normal operating levels, it periodically purchases coke from Polish and Czech coke producers to meet production needs. Volume and price are negotiated quarterly.
Steel Scrap and Other Materials
We believe that supplies of steel scrap and alloys that are adequate to meet our needs are readily available from outside sources at competitive market prices for the Flat-Rolled, Mini Mill and USSE segments. Generally, approximately 38 percent of our steel scrap requirements were internally generated through normal operations for these segments.
Limestone
All of Flat-Rolled’s limestone requirements and USSE's lime and limestone requirements are purchased from outside sources. We believe that supplies of limestone and lime adequate to meet our needs are readily available from outside sources at competitive market prices.
Zinc and Tin
We believe that supplies of zinc and tin required to fulfill the requirements for Flat-Rolled, Mini Mill and USSE are available from outside sources at competitive market prices. For Flat-Rolled and Mini Mill the main sources of zinc are Canada, Mexico and the United States and the main sources of tin are Bolivia, Brazil and Peru. For USSE, the main sources of zinc are Finland, Poland, the Netherlands, Germany and Slovakia and the main sources of tin are Peru, Indonesia, China and Bolivia.
During 2022, Flat-Rolled protected approximately 40 percent and 75 percent of its operation's zinc and tin purchases, respectively, with financial swap derivatives to manage exposure to zinc and tin price fluctuations. During 2022, USSE protected approximately 16 percent of its operation's zinc purchases with forward physical contracts to manage our exposure to zinc price fluctuations and protected approximately 68 percent of its operation's tin purchases with financial swaps to manage our exposure to tin price fluctuations. For further information, see Note 16 to the Consolidated Financial Statements.
Natural Gas
All of U. S. Steel ownsSteel’s natural gas requirements are purchased from outside sources.
17
We believe that adequate supplies to meet Flat-Rolled’s, Mini Mill's and operatesTubular's needs are available at competitive market prices. For 2022, approximately 70 percent of our natural gas purchases in Flat-Rolled were based on bids solicited on a cogeneration facilitymonthly basis from various vendors; the remainder were made daily or with term agreements.
We believe that utilizes by-productsadequate natural gas supplies to meet USSE’s needs are available at competitive market prices. During 2022, we routinely executed fixed-price forward physical purchase contracts for natural gas to partially manage our exposure to natural gas price increases. For 2022, approximately 48 percent of our natural gas purchases in USSE were made with fixed-price forward physical purchase contracts; the remainder were based on bids solicited on a quarterly or monthly basis.
Flat-Rolled and USSE use self-generated coke oven and blast furnace gas to reduce consumption of natural gas. USSE uses self-generated coke oven, converter and blast furnace gas to reduce consumption of natural gas and steam coal that results in lower CO2 emissions production.
Additionally, Russian supply of natural gas to Europe has decreased significantly in response to enacted sanctions. However, Slovakia has natural gas storage and access to additional supply from countries including Norway, the Gateway coke plantU.S. and Africa. Together, these sources are enough to generate heat and power.support the country's expected consumption through the 2023 winter season, which includes demand for natural gas for our USSE segment operations.
U. S. Steel purchases industrial gas in the U.S. under long-term contracts with various suppliers. USSE owns a Research and Technology Center located in Munhall, Pennsylvania, (near Pittsburgh) where we carry out a wide range of applied research, development and technical support functions.operates its own industrial gas facility, but also may purchase industrial gases from time to time from third parties.
Joint Ventures Within Flat-Rolled
U. S. Steel participates in a number of joint ventures that are included in Flat-Rolled, most of which are conducted through subsidiaries. All of these joint ventures are accounted for under the equity method. The significant joint ventures and other investments are described below. For information regarding joint ventures and other investments, see Note 12 to the Consolidated Financial Statements.
Joint Ventures (a) Within Flat-Rolled Table | ||||||||
| Joint Venture, (Property Location) | U. S. Steel's Ownership Percentage | Annual Production Capability | ||||||
Hibbing Taconite Company (Hibbing); (Hibbing, Minnesota) | 14.7% | 9 million tons of which U. S. Steel's share is 1.3 million tons | ||||||
PRO-TEC Coating Company (PRO-TEC), (Leipsic, Ohio) | 50.0% | 2.0 million tons (b) | ||||||
Double G Coatings Company (Double G) (c); Jackson, Mississippi | 50.0% | 315 thousand tons | ||||||
Worthington Specialty Processing (Worthington) (d) | 49.0% | not applicable | ||||||
Chrome Deposit Corporation (CDC), (six locations near major steel plants) | 50.0% | not applicable | ||||||
(a) See further information about our equity investees in Note 12 to the Consolidated Financial Statements. | ||||||||
(b) U. S. Steel's domestic production facilities supply PRO-TEC with cold-rolled sheets and U. S. Steel markets all of PRO-TEC's products. | ||||||||
(c) Each partner supplies its own steel to Double G and markets what is processed by Double G. | ||||||||
(d) In 2022, Worthington Specialty Processing sold its remaining manufacturing facilities. The joint venture is expected to be dissolved in 2023. | ||||||||
Mini Mill
14
The operations of Big River Steel has a 14.7 percent ownership interestare included in Hibbing Taconite Company (Hibbing), which is based in Hibbing, Minnesota. Hibbing’s rated annual production capability is 9.0 million tons of iron ore pellets, of which our share is about 1.3 million tons.
| Mini Mill Operations Table | ||||||||
| Operations, (Property Location) | Annual Production Capability | Principal Products and/or Services | ||||||
Big River Steel, (Osceola, Arkansas) | 3.3 million tons of raw steel | hot-rolled, cold-rolled and coated sheets; and electrical steels | ||||||
USSE
USSE operates an integrated facility in Košice, Slovakia which has annual raw steel production capability of 5.0 million tons. Thisan integrated facility has two coke batteries, four sintering strands, three blast furnaces, four steelmaking vessels, a vacuum degassing unit, two dual strand casters, a hot strip mill, two pickling lines, two cold reduction mills, four annealing facilities, a temper mill, a temper/double cold reduction mill, three hot dip galvanizing lines, two tin coating lines, a dynamo line, a color coating line and two spiral welded pipe mills. USSE also has multiple slitting, cutting and other finishing lines for flat products. Principal products include hot-rolled, cold-rolled and coated sheets, tin mill products and spiral welded pipe. USSE also has facilities for manufacturing refractory ceramic materials and has a power plant for internal steam and electricity generation. In June 2019, one of the blast furnaces at USSE was temporarily idled and currently remains idled.
| USSE Operations Table | ||||||||
| Operations, (Property Location) | Annual Production Capability | Principal Products and/or Services | ||||||
U. S. Steel Košice, (Košice, Slovakia) | 5.0 million tons of raw steel | coke; slabs; strip mill plate: hot, cold and coated sheets; tin mill products; and spiral welded pipe | ||||||
Tubular
Tubular manufactures seamless and welded OCTG, standard pipe, line pipe and mechanical tubing.
| Tubular Operations Table | ||||||||
| Operations, (Property Location) | Production Capability | Principal Products and Services | ||||||
Fairfield Tubular Operations, (Fairfield, Alabama) | 0.9 million tons of raw steel (a) and 750 thousand tons of tubular | seamless tubular pipe | ||||||
Lorain Tubular Operations (b), (Lorain, Ohio) | 380 thousand tons of tubular | seamless tubular pipe | ||||||
Lone Star Tubular(b), (Lone Star, Texas) | #1 electric-weld pipe mill (EWPM) 400 thousand tons and #2 EWPM 380 thousand tons of tubular | welded tubular pipe | ||||||
Wheeling Machine Products(c), (Pine Bluff, Arkansas and Hughes Springs, Texas) | not applicable | tubular couplings | ||||||
Offshore Operations, (Houston, Texas) | not applicable | tubular threading, inspection, accessories and storage services and premium connections | ||||||
Tubular Processing (d), (Houston, Texas) | not applicable | tubular processing | ||||||
(a) Based on the rounds caster capacity which is its constraining production unit. | ||||||||
(b) In April 2020, the Lorain Tubular and Lone Star Tubular operations were temporarily idled for an indefinite period of time. | ||||||||
(c) In April 2020, the Wheeling Machine Products at Hughes Springs, Texas was temporarily idled for an indefinite period of time. | ||||||||
(d) Tubular Processing has been temporarily idled since 2015. | ||||||||
Joint Ventures (a) Within Tubular Table | |||||||||||
| Operations, (Property Location) | U. S. Steel's Ownership Percentage | Production Capability | Principal Products and/or Services | ||||||||
Patriot Premium Threading Services, (Midland, Texas) | 50% | not applicable | Tubular threading, accessories and premium connections | ||||||||
(a)See further information about our equity investees in Note 12 to the Consolidated Financial Statements. | |||||||||||
Other
U. S. Steel’s Other Businesses includecategory includes the operating results relating to our 49.9% ownership interestreal estate operations, the previously held equity method investment in Big River Steel, and our former railroad services and real estate operations.
15
9
Human Capital Management
At U. S. Steel, we are focused on attracting and retaining the top talent needed to support our strategic transformation and meet our customers’ evolving needs as a sustainable steel solutions provider. The support and development of our people is foundational to achieving our Best for All strategy. We refer to this strategic talent pillar as “Moving Up the Talent Curve.”
Our focus on people extends to our current and future employees. We aim to have an engaged and diverse workforce to promote new ideas and innovation, reflect the communities where we operate, and deliver exceptional customer service. We seek to build an inclusive environment where people feel free to bring their professional selves to work. To achieve the Best for All strategy, we must have the “Best from All.”
| Active Employees as of December 31, 2022 | |||||
| North America | 14,487 | ||||
| Slovakia | 8,253 | ||||
| Total | 22,740 | ||||
Ethics & Compliance
Our culture is based on our S.T.E.E.L. Principles: Safety First; Trust and Respect; Environmental Stewardship; Excellence and Accountability; and Lawful and Ethical Conduct. We expect our employees and members of our board of directors to take personal responsibility to “do what’s right,” and our Code of Ethical Business Conduct serves as the foundation for the actions of our employees and directors. To further ensure that employees understand the Company’s expectations and all applicable rules, we provide annual formal ethics and compliance training to our employees and have frequent communications with information about key compliance topics, which include messages from senior management underscoring the importance of doing business with integrity. Employees also receive summaries of current events that demonstrate the need to do business lawfully and ethically that include reminders of the company’s expectations for all employees. In addition, through our annual policy certification process, employees of USSK, non-represented employees in the United States, and members of our board of directors certify their ongoing compliance with our Code of Ethical Business Conduct.
Employee Health & Safety
At U. S. Steel, we have a long-standing commitment to the safety and health of every person who works in our facilities. Every employee deserves to return home safely at the end of every day, and we are working to eliminate all injuries and incidents. In addition, the psychological safety of all employees is important to us. We have combined physical safety and psychological safety into the construct of 360° safety. Ensuring a safe workplace also improves productivity, quality, reliability and financial performance. By making safety and health a personal responsibility, our employees are making a daily commitment to follow safe work practices, look out for the safety of co-workers and ensure safe working conditions for everyone. A “Safety First” mindset is as essential to our success as the tools and technologies we rely on to do business.
Our objective is to attain a sustainable zero harm culture supported by leadership and owned by an engaged and highly skilled workforce, empowered with the capabilities and resources needed to assess, reduce and eliminate workplace risks and hazards. In support of these objectives, we have developed an enhanced Safety Management System, initiated new safety communication methods and enhanced contractor safety processes. One of our most important safety protocols is our fatality prevention audit program. These proactive assessments of the processes and protocols we have in place, and adherence to them, to avoid fatalities and severe injuries are conducted annually at the enterprise level and more frequently at each of our facilities. We assess our safety performance through a variety of lagging and leading indicators, including OSHA Days Away From Work (DAFW). This measurement allows us to evaluate the frequency of injuries sustained at our facilities requiring an employee to stay at home for more than one day. U. S. Steel has achieved record-safety performance in this measurement in the last several years, routinely achieving performance better than industry benchmarks.
10
For 2022, we had a corporate DAFW rate of 0.05, which is internally generated)18 times better than the U.S. Bureau of Labor Statistics' Iron and 1.3 tonsSteel benchmark DAFW rate of iron ore pellets0.90.
Diversity, Equity, & Inclusion
Attracting, developing, and retaining a workforce of talented, diverse people is essential to produce one tonhaving high-performing teams that drive results for our Company’s stakeholders. As part of raw steel. At normal operating levels,our commitment to cultivating a culture of caring, we have inclusive benefits available for our U.S. non-represented workforce, including expanded parental leave, back-up dependent care, infertility coverage, gender reassignment coverage and healthcare continuation for the families of employees who suffered work-related or military service fatalities. We also consume approximately 6 mmbtu’ssupport several employee resource groups (ERGs) to enhance employee engagement, promote a culture of natural gas per ton produced. While we believe that these estimated consumption amounts are useful for planning purposes,belonging, foster diversity in the workplace, and are presented to give a general sense of raw material and energy consumptionraise awareness related to steel production, substantial variations may occur.
Once at U. S. Steel, we seek to provide opportunities for continuous learning and development. All of our employees at a director-level and above have a formal professional development plan that is assessed at least annually. In addition, we proactively monitor our attrition rates and take targeted actions to ensure our highest potential and performing employees are motivated to remain with the Company. Over the past five years, our regrettable voluntary turnover rate has been at or below 5 percent.
We offer a competitive total rewards package of compensation and benefits that we regularly evaluate and benchmark across the manufacturing industry to ensure that we position U. S. Steel as an employer of choice.
At the onset of the pandemic in early 2020, we quickly transitioned our corporate and administrative employees, approximately 10% of our workforce, to a work-from-home environment. We’ve invested in technology to maintain this virtual community and found that our employees are more productive and have more flexibility and autonomy in managing their workload in a way that best fits their situation. We plan to maintain a virtual / hybrid working option for these employees in order to promote workplace flexibility and attract and retain highly qualified employees across the country.
Labor Relations
Approximately 80% of our employees in North America and Slovakia are covered by collective bargaining agreements. We work closely with union representatives to provide safe and productive workplaces that enable our employees to deliver high-quality products and meet USSE’sthe needs are available at competitive market prices.of our customers. Our relationship with the United Steelworkers (USW) includes not only a
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In addition, as part of the collective bargaining process, U. S. Steel and the USW agreed to leverage the overfunded OPEB plans to support the benefits provided to active represented employees. The OPEB plans were modified to allow the Company to utilize a certain amount of surplus assets to pay additional legally permissible benefits previously paid by the Company. The arrangement permits the Company to utilize a target of $75 million annually for active and retiree employee benefits, with an annual minimum of $50 million, beginning in 2023 and continuing through December 31, 2026. For additional information, see Note 18 to the Consolidated Financial Statements in Part II Item 8 of this Form 10-K.
Capital Structure, Liquidity and Capital Allocation
Our Best for All strategy's primary financial goal is to enhance stockholder value by utilizing our capital structure, liquidity and enhanced capital allocation priorities to advance the Company's strategic objectives, generate long-term value and reward stockholders. Our cash deployment strategy is aligned with our corporate strategy and includes: executing on strategic projects and portfolio moves; maintaining a strong balance sheet and a healthy pension plan; and delivering sustainable growth with a focus on core values such as safety and environmental stewardship and rewarding stockholders for the continued progress we make. Cash deployment is also performed with a customer-centric focus on improving safety, our environment, quality, delivery and cost.
Our liquidity supports our ability to satisfy short-term obligations, fund working capital requirements forand provides a foundation to execute key strategic priorities. We are focused on maintaining a strong balance sheet and may proactively refinance or repay our cokemaking facilities are purchased from outside sources. Pricing for Flat-Rolled's coking coal contracts are typically negotiated on a yearly basis, anddebt from time to time we haveto protect our capital structure from unforeseen external events and re-financing risks.
On May 27, 2022, U. S. Steel entered into multi-year agreements for a portionthe Sixth Amended and Restated Credit Facility Agreement (Credit Facility Agreement) to replace the existing Fifth Amended and Restated Credit Facility Agreement (Fifth Credit Facility Agreement). The Credit Facility Agreement has substantially the same terms as the Fifth Credit Facility Agreement, except the Credit Facility Agreement references the Secured Overnight Financing Rate instead of our coking coal requirements.
In North America,2022, we repurchased approximately $365 million in debt, and we ended the Flat-Rolled segment operatesyear with $5.9 billion of total liquidity.
On July 25, 2022, following the completion of previously authorized $800 million share repurchase programs, the Board of Directors authorized a cokemaking facility atnew share repurchase program for the Clairton Plantrepurchase of Mon Valley Works. At our Granite City Works, we also have a 15-year coke supply agreement with Gateway that expires on December 31, 2024. Blast furnace injectionup to $500 million of coal, and self-generated coke oven gas is also used to reduce coke usage.
U. S. Steel repurchased 37.6 million shares of common stock for approximately $849 million under these programs during the year ended December 31, 2022, and other end-users to adjustthere is approximately $301 million remaining under the current stock repurchase authorization. In addition, the Board of Directors declared quarterly dividends of five cents per common share for each of the quarters in 2022.
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Facilities and Locations as of December 31, 2022
13
Flat-Rolled
The operating results of all U. S. Steel's domestic-integrated steel and sheet plants, coke and iron ore operations and ore and sheet production needsjoint ventures are included in Flat-Rolled. Also, included within Flat-Rolled is a research and reduce transportation costs.
| Flat-Rolled Operations Table | ||||||||
| Operations, (Property Location) | Annual Production Capability | Principal Products and/or Services | ||||||
Gary Works, (Gary, Indiana)(a) | 7.5 million tons of raw steel | strip mill plate in coil; hot-rolled, cold-rolled and coated sheets; and tin mill products | ||||||
Midwest, (Portage, Indiana) | finishing facility | hot-rolled, cold-rolled and coated sheets; and tin mill products | ||||||
Great Lakes Works(b), (Ecorse, River Rouge and Dearborn, Michigan) | finishing facility | cold-rolled and coated sheets | ||||||
Mon Valley Works (c): Edgar Thompson, (Braddock, Pennsylvania), Irvin, (West Mifflin, Pennsylvania), Fairless, (Fairless Hills, Pennsylvania), and Clairton, (Clairton, Pennsylvania) | 2.9 million tons of raw steel and 4.3 million tons of coke | hot-rolled, cold-rolled and coated sheets; and coke and coke by-products | ||||||
Granite City Works (d), (Granite City, Illinois) | 2.8 million tons of raw steel | slabs and hot-rolled, cold-rolled and coated sheets | ||||||
Granite City Works, (Granite City, Illinois); Gateway Energy and Coke Company LLC (Gateway) | coke supply agreement | not applicable | ||||||
USS-UPI, LLC (UPI)(e), (Pittsburg, California) | finishing facility | cold-rolled and coated sheets; tin mill products | ||||||
Fairfield Works,(Fairfield, Alabama) | finishing facility | coated sheets | ||||||
Minnesota Ore Operations: Minntac, (Mt. Iron, Minnesota) and Keetac, (Keewatin, Minnesota) | 22.4 million tons of iron ore pellets | iron ore pellets | ||||||
(a) The majority of tin operations were indefinitely idled as of December 31, 2022. | ||||||||
(b) The steel and ironmaking production facilities were permanently idled in December of 2021 and June of 2022, respectively. Great Lakes Works' pickle line, cold mill and CGL continue to operate, while the DESCO and electrolytic galvanizing lines are indefinitely idled. | ||||||||
(c) From time to time, we may swap coke with other domestic steel producers or sell on the open market. Coke by-products are sold to the chemicals and raw materials industries. | ||||||||
(d) In March 2020, one of the blast furnaces at Granite City Works was indefinitely idled. | ||||||||
(e) In February 2020, UPI was added with the purchase of the remaining 50% ownership interest from POSCO. | ||||||||
Joint Ventures Within Flat-Rolled were based on bids solicited on a monthly basis from various vendors; the remainder were made daily or with term agreements.
U. S. Steel purchases industrial gasparticipates in a number of joint ventures that are included in Flat-Rolled, most of which are conducted through subsidiaries. All of these joint ventures are accounted for under the U.S. under long-term contractsequity method. The significant joint ventures and other investments are described below.
Joint Ventures (a) Within Flat-Rolled Table | ||||||||
| Joint Venture, (Property Location) | U. S. Steel's Ownership Percentage | Annual Production Capability | ||||||
Hibbing Taconite Company (Hibbing); (Hibbing, Minnesota) | 14.7% | 9 million tons of which U. S. Steel's share is 1.3 million tons | ||||||
PRO-TEC Coating Company (PRO-TEC), (Leipsic, Ohio) | 50.0% | 2.0 million tons (b) | ||||||
Double G Coatings Company (Double G) (c); Jackson, Mississippi | 50.0% | 315 thousand tons | ||||||
Worthington Specialty Processing (Worthington) (d) | 49.0% | not applicable | ||||||
Chrome Deposit Corporation (CDC), (six locations near major steel plants) | 50.0% | not applicable | ||||||
(a) See further information about our equity investees in Note 12 to the Consolidated Financial Statements. | ||||||||
(b) U. S. Steel's domestic production facilities supply PRO-TEC with cold-rolled sheets and U. S. Steel markets all of PRO-TEC's products. | ||||||||
(c) Each partner supplies its own steel to Double G and markets what is processed by Double G. | ||||||||
(d) In 2022, Worthington Specialty Processing sold its remaining manufacturing facilities. The joint venture is expected to be dissolved in 2023. | ||||||||
Mini Mill
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The operations of Big River Steel are included in Mini Mill. Big River Steel, located in Osceola, Arkansas, is an EAF sheet steel production facility.
| Mini Mill Operations Table | ||||||||
| Operations, (Property Location) | Annual Production Capability | Principal Products and/or Services | ||||||
Big River Steel, (Osceola, Arkansas) | 3.3 million tons of raw steel | hot-rolled, cold-rolled and coated sheets; and electrical steels | ||||||
USSE
USSE operates in Košice, Slovakia an integrated facility and a research laboratory, which, in conjunction with various suppliers. our Research and Technology Center, supports efforts in coke making, electrical steels, and design and instrumentation.
| USSE Operations Table | ||||||||
| Operations, (Property Location) | Annual Production Capability | Principal Products and/or Services | ||||||
U. S. Steel Košice, (Košice, Slovakia) | 5.0 million tons of raw steel | coke; slabs; strip mill plate: hot, cold and coated sheets; tin mill products; and spiral welded pipe | ||||||
Tubular
Tubular manufactures seamless and welded OCTG, standard pipe, line pipe and mechanical tubing.
| Tubular Operations Table | ||||||||
| Operations, (Property Location) | Production Capability | Principal Products and Services | ||||||
Fairfield Tubular Operations, (Fairfield, Alabama) | 0.9 million tons of raw steel (a) and 750 thousand tons of tubular | seamless tubular pipe | ||||||
Lorain Tubular Operations (b), (Lorain, Ohio) | 380 thousand tons of tubular | seamless tubular pipe | ||||||
Lone Star Tubular(b), (Lone Star, Texas) | #1 electric-weld pipe mill (EWPM) 400 thousand tons and #2 EWPM 380 thousand tons of tubular | welded tubular pipe | ||||||
Wheeling Machine Products(c), (Pine Bluff, Arkansas and Hughes Springs, Texas) | not applicable | tubular couplings | ||||||
Offshore Operations, (Houston, Texas) | not applicable | tubular threading, inspection, accessories and storage services and premium connections | ||||||
Tubular Processing (d), (Houston, Texas) | not applicable | tubular processing | ||||||
(a) Based on the rounds caster capacity which is its constraining production unit. | ||||||||
(b) In April 2020, the Lorain Tubular and Lone Star Tubular operations were temporarily idled for an indefinite period of time. | ||||||||
(c) In April 2020, the Wheeling Machine Products at Hughes Springs, Texas was temporarily idled for an indefinite period of time. | ||||||||
(d) Tubular Processing has been temporarily idled since 2015. | ||||||||
Joint Ventures (a) Within Tubular Table | |||||||||||
| Operations, (Property Location) | U. S. Steel's Ownership Percentage | Production Capability | Principal Products and/or Services | ||||||||
Patriot Premium Threading Services, (Midland, Texas) | 50% | not applicable | Tubular threading, accessories and premium connections | ||||||||
(a)See further information about our equity investees in Note 12 to the Consolidated Financial Statements. | |||||||||||
Other
U. S. Steel’s Other category includes the operating results relating to our real estate operations, the previously held equity method investment in Big River Steel, and our former railroad business. The Company owns approximately 45,000 acres of real estate assets, either held for development or managed, in Alabama, Illinois, Michigan, Minnesota and operates its own industrial gas facilities, but also may purchase industrial gases from time to time.Pennsylvania.
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Commercial Sales of Product
U. S. Steel characterizes sales as contract sales if sold pursuant to an agreement with a defined volume and pricing and a duration of longer than three months, and as spot if sold without a defined volume and pricing agreement.agreement, typically three months or less. In 2019,2022, approximately 7776 percent, 6361 percent, 48 percent and 3678 percent of sales by Flat-Rolled, Mini Mill, USSE and Tubular, respectively, were contract sales. Some contract pricing agreements include fixed prices while others are adjusted periodically based upon published prices of steel products or cost components.
9
Human Capital Management
At U. S. Steel, we are focused on attracting and retaining the top talent needed to support our strategic transformation and meet our customers’ evolving needs as a sustainable steel solutions provider. The support and development of our people is foundational to achieving our Best for All strategy. We refer to this strategic talent pillar as “Moving Up the Talent Curve.”
Our focus on people extends to our current and future employees. We aim to have an engaged and diverse workforce to promote new ideas and innovation, reflect the communities where we operate, and deliver exceptional customer service. We seek to build an inclusive environment where people feel free to bring their professional selves to work. To achieve the Best for All strategy, we must have the “Best from All.”
| Active Employees as of December 31, 2022 | |||||
| North America | 14,487 | ||||
| Slovakia | 8,253 | ||||
| Total | 22,740 | ||||
Ethics & Compliance
Our culture is based on our S.T.E.E.L. Principles: Safety First; Trust and Respect; Environmental Stewardship; Excellence and Accountability; and Lawful and Ethical Conduct. We expect our employees and members of our board of directors to take personal responsibility to “do what’s right,” and our Code of Ethical Business Conduct serves as the foundation for the actions of our employees and directors. To further ensure that employees understand the Company’s expectations and all applicable rules, we provide annual formal ethics and compliance training to our employees and have frequent communications with information about key compliance topics, which include messages from senior management underscoring the importance of doing business with integrity. Employees also receive summaries of current events that demonstrate the need to do business lawfully and ethically that include reminders of the company’s expectations for all employees. In addition, through our annual policy certification process, employees of USSK, non-represented employees in the United States, and members of our board of directors certify their ongoing compliance with our Code of Ethical Business Conduct.
Employee Health & Safety
At U. S. Steel, we have a long-standing commitment to the safety and health of every person who works in our facilities. Every employee deserves to return home safely at the end of every day, and we are working to eliminate all injuries and incidents. In addition, the psychological safety of all employees is important to us. We have combined physical safety and psychological safety into the construct of 360° safety. Ensuring a safe workplace also improves productivity, quality, reliability and financial performance. By making safety and health a personal responsibility, our employees are making a daily commitment to follow safe work practices, look out for the safety of co-workers and ensure safe working conditions for everyone. A “Safety First” mindset is as essential to our success as the tools and technologies we rely on to do business.
Our objective is to attain a sustainable zero harm culture supported by leadership and owned by an engaged and highly skilled workforce, empowered with the capabilities and resources needed to assess, reduce and eliminate workplace risks and hazards. In support of these objectives, we have developed an enhanced Safety Management System, initiated new safety communication methods and enhanced contractor safety processes. One of our most important safety protocols is our fatality prevention audit program. These proactive assessments of the processes and protocols we have in place, and adherence to them, to avoid fatalities and severe injuries are conducted annually at the enterprise level and more frequently at each of our facilities. We assess our safety performance through a variety of lagging and leading indicators, including OSHA Days Away From Work (DAFW). This measurement allows us to evaluate the frequency of injuries sustained at our facilities requiring an employee to stay at home for more than one day. U. S. Steel has achieved record-safety performance in this measurement in the last several years, routinely achieving performance better than industry benchmarks.
10
For 2022, we had a corporate DAFW rate of 0.05, which is 18 times better than the U.S. Bureau of Labor Statistics' Iron and Steel benchmark DAFW rate of 0.90.
Diversity, Equity, & Inclusion
Attracting, developing, and retaining a workforce of talented, diverse people is essential to having high-performing teams that drive results for our Company’s stakeholders. As part of our commitment to cultivating a culture of caring, we have inclusive benefits available for our U.S. non-represented workforce, including expanded parental leave, back-up dependent care, infertility coverage, gender reassignment coverage and healthcare continuation for the families of employees who suffered work-related or military service fatalities. We also support several employee resource groups (ERGs) to enhance employee engagement, promote a culture of belonging, foster diversity in the workplace, and raise awareness related to issues of identity and intersectionality. Our ERGs also provide training and education, mentorship and networking opportunities for their members.
Talent Attraction, Development and Retention
We believe that attraction, development and retention of talent is essential to our success, especially in today’s competitive labor market. We offer internship programs, partner with universities, community colleges and technical schools, and collaborate with community employment centers and economic development nonprofit organizations to build strong and diverse internal and external sources of potential employees and opportunities for our existing employee's growth and development.
Once at U. S. Steel, we seek to provide opportunities for continuous learning and development. All of our employees at a director-level and above have a formal professional development plan that is assessed at least annually. In addition, we proactively monitor our attrition rates and take targeted actions to ensure our highest potential and performing employees are motivated to remain with the Company. Over the past five years, our regrettable voluntary turnover rate has been at or below 5 percent.
We offer a competitive total rewards package of compensation and benefits that we regularly evaluate and benchmark across the manufacturing industry to ensure that we position U. S. Steel as an employer of choice.
At the onset of the pandemic in early 2020, we quickly transitioned our corporate and administrative employees, approximately 10% of our workforce, to a work-from-home environment. We’ve invested in technology to maintain this virtual community and found that our employees are more productive and have more flexibility and autonomy in managing their workload in a way that best fits their situation. We plan to maintain a virtual / hybrid working option for these employees in order to promote workplace flexibility and attract and retain highly qualified employees across the country.
Labor Relations
Approximately 80% of our employees in North America and Slovakia are covered by collective bargaining agreements. We work closely with union representatives to provide safe and productive workplaces that enable our employees to deliver high-quality products and meet the needs of our customers. Our relationship with the United Steelworkers (USW) includes not only a
11
commitment to safety programs, but also a common approach to combating the unfairly traded imports that threaten our industry, our company and ultimately the jobs of our employees.
Certain hourly employees of U. S. Steel’s flat-rolled, tubular, cokemaking and iron ore operations in the United States are covered by collective bargaining agreements with the USW entered into effective September 1, 2022, (the 2022 Labor Agreements) that expire on September 1, 2026. The 2022 Labor Agreements include a signing bonus for each eligible USW-represented employee and annual 5% wage increases effective September 1, 2022, 2023, 2024 and 2025. The 2022 Labor Agreements also provide for certain increases to pension and retirement benefits, including increases in our defined benefit pension plan, retiree healthcare contributions, and to the contribution rate to the Steelworkers Pension Trust from $3.50 to $4.00 per hour, effective January 1, 2023. During the fourth quarter of 2022, U. S. Steel recorded a charge of approximately $67 million for the 2022 Labor Agreements signing bonus and related costs.
In addition, as part of the collective bargaining process, U. S. Steel and the USW agreed to leverage the overfunded OPEB plans to support the benefits provided to active represented employees. The OPEB plans were modified to allow the Company to utilize a certain amount of surplus assets to pay additional legally permissible benefits previously paid by the Company. The arrangement permits the Company to utilize a target of $75 million annually for active and retiree employee benefits, with an annual minimum of $50 million, beginning in 2023 and continuing through December 31, 2026. For additional information, see Note 18 to the Consolidated Financial Statements in Part II Item 8 of this Form 10-K.
Capital Structure, Liquidity and Capital Allocation
Our Best for All strategy's primary financial goal is to enhance stockholder value by utilizing our capital structure, liquidity and enhanced capital allocation priorities to advance the Company's strategic objectives, generate long-term value and reward stockholders. Our cash deployment strategy is aligned with our corporate strategy and includes: executing on strategic projects and portfolio moves; maintaining a strong balance sheet and a healthy pension plan; and delivering sustainable growth with a focus on core values such as safety and environmental stewardship and rewarding stockholders for the continued progress we make. Cash deployment is also performed with a customer-centric focus on improving safety, our environment, quality, delivery and cost.
Our liquidity supports our ability to satisfy short-term obligations, fund working capital requirements and provides a foundation to execute key strategic priorities. We are focused on maintaining a strong balance sheet and may proactively refinance or repay our debt from time to time to protect our capital structure from unforeseen external events and re-financing risks.
On May 27, 2022, U. S. Steel entered into the Sixth Amended and Restated Credit Facility Agreement (Credit Facility Agreement) to replace the existing Fifth Amended and Restated Credit Facility Agreement (Fifth Credit Facility Agreement). The Credit Facility Agreement has substantially the same terms as the Fifth Credit Facility Agreement, except the Credit Facility Agreement references the Secured Overnight Financing Rate instead of the London Interbank Offered Rate, adjusts the individual lenders' commitments, and renews the five-year maturity to May 27, 2027, and the financial impact from replacing the Fifth Credit Facility Agreement was immaterial. The Credit Facility Agreement also adjusts the threshold for the fixed charge coverage ratio. The total availability under the facility remained the same at $1,750 million. Consistent with the Fifth Credit Facility Agreement, the Credit Facility Agreement is secured by first-priority liens on certain accounts receivable and inventory and includes targets related to greenhouse gas emissions intensity reduction, safety performance and facility certification by ResponsibleSteel™.
On September 6, 2022, U. S. Steel closed on an offering of $290 million aggregate principal amount of 5.450% Environmental Improvement Revenue Bonds due 2052 (2052 ADFA Green Bonds). U. S. Steel received net proceeds of approximately $287 million after fees of approximately $3 million related to the underwriting and third-party expenses. The net proceeds from the issuance of the 2052 ADFA Green Bonds will be used to partially fund work related to U. S. Steel's solid waste disposal facilities, including two EAFs and other equipment facilities at its new technologically-advanced flat rolled steel making facility, BR2, currently under construction near Osceola, Arkansas.
In 2022, we repurchased approximately $365 million in debt, and we ended the year with $5.9 billion of total liquidity.
On July 25, 2022, following the completion of previously authorized $800 million share repurchase programs, the Board of Directors authorized a new share repurchase program for the repurchase of up to $500 million of the Company's outstanding common stock from time to time in the open market or privately negotiated transactions at the discretion of management. The Company's share repurchase program does not obligate it to acquire any specific number of shares.
U. S. Steel repurchased 37.6 million shares of common stock for approximately $849 million under these programs during the year ended December 31, 2022, and there is approximately $301 million remaining under the current stock repurchase authorization. In addition, the Board of Directors declared quarterly dividends of five cents per common share for each of the quarters in 2022.
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Facilities and Locations as of December 31, 2022
13
Flat-Rolled
The operating results of all U. S. Steel's domestic-integrated steel and sheet plants, coke and iron ore operations and ore and sheet production joint ventures are included in Flat-Rolled. Also, included within Flat-Rolled is a research and technology center located in Munhall, Pennsylvania (near Pittsburgh) and a technology center in Troy, Michigan. The research and technology center carries out a wide range of applied research, development and technical support functions. The technology center brings automotive sales, service, distribution and logistics services, product technology and applications research into one location and much of U. S. Steel’s work in developing new grades of steel to meet the demands of automakers for high-strength, light-weight and formable materials is carried out at this location.
| Flat-Rolled Operations Table | ||||||||
| Operations, (Property Location) | Annual Production Capability | Principal Products and/or Services | ||||||
Gary Works, (Gary, Indiana)(a) | 7.5 million tons of raw steel | strip mill plate in coil; hot-rolled, cold-rolled and coated sheets; and tin mill products | ||||||
Midwest, (Portage, Indiana) | finishing facility | hot-rolled, cold-rolled and coated sheets; and tin mill products | ||||||
Great Lakes Works(b), (Ecorse, River Rouge and Dearborn, Michigan) | finishing facility | cold-rolled and coated sheets | ||||||
Mon Valley Works (c): Edgar Thompson, (Braddock, Pennsylvania), Irvin, (West Mifflin, Pennsylvania), Fairless, (Fairless Hills, Pennsylvania), and Clairton, (Clairton, Pennsylvania) | 2.9 million tons of raw steel and 4.3 million tons of coke | hot-rolled, cold-rolled and coated sheets; and coke and coke by-products | ||||||
Granite City Works (d), (Granite City, Illinois) | 2.8 million tons of raw steel | slabs and hot-rolled, cold-rolled and coated sheets | ||||||
Granite City Works, (Granite City, Illinois); Gateway Energy and Coke Company LLC (Gateway) | coke supply agreement | not applicable | ||||||
USS-UPI, LLC (UPI)(e), (Pittsburg, California) | finishing facility | cold-rolled and coated sheets; tin mill products | ||||||
Fairfield Works,(Fairfield, Alabama) | finishing facility | coated sheets | ||||||
Minnesota Ore Operations: Minntac, (Mt. Iron, Minnesota) and Keetac, (Keewatin, Minnesota) | 22.4 million tons of iron ore pellets | iron ore pellets | ||||||
(a) The majority of tin operations were indefinitely idled as of December 31, 2022. | ||||||||
(b) The steel and ironmaking production facilities were permanently idled in December of 2021 and June of 2022, respectively. Great Lakes Works' pickle line, cold mill and CGL continue to operate, while the DESCO and electrolytic galvanizing lines are indefinitely idled. | ||||||||
(c) From time to time, we may swap coke with other domestic steel producers or sell on the open market. Coke by-products are sold to the chemicals and raw materials industries. | ||||||||
(d) In March 2020, one of the blast furnaces at Granite City Works was indefinitely idled. | ||||||||
(e) In February 2020, UPI was added with the purchase of the remaining 50% ownership interest from POSCO. | ||||||||
Joint Ventures Within Flat-Rolled
U. S. Steel participates in a number of joint ventures that are included in Flat-Rolled, most of which are conducted through subsidiaries. All of these joint ventures are accounted for under the equity method. The significant joint ventures and other investments are described below.
Joint Ventures (a) Within Flat-Rolled Table | ||||||||
| Joint Venture, (Property Location) | U. S. Steel's Ownership Percentage | Annual Production Capability | ||||||
Hibbing Taconite Company (Hibbing); (Hibbing, Minnesota) | 14.7% | 9 million tons of which U. S. Steel's share is 1.3 million tons | ||||||
PRO-TEC Coating Company (PRO-TEC), (Leipsic, Ohio) | 50.0% | 2.0 million tons (b) | ||||||
Double G Coatings Company (Double G) (c); Jackson, Mississippi | 50.0% | 315 thousand tons | ||||||
Worthington Specialty Processing (Worthington) (d) | 49.0% | not applicable | ||||||
Chrome Deposit Corporation (CDC), (six locations near major steel plants) | 50.0% | not applicable | ||||||
(a) See further information about our equity investees in Note 12 to the Consolidated Financial Statements. | ||||||||
(b) U. S. Steel's domestic production facilities supply PRO-TEC with cold-rolled sheets and U. S. Steel markets all of PRO-TEC's products. | ||||||||
(c) Each partner supplies its own steel to Double G and markets what is processed by Double G. | ||||||||
(d) In 2022, Worthington Specialty Processing sold its remaining manufacturing facilities. The joint venture is expected to be dissolved in 2023. | ||||||||
Mini Mill
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The operations of Big River Steel are included in Mini Mill. Big River Steel, located in Osceola, Arkansas, is an EAF sheet steel production facility.
| Mini Mill Operations Table | ||||||||
| Operations, (Property Location) | Annual Production Capability | Principal Products and/or Services | ||||||
Big River Steel, (Osceola, Arkansas) | 3.3 million tons of raw steel | hot-rolled, cold-rolled and coated sheets; and electrical steels | ||||||
USSE
USSE operates in Košice, Slovakia an integrated facility and a research laboratory, which, in conjunction with our Research and Technology Center, supports efforts in coke making, electrical steels, and design and instrumentation.
| USSE Operations Table | ||||||||
| Operations, (Property Location) | Annual Production Capability | Principal Products and/or Services | ||||||
U. S. Steel Košice, (Košice, Slovakia) | 5.0 million tons of raw steel | coke; slabs; strip mill plate: hot, cold and coated sheets; tin mill products; and spiral welded pipe | ||||||
Tubular
Tubular manufactures seamless and welded OCTG, standard pipe, line pipe and mechanical tubing.
| Tubular Operations Table | ||||||||
| Operations, (Property Location) | Production Capability | Principal Products and Services | ||||||
Fairfield Tubular Operations, (Fairfield, Alabama) | 0.9 million tons of raw steel (a) and 750 thousand tons of tubular | seamless tubular pipe | ||||||
Lorain Tubular Operations (b), (Lorain, Ohio) | 380 thousand tons of tubular | seamless tubular pipe | ||||||
Lone Star Tubular(b), (Lone Star, Texas) | #1 electric-weld pipe mill (EWPM) 400 thousand tons and #2 EWPM 380 thousand tons of tubular | welded tubular pipe | ||||||
Wheeling Machine Products(c), (Pine Bluff, Arkansas and Hughes Springs, Texas) | not applicable | tubular couplings | ||||||
Offshore Operations, (Houston, Texas) | not applicable | tubular threading, inspection, accessories and storage services and premium connections | ||||||
Tubular Processing (d), (Houston, Texas) | not applicable | tubular processing | ||||||
(a) Based on the rounds caster capacity which is its constraining production unit. | ||||||||
(b) In April 2020, the Lorain Tubular and Lone Star Tubular operations were temporarily idled for an indefinite period of time. | ||||||||
(c) In April 2020, the Wheeling Machine Products at Hughes Springs, Texas was temporarily idled for an indefinite period of time. | ||||||||
(d) Tubular Processing has been temporarily idled since 2015. | ||||||||
Joint Ventures (a) Within Tubular Table | |||||||||||
| Operations, (Property Location) | U. S. Steel's Ownership Percentage | Production Capability | Principal Products and/or Services | ||||||||
Patriot Premium Threading Services, (Midland, Texas) | 50% | not applicable | Tubular threading, accessories and premium connections | ||||||||
(a)See further information about our equity investees in Note 12 to the Consolidated Financial Statements. | |||||||||||
Other
U. S. Steel’s Other category includes the operating results relating to our real estate operations, the previously held equity method investment in Big River Steel, and our former railroad business. The Company owns approximately 45,000 acres of real estate assets, either held for development or managed, in Alabama, Illinois, Michigan, Minnesota and Pennsylvania.
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Raw Materials and Energy
As a predominantly integrated producer, U. S. Steel’s primary raw materials are iron units in the form of iron ore pellets and sinter ore, carbon units in the form of coal and coke (which is produced from coking coal) and steel scrap. For our EAF production, our primary raw material is scrap. U. S. Steel’s raw materials supply strategy consists of acquiring and expanding captive sources of certain primary raw materials and entering into flexible supply contracts for certain other raw materials at competitive market prices that are subject to fluctuations based on market conditions at the time.
The amounts of such raw materials needed to produce a ton of steel will fluctuate based upon the specifications of the final steel products, the quality of raw materials and, to a lesser extent, differences among steel producing equipment. In broad terms, the Company's integrated steel process consumes approximately 1.4 tons of coal to produce one ton of coke and then it consumes approximately 0.3 tons of coke, 0.3 tons of steel scrap (approximately 60 percent of which is internally generated) and 1.3 tons of iron ore pellets to produce one ton of raw steel. In addition, we consume approximately 10 mmbtu’s of natural gas per ton produced. Generally, the Company's mini mill operations consumes approximately 0.8 tons of steel scrap, 0.3 tons of pig iron, and 0.1 tons of HBI to produce one ton of raw steel. In addition, the mini mill operations consume approximately 0.6 MKWH of electricity per ton of raw steel produced. While we believe that these estimated consumption amounts are useful for planning purposes, and are presented to give a general sense of raw material and energy consumption related to steel production, substantial variations may occur.
Iron Ore
(a) Includes our share of production from Hibbing through December 31, 2022.
The iron ore facilities at Minntac and Keetac contain approximately 900 million short tons of indicated resources and probable reserves and our share of recoverable reserves at the Hibbing joint venture is approximately 4 million short tons. Refer to Mining Properties in Item 2 of this Form 10-K for additional information. Recoverable reserves are defined as the tons of product that can be used internally or delivered to a customer after considering mining and beneficiation or preparation losses. Minntac and Keetac’s annual capability and our share of annual capability for the Hibbing joint venture total approximately 23 million tons. We have iron ore pellet production capability that exceeds our steelmaking capability in the U.S.
We historically have sold iron ore pellets to third parties, including in 2022, 2021 and 2020. The Company has agreements to supply iron ore pellets to third-party customers over the next several years.
Substantially all of USSE’s iron ore requirements are purchased from outside sources, primarily Ukrainian and Brazilian mining companies. Prices are determined in long-term contracts with strategic suppliers or as spot prices negotiated monthly or quarterly. USSE also has received iron ore from U. S. Steel’s iron ore facilities in North America. We believe that supplies of iron ore adequate to meet USSE’s needs are available at competitive market prices.
Coking Coal
All of U. S. Steel’s coal requirements for our cokemaking facilities are purchased from outside sources. Pricing for Flat-Rolled's coking coal contracts are typically negotiated on a yearly basis, and from time to time we have entered into multi-year agreements for a portion of our coking coal requirements.
Prices for European contracts are negotiated quarterly, annually or determined as index-based prices.
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We believe that supplies of coking coal adequate to meet our needs are available from outside sources at competitive market prices. The main source of coking coal for Flat-Rolled is the United States, and sources for USSE include Poland, Ukraine, Canada, Australia and the United States.
Coke
In North America, the Flat-Rolled segment operates a cokemaking facility at the Clairton Plant of Mon Valley Works. At our Granite City Works, we have a 15-year coke supply agreement with Gateway that expires on December 31, 2024. Blast furnace injection of coal, and self-generated coke oven gas is also used to reduce coke usage.
With Flat-Rolled’s cokemaking facilities and the Gateway long-term supply agreement, it has the capability to be nearly self-sufficient with respect to its annual coke requirements at normal operating levels. Coke from time to time has been purchased from, sold to, or swapped with suppliers and other end-users to adjust for production needs and reduce transportation costs.
In Europe, the USSE segment operates cokemaking facilities at USSK. While USSE is self-sufficient for coke at normal operating levels, it periodically purchases coke from Polish and Czech coke producers to meet production needs. Volume and price are negotiated quarterly.
Steel Scrap and Other Materials
We believe that supplies of steel scrap and alloys that are adequate to meet our needs are readily available from outside sources at competitive market prices for the Flat-Rolled, Mini Mill and USSE segments. Generally, approximately 38 percent of our steel scrap requirements were internally generated through normal operations for these segments.
Limestone
All of Flat-Rolled’s limestone requirements and USSE's lime and limestone requirements are purchased from outside sources. We believe that supplies of limestone and lime adequate to meet our needs are readily available from outside sources at competitive market prices.
Zinc and Tin
We believe that supplies of zinc and tin required to fulfill the requirements for Flat-Rolled, Mini Mill and USSE are available from outside sources at competitive market prices. For Flat-Rolled and Mini Mill the main sources of zinc are Canada, Mexico and the United States and the main sources of tin are Bolivia, Brazil and Peru. For USSE, the main sources of zinc are Finland, Poland, the Netherlands, Germany and Slovakia and the main sources of tin are Peru, Indonesia, China and Bolivia.
During 2022, Flat-Rolled protected approximately 40 percent and 75 percent of its operation's zinc and tin purchases, respectively, with financial swap derivatives to manage exposure to zinc and tin price fluctuations. During 2022, USSE protected approximately 16 percent of its operation's zinc purchases with forward physical contracts to manage our exposure to zinc price fluctuations and protected approximately 68 percent of its operation's tin purchases with financial swaps to manage our exposure to tin price fluctuations. For further information, see Note 16 to the Consolidated Financial Statements.
Natural Gas
All of U. S. Steel’s natural gas requirements are purchased from outside sources.
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We believe that adequate supplies to meet Flat-Rolled’s, Mini Mill's and Tubular's needs are available at competitive market prices. For 2022, approximately 70 percent of our natural gas purchases in Flat-Rolled were based on bids solicited on a monthly basis from various vendors; the remainder were made daily or with term agreements.
We believe that adequate natural gas supplies to meet USSE’s needs are available at competitive market prices. During 2022, we routinely executed fixed-price forward physical purchase contracts for natural gas to partially manage our exposure to natural gas price increases. For 2022, approximately 48 percent of our natural gas purchases in USSE were made with fixed-price forward physical purchase contracts; the remainder were based on bids solicited on a quarterly or monthly basis.
Flat-Rolled and USSE use self-generated coke oven and blast furnace gas to reduce consumption of natural gas. USSE uses self-generated coke oven, converter and blast furnace gas to reduce consumption of natural gas and steam coal that results in lower CO2 emissions production.
Additionally, Russian supply of natural gas to Europe has decreased significantly in response to enacted sanctions. However, Slovakia has natural gas storage and access to additional supply from countries including Norway, the U.S. and Africa. Together, these sources are enough to support the country's expected consumption through the 2023 winter season, which includes demand for natural gas for our USSE segment operations.
Industrial Gases
U. S. Steel purchases industrial gas in the U.S. under long-term contracts with various suppliers. USSE owns and operates its own industrial gas facility, but also may purchase industrial gases from time to time from third parties.
International Trade
U. S. Steel continues to face import competition, much of which is unfairly traded and fueled by massive global steel overcapacity, currently estimated to be over 500 million metric tons per year—more than five times the entire U.S. steel market and over seventeen times total U.S. steel imports. These imports and overcapacity negatively impact the Company’s operational and financial performance. U. S. Steel continues to lead efforts to address these challenges that threaten the Company, our workers, our stockholders and our country’s national and economic security.
As of the date of this filing, pursuant to a series of Presidential Proclamations issued in accordance with Section 232 of the Trade Expansion Act of 1962, U.S. imports of certain steel products are subject to a 25 percent tariff, except imports from: (1) Argentina, Brazil, and South Korea, which are subject to restrictive quotas; (2) the European Union (EU), Japan and the United Kingdom (UK) that are melted and poured in the EU/Japan/UK, within quarterly tariff-rate quota (TRQ) limits; (3) Canada and Mexico, which are not subject to tariffs or quotas, but tariffs could be re-imposed on surging product groups after consultations; (4) Ukraine, which are exempt from tariffs until June 1, 2023; and (5) Australia, which are not subject to tariffs, quotas or an anti-surge mechanism.
The U.S. Department of Commerce (DOC) is managing a process in which U.S. companies may request and/or oppose temporary product exclusions from the Section 232 tariffs and quotas. U. S. Steel opposes exclusion requests for imported products that are the same as, or substitutes for, products manufactured by U. S. Steel.
Multiple legal challenges to the Section 232 action continue before the U.S. Court of International Trade (CIT) and the U.S. Court of Appeals for the Federal Circuit (CAFC), the latter which has consistently rejected constitutional and statutory challenges to the Section 232 action.
Since its implementation in March 2018, the Section 232 action has supported the U.S. steel industry’s and U. S. Steel’s investments in advanced steel production capabilities, technology and skills, strengthening U.S. national and economic security. The Company continues to actively defend the Section 232 action.
In February 2019, the European Commission (EC) implemented a definitive safeguard on global steel imports in the form of TRQs that impose 25 percent tariffs on steel imports that exceed the TRQ limit, effective through June 2024. In December 2022, the EC initiated a fourth review of the safeguard.
Antidumping duties (AD) and countervailing duties (CVD or antisubsidy duties) apply in addition to the Section 232 tariffs, quotas, TRQs and the EC’s safeguard, and AD/CVD orders may continue beyond the Section 232 action and the EC’s safeguard. U. S. Steel continues to actively defend and maintain the 61 U.S. AD/CVD orders and 14 EU AD/CVD orders covering U. S. Steel products in multiple proceedings before the DOC, U.S. International Trade Commission (ITC), CIT, CAFC, the EC and European courts, and the World Trade Organization (WTO).
In July 2022, the ITC voted to continue the AD/CVD orders on corrosion-resistant steel from China, India, Italy, South Korea and Taiwan and cold-rolled steel from China, India, Japan, South Korea and the UK for another five years, but voted to revoke the AD/CVD orders on cold-rolled steel from Brazil. In October 2022, the ITC voted to continue the AD/CVD orders on hot-rolled
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steel from Australia, Japan, Korea, Netherlands, Russia, Turkey and the United Kingdom for another five years, but voted to revoke the AD/CVD orders on hot-rolled steel from Brazil. Also, in October 2022, the ITC voted to impose new AD/CVD orders on imports of OCTG from Argentina, Mexico, Korea and Russia.
In August 2022, the EC imposed definitive AD measures on imports of hot-dipped galvanized steel from Russia and Turkey and announced the continuation of AD measures on imports of cold-rolled steel from China and Russia for another five years. The EC is conducting five-year reviews of the AD/CVD orders on hot-rolled steel from five countries with a decision expected in 2023.
In April 2022, the U.S. suspended normal trade relations with Russia and Belarus, resulting in higher than normal tariffs on imports from Russia and Belarus, including steel and raw materials. In June, President Biden announced additional tariff increases on certain products from Russia, including certain steel products and ferroalloys, effective August 1, 2022.
Additional tariffs of 7.5 to 25 percent continue to apply to certain U.S. imports from China, including certain raw materials used in steel production, semi-finished and finished steel products, and downstream steel-intensive products, pursuant to Section 301 of the Trade Act of 1974. The Office of the United States Trade Representative (USTR) is currently conducting a statutory review of the Section 301 tariffs.
The United States and EU are currently negotiating a global sustainable steel arrangement to restore market-oriented conditions and address carbon intensity that is targeted for completion by the end of 2023.
U. S. Steel will continue to execute a broad, global strategy to maximize opportunities and navigate challenges presented by imports, global steel overcapacity, and international trade law and policy developments.
Environmental Stewardship
U. S. Steel is committed to effective environmental stewardship. We have implemented and continue to develop business practices that are designed to reduce negative environmental impacts. We believe part of being a good corporate citizen requires a dedicated focus on how our industry affects the environment. We have taken the actions described below in furtherance of that goal. U. S. Steel's environmental expenditures totaled $334 million in 2022, $302 million in 2021 and $278 million in 2020. Overall, environmental compliance expenditures represent approximately 2 percent of U. S. Steel’s total costs and expenses in 2022, 2021 and 2020. For further information, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Environmental Matters.”
We continue to work on the promotion of cost-effective environmental strategies by supporting the development of appropriate air, water and waste laws and regulations at the local, state, national and international levels. We are committed to reducing our emissions and are investigating, creating and implementing innovative, best practice solutions throughout our operations to improve our environmental performance and to manage and reduce energy consumption.
U. S. Steel’s North America operations recycled 4.8 million tons of purchased and produced steel scrap annually in 2022 and in 2021. USSK recycled approximately 754 thousand tons and 970 thousand tons of produced steel scrap in 2022 and 2021, respectively. Because of steel’s physical properties, our products can be recycled at the end of their useful life without loss of quality, contributing to steel’s high recycling rate and affordability. North America operations recycled approximately 2.2 million tons of blast furnace slag, 58 thousand tons of Basic Oxygen Process steel slag, and 75 thousand tons of electric arc furnace slag by selling it for use as aggregate and in highway construction. In 2022, USSK recycled approximately 1.1 million tons of blast furnace slag, and 168 thousand tons of Basic Oxygen Process steel slag.
Many of our major production facilities have Environmental Management Systems that are certified to the ISO 14001 Standard. This standard, published by the International Organization for Standardization (ISO), provides the framework for the measurement and improvement of environmental impacts of the certified facility.
In 2019, and in each succeeding year since, we published the Clairton Operating and Environmental Report related to our Clairton Plant of Mon Valley Works. While U. S. Steel agreed to publish an annual report as part of the 2019 Allegheny County Health Department Settlement Order and Agreement, we took the opportunity to enhance the report by including detailed descriptions of our operations, our safety and environmental performance and community involvement in order to provide easily accessible information for the public. The Report details battery combustion stack and fugitive emission performance at Clairton and Clairton's continued commitment to environmental stewardship. In 2021, we published a similar report for the Edgar Thomson facility.
Reduction of Greenhouse Gas Emissions
In 2019, the Company announced its commitment to reduce greenhouse gas emissions intensity across its global footprint by 20 percent, as measured by the rate of CO2 equivalents emitted per ton of finished steel shipped, by 2030 based on 2018 baseline levels. Then, in 2021, the Company announced its goal to achieve net-zero emissions by 2050, as measured by the rate of CO2
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equivalents emitted per ton of finished steel shipped. The Company has provided information on paths to achieve this goal on its website. These targets apply to U. S. Steel’s global operations.
U. S. Steel plans to achieve its greenhouse gas emissions intensity reduction goals through the execution of multiple initiatives. These include the use of EAF steelmaking technology at U. S. Steel’s Fairfield Works and at Big River Steel, the first LEED-certified steel mill in the United States and the first steel mill in North America to receive ResponsibleSteel™ site certification. EAF steelmaking primarily relies on recycled scrap, rather than iron ore, to produce new steel products, which is a less carbon intensive process and leverages the ability to continuously recycle steel. Further carbon intensity reductions are expected to come from the implementation of ongoing energy efficiency measures, continued use of renewable energy sources and other process improvements to be developed.
The carbon reduction targets reflect our continued commitment to improvement in production efficiency and the manufacture of products that are environmentally friendly. In addition to a commitment to reduce its own greenhouse gas emissions intensity, U. S. Steel is committed to helping its customers achieve their environmental goals. Our industry-leading XG3™ advanced high-strength steel enables automakers to manufacture lighter weight vehicles that meet federal Corporate Average Fuel Economy (CAFE) standards with reduced carbon emissions. As part of our innovation efforts, we continue to look at new steelmaking technologies so that we can produce green steels and further reduce carbon emissions.
Environmental Matters, Litigation and Contingencies
Some of U. S. Steel’s facilities were in operation before 1900. Although the Company believes that its environmental practices have either led the industry or at least been consistent with prevailing industry practices, hazardous materials have been and may continue to be released at current or former operating sites or delivered to sites operated by third parties.
Our U.S. facilities are subject to environmental laws applicable in the U.S., including the Clean Air Act (CAA), the Clean Water Act (CWA), the Resource Conservation and Recovery Act (RCRA) and the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), as well as state and local laws and regulations.
U. S. Steel has incurred and will continue to incur substantial capital, operating and maintenance and remediation expenditures as a result of environmental laws and regulations, related to release of hazardous materials, which in recent years have been mainly for process changes to meet CAA obligations and similar obligations in Europe.
EU Environmental Requirements and Slovak Operations
The EU's Industrial Emissions Directive requires implementation of EU determined best available techniques (BAT) for Iron and Steel production to reduce environmental impacts as well as compliance with BAT associated emission levels. Our most recent estimate of totalTotal capital expenditures for projects to comply with or go beyond BAT requirements iswere €138 million (approximately $155$147 million). These costs were partially offset by the EU funding received and may be mitigated over the 2017 to 2020 program period. These costs may be mitigatednext measurement periods if USSK complies with certain financial covenants, which are assessed annually. USSK complied with these covenants as of December 31, 2019.2022. If we are unable to meet these covenants in the future, USSK might be required to provide
additional collateral (e.g., bank guarantee) to secure 50 percent of the full value of estimated expenditures. There could be increased operating costs associated with these projects, such as increased energy and maintenance costs. We are currently unable to reliably estimate what the increase in operating costs will be as many projects are in the development stage.
For further discussion of laws applicable in Slovakia and the EU and their impact on USSK,USSE, see Note 26 to the Consolidated Financial Statements, “Contingencies and Commitments, - Environmental Matters, EU Environmental Requirements.”
Minnesota Mining Operations - Water
The State of Minnesota has a sulfate wild rice water quality standard (WQS) set at 10mg/L. This sulfate WQS was established in 1973, since this time industry has been working with the legislature and the Minnesota Pollution Control Agency (MPCA) to reevaluate the environmental protection and science behind the 10 mg/L standard. In 2011, the legislature passed a law requiring MPCA to revise the sulfate standard. MPCA started the process to revise the rulemaking for the sulfate WQS, but it was never completed. During the interim the Keetac National Pollutant Discharge Elimination System (NPDES) permit was issued in November 2011 with a sulfate standard of 14 mg/L and a compliance schedule. Then in 2015, the Minnesota legislature passed a law that MPCA could not require businesses to expend funds to comply with the sulfate limit until the rulemaking was revised by MPCA as directed by the legislature in 2011. To date the sulfate WQS rulemaking has not been revised. During this time Minntac has also received a NPDES permit with a sulfate limit and compliance schedule.
Both Minntac and Keetac have been working to determine the best options to address sulfate. One of the options in process is that both sites have submitted and even renewed site-specific standard (SSS) requests to MPCA. The SSS present plans specific to each location and explain the actual impact on sulfate from the facilities. To date MPCA has not taken any action on
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the SSS plans. The United States Environmental Protection Agency (the U.S. EPA) partially rejected the CWA 303(d) list for impaired waters submitted by MPCA for 2021. The MPCA's impaired waters list was in part rejected to add Hay Lake as being impaired for wild rice sulfate. In February 2022, the U.S. EPA Region V sent a letter to MPCA recognizing the conflict between state law and the CWA.
U. S. Steel is continuing to work to determine the most efficient and effective options to meet the sulfate standard. However, if MPCA does not revise the sulfate standard of 10mg/L or approve the SSS it is likely to have an impact on mining operations as it will require extensive changes to water collection and treatment.
New and Emerging Environmental Regulations
United States and European Greenhouse Gas Emissions Regulations
In order to achieve the EU political goal of carbon based systems. Becauseemissions neutrality by 2050, on July 14, 2021, the European Commission released a package of legislative proposals called Fit for 55. The proposals contain significant changes to current EU ETS functions and requirements, including: a new carbon border adjustment mechanism to impose carbon fees on EU imports, further reduction of free CO2 allowance allocation to heavy industry and measures to strengthen the supply of carbon allowances. The legislative process is being impacted by the ongoing Russia-Ukraine crisis. The proposals are subject to the EU legislative process, and we cannot predict what requirements ultimately will be imposed in the U.S. and Europe, it is difficult to estimate the likely impact on U. S. Steel, but it could be substantial. On March 28, 2017, President Trump signed Executive Order 13783 instructing the United States Environmental Protection Agency (U.S. EPA) to review the Clean Power Plan. On October 16, 2017, the U.S. EPA proposed to repeal the Clean Power Plan after reviewing the plan pursuant to President Trump’s executive order. Any repeal and/or replacement of the Clean Power Plan is likely to be challenged by various proponents of the plan, such as environmental groups and certain states. Any impacts to our operations as a result of anytheir future greenhouse gas regulations are not estimable at this time since the matter is unsettled. In any case, to the extent expenditures associated with any greenhouse gas regulation, as with all costs, are not ultimately reflected in the prices of U. S. Steel's products and services, operating results will be reduced.impact.
United States - Air
The CAA imposes stringent limits on air emissions with a federally mandated operating permit program and civil and criminal enforcement sanctions. The CAA requires, among other things, the regulation of hazardous air pollutants through the development and promulgation of National Emission Standards for Hazardous Air Pollutants (NESHAP) and Maximum Achievable Control Technology (MACT) Standards. The U.S. EPA has developed various industry-specific MACT standards pursuant to this requirement. The CAA requires the U.S. EPA to promulgate regulations establishing emission standards for each category of Hazardous Air Pollutants. The U.S. EPA also must conduct risk assessments on each source category that is already subject to MACT standards and determine if additional standards are needed to reduce residual risks.
While our operations are subject to several different categories of NESHAP and MACT standards, the principal impact of these standards on U. S. SteelSteel's operations includes those that are specific to coke making, iron making, steel making and iron ore processing.
For the Taconite Iron Ore Processing category, based on the results of the Agency’sU.S. EPA's risk review, the agency promulgated a final rule on July 28, 2020, in which the U.S. EPA is proposingdetermined that risks from emissions of air toxics from this source category are acceptable and that the existing standards provide an ample margin of safety. Furthermore, under the technology review, the Agencyagency identified no cost-effective developments in controls, practices, or processes to achieve further emissions reductions. Therefore,Petitions for review of the rule were filed in the United States Court of Appeals for the D.C. Circuit, in which the Company and the
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AISI intervened. The U.S.
EPA is proposing no revisionsrequired by court order to issue a final rule by November 16, 2023. Because the existing standards based on the RTRs. U.S. EPA accepted comments on the taconite proposed rule until October 25, 2019. Based upon our analysis of the proposedhas yet to propose a revised taconite rule, any impacts are not estimable at this time.
The U.S. EPA is in the Company does not expect any material impact if the rule is finalized as proposed.process of conducting its statutorily obligated residual risk and technology review of coke oven standards. Because the U.S. EPA has not completed its review of the Coke MACT regulations, any impacts related to the U.S. EPA’s review of the coke standards cannot be estimated at this time. The U.S. EPA is under a court-ordered deadline to complete the residual risk and technology rulemaking by May 23, 2024.
The CAA also requires the U.S. EPA to develop and implement NAAQSNational Ambient Air Quality Standards (NAAQS) for criteria pollutants, which include, among others, particulate matter (PM) - consisting of PM10 and PM2.5, lead, carbon monoxide, nitrogen dioxide, sulfur dioxide (SO2), and ozone.
In October 2015, the U.S. EPA lowered the NAAQS for ozone from 75 ppbparts per billion (ppb) to 70 ppb. On November 6, 2017, the U.S. EPA designated most areas in which we operate as attainment with the 2015 standard. In a separate ruling, on June 4, 2018, the U.S. EPA designated other areas in which we operate as “marginal nonattainment” with the 2015 ozone standard. On December 6, 2018, the U.S. EPA published a final rule regarding implementation of the 2015 ozone standard. Because no state regulatory or permitting actions to bring the ozone nonattainment areas into attainment have yet to be proposed or developed for U. S. Steel facilities, the operational and financial impact of the ozone NAAQS cannot be reasonably estimated at this time. On December 31, 2020, the U.S. EPA published a final rule pursuant to its statutorily required review of NAAQS that retains the ozone NAAQS at 70 ppb. In January 2021, New York, along with several states and non-governmental organizations filed petitions for judicial review of the action with the United States Court of Appeals for the D.C. Circuit. Several other states and industry trade groups intervened in support of the U. S. EPA’s action. The case remains in abeyance before the court until December 15, 2023, as the U.S. EPA voluntarily reconsiders the ozone NAAQS. Because the U.S. EPA has yet to complete its reconsideration and propose a revised ozone NAAQS, any impacts are not estimable at this time.
On December 14, 2012,18, 2020, the U.S. EPA loweredpublished a final rule pursuant to its statutorily required review of NAAQS that retains the annual standardexisting PM2.5 standards without revision. In early 2021, several states and non-governmental organizations filed petitions for PM2.5 from 15 micrograms per cubic meter (ug/m3) to 12 ug/m3, and retainedjudicial review of the PM2.5 24-hour and PM10 NAAQS rules. In December 2014,action with the United States Court of Appeals for the D.C. Circuit. Several industry trade groups intervened in support of the U.S. EPA’s action. The case remains in abeyance before the court until March 1, 2023, as the U.S. EPA designated some areas in whichvoluntarily reconsiders the PM2.5 NAAQS. On January 6, 2023, the U.S. EPA proposed to lower the annual PM2.5 NAAQS from the current 12 ug/m3 standard to within the range of 9.0 to 10.0 ug/m3. U. S. Steel operates as nonattainment withis currently reviewing the proposal to determine the impacts and evaluate any need to comment. Because the U.S. EPA has very recently proposed the rule without specificity, any impacts are inestimable at this time.
For calendar year 2022, all Allegheny County ambient air quality monitors met all U.S. EPA health based National Ambient Air Quality Standards for the second consecutive year. On March 16, 2022, the U.S. EPA published a final rule, a clean data determination, showing that Allegheny County has attained the 2012 annual PM2.5 standard. On April 6,NAAQS based on the 2018 the U.S. EPA published– 2020 ambient air quality data. Based on these and other data, ACHD submitted a notice that Pennsylvania, CaliforniaRedesignation Request and Idaho failed to submit a SIP to demonstrate attainment with the 2012 fine particulate standard by the deadline established by the CAA. As a result of the notice, Pennsylvania, a state in which we operate, is required to submit a SIPMaintenance Plan to the U.S. EPA no later than November 7, 2019 to avoid sanctions. On April 29, 2019,requesting that the ACHD published a draft SIP for the Allegheny County nonattainment area which demonstrates thatU.S. EPA redesignate all of Allegheny County will meet its reasonable further progress requirements and be in attainment with the 2012current PM2.5 annual and 24-hour NAAQS by December 31, 2021 with the existing controls that are in place. On September 12, 2019, the Allegheny County Board of Health unanimously approved the draft SIP. NAAQS.
United States – Water
The draft SIP was then sent to the Pennsylvania Department of Environmental Protection (PADEP). PADEP submitted the SIP to U.S. EPA for approval on Novemberissued the final rule redefining the Waters of the United States (WOTUS), set to become effective March 1, 2019. To date, U.S.2023. The definition of WOTUS has had many changes and legal challenges over the last several years. The new WOTUS rule expands the definition of what all waters will be considered to be a waters of the United States. The expansion of the WOTUS definition is likely to lead to additional legal challenges. It is also possible that the ruling in the U. S. Supreme court case Sackett v. EPA has not taken action on PADEP’s submittal.
Environmental Remediation
For further discussion of relevant environmental matters, including environmental remediation obligations, see "Item 3. Legal Proceedings, - Environmental Proceedings."
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Property, Plant and Equipment Additions
For property, plant and equipment additions, including finance leases, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition, Cash FlowsLiquidity and Liquidity – Cash Flows”Capital Resources” and Note 13 to the Consolidated Financial Statements.
Available Information
U. S. Steel’s Internet address is www.ussteel.com. We post our Annual Report on Form 10-K, our quarterly reports on Form 10-Q, our proxy statement, our current reports on Form 8-K, amendments to those reports and our interactive data files to our website free of charge as soon as reasonably practicable after such reports are filed, or furnished to, with the Securities and Exchange Commission (SEC). We also post all press releases and earnings releases to our website.
All other filings with the SEC are available via a direct link on the U. S. Steel website to the SEC’s website, www.sec.gov.
Also available on the U. S. Steel website are U. S. Steel’s Corporate Governance Principles, Code of Ethical Business Conduct and the charters of the Audit Committee, the Compensation & Organization Committee and the Corporate Governance & Sustainability Committee of the Board of Directors. These documents and the Annual Report on Form 10-K and proxy statement are also available in print to any stockholder who requests them. Such requests should be sent to the Office of the Corporate Secretary, United States Steel Corporation, 600 Grant Street, Suite 1500,1844, Pittsburgh, Pennsylvania, 15219-2800 (telephone: 412-433-1121).
U. S. Steel does not incorporate into this document the contents of any website or the documents referred to in the immediately preceding paragraphs.
Other Information
Information on net sales, depreciation, capital expenditures, earnings (loss) before interest and income taxes and assets by reportable segment and for business in the Other Businessescategory and on net sales and assets by geographic area are set forth in Note 4 to the Consolidated Financial Statements.
For significant operating data for U. S. Steel for each of the last five years, see “Five-Year Operating Summary (Unaudited)” within this document.
Item 1A. RISK FACTORS
The changing global economic climate is having adverse impacts on our business, which may create new risks and exacerbate certain other risks set forth below.
Changes in the global economic environment, inflation, rising interest rates, recessions or prolonged periods of slow economic growth, and global instability and actual and threatened geopolitical conflict, could have an adverse effect on our industry and business, as well as those of our customers and suppliers.
Overall economic conditions in the U.S. and globally, including in Europe, including adverse factors such as inflation, rising interest rates, supply chain disruptions and the impacts of the war in Ukraine, significantly impact our business. Periods of economic downturn or continued uncertainty could result in difficulty increasing or maintaining our level of sales or profitability and we may experience an adverse effect on our business, results of operations, financial condition and cash flows.
Our InvestmentsU.S. operations are subject to economic conditions, including credit and capital market conditions, inflation, prevailing interest rates, and political factors, which if changed could negatively affect our results of operations, cash flows and liquidity. Political factors include, but are not limited to, changes to tax laws and regulations resulting in New Technologies May Not Be Fully Successfulincreased income tax liability, increased regulation, such as carbon emissions limitations or trading mechanisms, limitations on exports of energy and raw materials, and trade remedies. Actions taken by the U.S. government could affect our results of operations, cash flows and liquidity.
USSE is subject to economic conditions and political factors associated with the EU, Slovakia and neighboring countries, and the euro currency. Changes in any of these economic conditions or political factors could negatively affect our results of operations, cash flows and liquidity. Political factors include, but are not limited to, taxation, nationalization, inflation, government instability, regional conflict, civil unrest, increased regulation and quotas, tariffs, sanctions and other market-distorting measures. The ongoing war in Ukraine has had a broad range of adverse impacts on global economic conditions, some of which have had and are likely to continue to have adverse impacts on our business, including increased raw material and energy costs, softer
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customer demand and lower steel prices. USSE purchases a significant portion of its iron ore and coal from suppliers based in Ukraine.
Additionally, we are also exposed to risks associated with the business success and creditworthiness of our suppliers and customers. If our customers or suppliers are negatively impacted by a slowdown in economic markets, we may face the reduction, delay or cancellation of customer orders, delays or interruptions of the supply of raw materials, and increased risk of insolvency and other credit related issues of customers or suppliers, which could delay payments from customers, result in increased customer defaults and cause our suppliers to delay filling, or to be unable to fill, our needs at all or on a timely or cost-effective basis. The occurrence of any of these events may adversely affect our business, results of operations, financial condition and cash flows.
The steel industry, as well as the industries of our customers and suppliers upon whom we are reliant, is highly cyclical, which may have an adverse effect on our customer demand and results of operations.
Steel consumption is highly cyclical and generally follows economic and industrial conditions both worldwide and in regional markets. Price fluctuations are impacted by the timing, magnitude and duration of these cycles, and are difficult to predict. This volatility makes it difficult to balance the procurement of raw materials and energy with global steel prices, our steel production and customer product demand. U. S. Steel has implemented strategic initiatives to produce more stable and consistent results, even during periods of economic and market downturns, but this may not be enough to mitigate the effect that the volatility inherent in the steel industry has on our results of operations.
Additionally, our business is reliant on certain other industries that are cyclical in nature. We sell to the automotive, service center, converter, energy and appliance and construction-related industries. Some of these industries are highly sensitive to general economic conditions and may also face meaningful fluctuations in demand based on a number of factors outside of our control, including regulatory factors, supply chain disruptions, changing customer demand, economic conditions and raw material and energy costs. As a result, downturns or volatility in any of the markets we serve could adversely affect our financial position, results of operations and cash flows.
U. S. Steel has been and continues to be adversely affected by unfairly traded imports and globalovercapacity, which may cause downward pricing pressure, lost sales and revenue, market share, decreased production, investment, and profitability.
Currently, global steel production capacity significantly exceeds global steel demand, which adversely affects U.S. and global steel prices. Global overcapacity continues to result in high levels of dumped and subsidized steel imports into the markets we serve. Domestic and international trade laws provide mechanisms to address the injury caused by such imports to domestic industries. Excessive steel imports have resulted and may continue to result in downward pricing pressure and lost sales and revenue, which adversely impacts our business, operations, financial condition and cash flows.
Although U. S. Steel currently benefits from 61 U.S. AD and CVD or anti-subsidy duty orders and 14 EU AD/CVD orders, petitions for trade relief are not always successful or effective. When implemented, such relief is generally subject to periodic reviews and challenges, which can result in revocation of AD/CVD orders or reduction of effective duty rates. There can be no assurance that any relief will be obtained or continued in the future or that such relief will adequately combat unfairly traded imports.
As of the date of this filing, pursuant to a series of Presidential Proclamations issued in accordance with Section 232 of the Trade Expansion Act of 1962, U.S. imports of certain steel products are subject to a 25 percent tariff, except imports from: (1) Argentina, Brazil, and South Korea, which are subject to restrictive quotas; (2) the EU, Japan, and UK that are melted and poured in the EU/Japan/UK, within quarterly TRQ limits; (3) Canada and Mexico, which are not subject to tariffs or quotas, but tariffs could be re-imposed on surging product groups after consultations; (4) Ukraine, which are exempt from tariffs until June 1, 2023; and (5) Australia, which are not subject to tariffs, quotas, or an anti-surge mechanism. The Section 232 national security action on steel imports currently provides U. S. Steel and other domestic steel producers critical relief from imports. With no scheduled end date, the future coverage and duration of the Section 232 action is not known. Further, the U.S. government may negotiate alternatives to the Section 232 tariffs for certain countries, similar to TRQ agreements with the EU, Japan, and the UK.
USTR's review of additional imports tariffs of 7.5 to 25 percent on certain U.S. imports from China, including certain raw materials used in steel production, semi-finished and finished steel products, and downstream steel-intensive products, pursuant to Section 301 of the Trade Act of 1974 could change the coverage and levels of such tariffs.
In February 2019, the EC implemented a definitive safeguard on global steel imports in the form of TRQs. The TRQs, which impose 25 percent tariffs on steel imports that exceed the TRQ limit, are currently effective through June 2024. In December 2022, the EC initiated its fourth periodic review of this safeguard, which may result in adjustments to the safeguard TRQ limits.
All of the above factors present a degree of uncertainty to our financial and operational performance, our customers, and overall economic conditions, all of which could impact steel demand and our performance. Faced with significant import competition and
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overcapacity in various markets, we will continue to evaluate potential strategic and organizational opportunities, which may include exiting lines of business and the sale of certain assets, temporary shutdowns or closures of facilities.
Shortages of skilled labor, increased labor costs or our failure to attract and retain other highly qualified personnel in the future could disrupt our operations and adversely affect our financial results.
We depend on skilled labor for the manufacture of our products. Some of our facilities are located in areas where demand for skilled labor often exceeds supply. Shortages of some types of skilled labor, such as electricians and qualified maintenance technicians, could restrict our ability to maintain or increase production rates, lead to production inefficiencies and increase our labor costs. Ourshift to the Best for All strategy will also require a set of job skills that is different from our prior needs. Our continued success depends on the active participation of our key employees. We have recently observed an overall tightening and increasingly competitive labor market. The competitive nature of the labor markets in which we operate, the cyclical nature of the steel industry and our resulting needs for skilled employees increase our risk of not being able to recruit, train and retain the employees we require at efficient costs and on reasonable terms, and could lead to increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain employees. In addition, many companies, including U. S. Steel, have had employee layoffs as a result of reduced business activities during industry downturns. The loss of our key people or our inability to attract new key employees could adversely affect our operations. Additionally, layoffs or other adverse actions could result in an adverse relationship with our workforce or third-party labor providers. If we are unable to recruit, train and retain adequate numbers of qualified employees and third-party labor providers on a timely basis or at a reasonable cost or on reasonable terms, our business and results of operations could be adversely affected. Additionally, an overall labor shortage, lack of skilled labor, increased turnover or labor inflation as a result of general macroeconomic factors that affect our customers or suppliers could have a material adverse impact on the company’s operations, results of operations, liquidity or cash flows.
Strategic Risk Factors
Our investments in new technologies and products may not be fully successful.
Execution of our Best for All® strategy depends, in part, on the success of a number of investments we have made and plan to make in new technologies.facilities, technologies and products and successfully transitioning our footprint to a lower-cost, carbon and capital intensive model. Our Best for All strategy is centered around expanding our competitive advantages in low-cost iron ore mini mill steelmaking, and best-in-class finishing capabilities. These competitive advantages are built on a foundation of research, innovation and deep customer relationships. We are expanding our low-cost iron ore competitive advantage by investing in ways to translate the advantage to feed our growing EAF footprint. This includes investments in a pig iron caster at the Gary Works facility and DR-grade pellet capabilities in Keetac, Minnesota. We are expanding our mini mill steelmaking capabilities through the construction of a second mini mill facility in Osceola, Arkansas. We are also expanding our best-in-class finishing capabilities through investments in a non-grain oriented electrical steel line and galvanizing construction line at Big River Steel. In executing our strategy, we aim to enhance our earnings profile, deliver long-term cash flow through industry cycles and reduce our cost, capital, and carbon intensity. By offering the product capabilities, including the more sustainable steels (steels made with lower greenhouse gas emissions) our customers are increasingly demanding, we believe that we can achieve more competitive positioning in strategic, high-margin end markets, and deliver high-quality, sustainable, value-added products and innovative solutions.
Construction of our investments are expected to deliver an enhanced “best of both” business model that delivers cost and/or capability differentiation for our stakeholders. Our intent to eventually acquire 100% of Big River Steel, like our other investments in state-of-the-art sustainable steel technologies including, but not limited to, the endless casting and rolling line at Mon Valley Works and XG3 at our PRO-TEC joint venture,strategic projects is a significant element of our strategy. If our investment in Big River Steel fails to provide the benefits we expect or our financial condition is constrained, we may choose not to exercise our option to acquire its remaining outstanding ownership interests. In addition, if Big River Steel does not achieve the expected financial performance, we still may be required to acquire the remaining ownership interests at a discounted purchase price. Additionally, like with any significant construction project, we may be subject to changing market conditions and demand for our completed projects, delays, inflation and cost overruns, work stoppages, labor shortages, engineering issues, weather interferences, supply chain delays, changes required by governmental authorities, delays or the inability to acquire required permits or licenses, changes in the ability to finance the projects or disruption of existing operations, any of which could have an adverse impact on our operational and financial results. Furthermore, new product development or modification is costly, may be restricted by regulatory requirements, involves significant research, development, time, expense and expensehuman capital and may not necessarily result in the successful commercialization of any new products, customer adoption of new technologies or products or new technologies may not perform as intended or expected. Unsuccessful execution of these strategic projects, or underperformance of any of these assets or failure of new products to gain market acceptance could adversely affect our business, results of operations and financial condition.condition and may limit the benefits of our stockholder value creation strategy.
From time to time, we engage in acquisitions, divestitures and joint ventures and may encounter difficulties in integrating and separating these businesses and therefore we may not realize the anticipated benefits.
As we pursue our Best for All® strategy, we may seek growth opportunities through strategic acquisitions as well as evaluate our portfolio for potential divestitures to optimize our business footprint and portfolio. The success of these transactions will depend on our ability to integrate or separate, as applicable, assets and personnel in these transactions and to cooperate with our strategic partners. We may encounter difficulties in integrating acquisitions with our operations as well as separating divested businesses, and in managing strategic investments. Furthermore, we may not realize the degree, or timing, of benefits we anticipate when we first enter into a transaction.
Additionally, we seek opportunities to monetize non-core and excess iron assets, including through real estate sales, third party agreements and option agreements. These opportunities may not materialize or generate the financial benefits expected. For
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example, Stelco Inc. holds an option (Option) to acquire an undivided 25 percent interest in a to-be-formed entity that will own the Company’s current iron ore mine located in Mt. Iron, Minnesota. There is a possibility that Stelco may not exercise its Option in the anticipated timeframe or at all. If the proposed joint venture with Stelco is not successful, fails to provide the benefits we expect, or is not created at all, we may in the future have more iron ore than we need to support the business. Additionally, the existence of the Option may deter future potential opportunities to monetize the iron ore assets. Any of the foregoing could adversely affect our business and results of operations.
Operational and Commercial Risk Factors
Our operational footprint, unplanned equipment outages and other unforeseen disruptions may adversely impact our results of operations.operations or result in idle facility costs or impairment charges.
U. S. Steel has adjusted its operating configuration to advance its Best for All® strategy, in response to market conditions, including global economic volatility, declining steel prices, oil and gas industry disruption, global overcapacity and unfairly traded imports, and to optimize capability and cost performance, by idling and restarting production at certain facilities. Due to our existing operational footprint, the Company may not be able to respond in an efficient manner to fully realize the benefits from changing market conditions that are favorable to integrated steel producers.producers or most efficiently mitigate the negative impacts of such changes. Our decisions concerning which facilities to operate and at what levels are made based upon execution of our Best for All strategy, market conditions, our customers’ orders for products as well as the capabilities and cost performance of our locations. We may concentrate production operations at several plant locations and not operate others, and as a result we may incur idle facility costs or impairment charges.
Our steel production depends on the operation of critical structures and pieces of equipment, such as blast furnaces, electric arc furnaces, steel shops, casters, hot strip mills and various structures and operations, including information technology systems, that support them.them, as well as finishing lines at our facilities and certain of our joint ventures. While we are implementinginvested in operational and reliability enhancements to our assets through the asset revitalization program, launched in 2017, and continue to implement initiatives focused on proactive maintenance of key machinery and equipment at our production facilities, we may experience prolonged periods of reduced production and increased maintenance and repair costs due to equipment failures at our facilities or those of our key suppliers.
It is also possible that operations may be disrupted due to other unforeseen circumstances such as power outages, explosions, fires, floods, pandemics, terrorism, accidents, severe weather conditions, and changes in U.S., European Union and other foreign tariffs, free trade agreements, trade regulations, laws and policies. We are also exposed to similar risks involving major customers and suppliers such as force majeure events of raw materials suppliers that have occurred and may occur in the future. Availability of raw materials and delivery of products to customers could be affected by logistical disruptions, such as shortages of barges, ocean vessels, rail cars or trucks or unavailability of rail lines or of the locks on the Great Lakes or other bodies of water. To the extent that lost production could not be compensated for at unaffected facilities and depending on the length of the outage, our sales and our unit production costs could be adversely affected.
The steel industry is highly cyclical, whichphysical impacts of climate change may also have ana material adverse effect on our results of operations. Climate change may be associated with increased occurrence of extreme weather conditions, which could include, among other things, increased risk of flooding, potential heat stress at facilities and other natural disasters that may lead our customers to curtail or shut down production or to supply chain and operational disruptions.
We face increased competition within our industry and from alternative materials and risks concerning innovation, new technologies, products and increasing customer requirements.demand for lower-carbon products.
As a result of increasingly stringent regulatory requirements and increased market and technological changes driven by broader trends such as decarbonization and electrification efforts in response to climate change, designers, engineers and industrial manufacturers, especially those in the automotive industry, are increasing their use of lighter weight, less carbon intense and alternative materials, such as aluminum, composites, plastics and carbon fiber. Use of such materials could reduce the demand for our steel products or steel products generally, which may reduce our profitability and cash flow. Additionally, the trend toward light weighting in the automotive industry, which requires lighter gauges of steel at higher strengths, could result in lower steel volumes required by that industry over time.
Additionally, technologies such as direct iron reduction, EAF production, oxygen-coal injection and experimental technologies such as molten oxide electrolysis and hydrogen flash smelting may be more cost effective than our current production methods. However, we may not have sufficient capital to invest in such technologies and may incur difficulties adapting and fully integrating these
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technologies into our existing operations. We may also encounter production restrictions, or not realize the cost benefit from such capital intensive technology adaptations to our current production processes. Customers, such as those in the automotive industry, are demanding stronger and lighter products. Tubular customers are increasingly requesting pipe producers to supply connections and other ancillary parts as well as inspection and other services. We may not be successful in meeting these technological challenges.
Limited availability, or volatility in prices of raw materials, scrap and energy may constrain operating levels and reduce profit margins.
U. S. Steel and other steel producers have periodically faced problems obtaining sufficient raw materials and energy in a timely manner due to delays, defaults, severe weather conditions, or force majeure events, shortages or transportation problems (such as shortages of barges, ore vessels, rail cars or trucks, or disruption of rail lines, waterways, or natural gas transmission lines), resulting in production curtailments. As a result, we may be exposed to risks concerning pricing and availability of raw materials and energy resources from third parties as well as logistics constraints moving our own raw materials and scrap to our plants. USSE purchases substantially all of its iron ore and coking coal requirements from outside sources. USSE is also dependent upon availability of natural gas produced in Russia and transported through Ukraine. Any curtailments or escalated costs may further reduce profit margins.
U. S. Steel has agreed, and may continue to agree, to purchase raw materials and energy at prices that have been, and may be, above future market prices or in greater volumes than required in the future. Additionally, any future decreases in iron ore, scrap, natural gas, electricity and oil prices may place downward pressure on steel prices. If steel prices decline, our profit margins on indexed contracts and spot business could be reduced.
A failure of our information technology infrastructure and cybersecurity threats may adversely affect our business operations.
Despite efforts to protect confidential business information, personal data of employees and contractors, and the control systems of manufacturing plants, U. S. Steel systems and those of our third-party service providers have been and may be subject to cyber-attacks or system breaches. System breaches can lead to theft, unauthorized disclosure, modification or destruction of proprietary business data, personally identifiable information (PII), or other sensitive information, and to defective products, production downtime and damage to production assets, and the inaccessibility of key systems, with a resulting impact to our reputation, competitiveness and operations. We have experienced cybersecurity attacks that have resulted in unauthorized persons gaining access to our information technology systems and networks, and we could in the future experience similar attacks. To date, no cybersecurity attack has had a material impact on our financial condition, results of operations or liquidity.
While the Company continually works to safeguard our systems and mitigate potential risks, there can be no assurance that such actions will be sufficient to prevent cyber-attacks or security breaches or mitigate all potential risks to our systems, networks and data.data, particularly with the recent proliferation and sophistication of ransomware attacks around the world. The potential consequences of a material cybersecurity attack include reputational damage, investigations and/or adverse proceedings with government regulators or enforcement agencies, litigation with third parties, disruption to our systems, including production capabilities, unauthorized release of confidential, personally
identifiable or otherwise protected information, corruption of data, diminution in the value of our investment in research, development and engineering and increased cybersecurity protection and remediation costs, which in turn could adversely affect our competitiveness, results of operations and financial condition. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilities resulting from a cybersecurity attack.
We depend on third parties for transportation services and increases in costs or the availability of transportation may adversely affect our business and operations.
Our business depends on the transportation of a large number of products, both domestically and internationally. We rely primarily on third parties, including the recently divested Transtar business, for transportation of the products we manufacture as well as delivery of our raw materials.Any increase in the cost of the transportation of our raw materials or products, as a result of increases in fuel or labor costs, higher demand for logistics services, consolidation in the transportation industry or otherwise, may adversely affect our results of operations as we may not be able to pass such cost increases on to our customers.
Our transportation service providers may face disruptions due to weather conditions or events, strikes, labor shortages or other constraints. If any of these providers were to fail to deliver raw materials to us or deliver our products in a timely manner, we may be unable to manufacture and deliver our products in response to customer demand. In addition, if any of these third parties were to cease operations or cease doing business with us, we may be unable to replace them at a reasonable cost.
Our 2022 Labor Agreements with the USW contain provisions that grant the USW a limited right to bid on the Company’s sale of both" stockholder value creation strategy and asset revitalization program may be limited a facility (or sale of a controlling interest in an entity owning a facility) covered by the 2022 Labor Agreements, excluding public equity offerings and/or may not be fully realized.
the transfer of assets between U. S. Steel is pursuingand its wholly owned subsidiaries. These agreements also require a stockholder value creation strategy focusedminimum level of capital expenditures (subject to approval of the Board of Directors) to maintain the competitive status
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of the covered facilities, and place certain limited restrictions on delivering an enhanced “best of both” business model that delivers cost and/or capability differentiation for our customers. This includes investing in new assets and technologies to leverage the advantages of integrated and mini mill capabilities. This strategy builds on our asset revitalization program, launched in 2017, which covers investments in our existing assets, and involves investments beyond routine capital and maintenance spending. Asset revitalization projects have delivered, and are expected to deliver, both operational and commercial benefits, but such benefits may be limited to the assets that are revitalized. Business conditions, our ability to implement such initiatives, and factors beyond our control may limitreplace product produced at a covered facility with product produced at other than Company facilities or affiliates or U.S. or Canadian facilities with employee protections similar to the benefits associated with certain identified projects and limit the economic benefits of our stockholder value creation strategy or asset revitalization program. Our goal remains to deliver high-quality, value-added products on time every time and to collaborate with our customers to develop innovative solutions that address their most challenging needs.
Financial Risk Factors
Our business requiresand execution of our strategy require substantial expenditures for capital investments, debt service obligations, capital investments, operating leases and maintenance that we may be unable to fund.fund, which may require other actions to satisfy our obligations under our debt.
We have approximately $3.6$3.9 billion of total debt (see Note 17 to the Consolidated Financial Statements), including $600 million of outstanding borrowings under our Fifth Amended and Restated Credit Agreement and $393 million of outstanding borrowings under our USSK Credit Agreement.. If our cash flows and capital resources are insufficient to fund our planned capital expenditures or debt service obligations, we may face substantial liquidity problems and may be forced to reduce or delay investments and capital expenditures, terminate strategic projects, or to dispose of material assets or operations or issue additional debt or equity. We may not be able to take such actions, if necessary, on commercially reasonable terms or at all. The Credit Facility Agreement, the documents governing the USSK Credit Facility, the documents governing the Big River Steel ABL Facility and Big River Steel notes, and the indentures governing our existing senior unsecured notes may restrict our ability to dispose of assets and may also restrict our ability to raise debt or equity capital to be used to repay other debt when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due. Our inability to
generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results or operations and may place us at a competitive disadvantage with competitors who may have less indebtedness and other obligations or greater access to financing. In addition, the availability under our Credit Facility Agreement and Big River ABL Facility may be reduced if we have insufficient collateral, or if we do not meet a fixed charge coverage ratio test. Availability under the USSK Credit Agreement could be limited if USSK does not meet certain financial covenants.
Our ability to service or refinance our debt or fund investments and capital expenditures required to maintain or expand our business operations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control.control, such as inflation, rising interest rates, supply chain disruptions and the impacts of the war in Ukraine. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to satisfy our liquidity needs. In addition, the availability under certain of our Fifthdebt instruments may be limited if we do not meet certain financial covenants. Furthermore, the agreements governing the BRS ABL Facility and other outstanding indebtedness of Big River Steel LLC and its subsidiaries limit their ability, subject to certain exceptions, to pay dividends or distributions or make other restricted payments, such that we may not be able to access the cash generated by these subsidiaries to fund our other expenditures.
If we cannot make scheduled payments on our debt, we will be in default and holders of our senior unsecured notes could declare all outstanding principal and interest to be due and payable, the lenders under the Sixth Amended and Restated Credit Agreement, may be reduced if we have insufficient collateral, or if we do not meet a customary fixed charge coverage test. Availability under the USSK Credit AgreementFacility and the Export Credit Facility could terminate their commitments to loan money, accelerate full repayment of any or all amounts outstanding (which may result in the cross acceleration of certain of our other debt obligations) and the lenders could foreclose against the assets securing their borrowings and we could be limited if USSK does not meet certainforced into bankruptcy or liquidation. All of these events would materially and adversely affect our financial covenants. Seeposition and results of operations.
Furthermore, ratings agencies could downgrade our ratings either due to factors specific to our business, a prolonged cyclical downturn in the Liquidity sectionsteel industry, macroeconomic trends such as global or regional recessions and trends in "Item 7. Management's Discussioncredit and Analysis" and Note 17 tocapital markets more generally. Ratings agencies also may lower, suspend or withdraw ratings on the Consolidated Financial Statements for further details.outstanding securities of U. S. Steel or Big River Steel. Any lowering, suspension or withdrawal of such ratings may have an adverse effect on the market prices of such securities.
We have significant retiree health care, retiree life insurance and pension plan costs, which may negatively affect our results of operations and cash flows.
We maintain retiree health care and life insurance and defined benefit pension plans covering many of our domestic employees and former employees upon their retirement. Some of these benefit plans are not fully funded, and thus will require cash funding in future years. Minimum contributions to domestic qualified pension plans (other than contributions to the Steelworkers Pension Trust (SPT) described below) are regulated under the Employee Retirement Income Security Act of 1974 (ERISA) and the Pension Protection Act of 2006 (PPA).
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The level of cash funding for our defined benefit pension plans in future years depends upon various factors, including voluntary contributions that we may make, future pension plan asset performance, actual interest rates under the law, and the impactsimpact of business acquisitions or divestitures, union negotiated benefit changes and future government regulations, many of which are not within our control. In addition, assets held by the trusts for our pension plan and our trust for retiree health care and life insurance benefits are subject to the risks, uncertainties and variability of the financial markets. Future funding requirements could also be materially affected by differences between expected and actual returns on plan assets, actuarial data and assumptions relating to plan participants, the discount rate used to measure the pension obligations and changes to regulatory funding requirements. See "Item 7. Management's Discussion and Analysis"Analysis of Financial Condition and Results of Operations" and Note 18 to the Consolidated Financial Statements for a discussion of assumptions and further information associated with these benefit plans.
U. S. Steel contributes to a domestic multiemployer defined benefit pension plan, the SPT, for USW-represented employees formerly employed by National Steel and represented employees hired after May 2003. We have legal requirements for future funding of this plan should the SPT become significantly underfunded or we decide to withdraw from the plan. Either of these scenarios may negatively impact our future cash flows. The 20182022 Labor Agreements increased the contribution rate for most steelworker employees. Collectively bargained company contributions to the plan could increase further as a result of future changes agreed to by the Company and the USW.
The accounting treatment of goodwill, equity method investments and other long-lived assets could result in future asset impairments, which would reduce our earnings.
We periodically test our goodwill, equity method investments and other long-lived assets to determine whether their estimated fair value is less than their value recorded on our balance sheet. The results of this testing for potential impairment may be adversely affected by uncertain market conditions for the global steel industry and general economic conditions. If we determine that the fair value of any of these assets is less than the value recorded on our balance sheet, and, in the case of equity method investments the decline is other than temporary, we would likely incur a non-cash impairment loss that would negatively impact our results of operations. We have incurred asset impairment charges in recent years, including during the year ended December 31, 2022, and there can be no assurances that continued market dynamics or other factors may not result in future impairment charges.
We are subject to foreign currency risks, which may negatively impact our profitability and cash flows.
The financial condition and results of operations of USSE are reported in euros and then translated into U.S. dollars at the applicable exchange rate for inclusion in our financial statements. The appreciation of the U.S. dollar against the euro negatively affects our Consolidated Results of Operations. International cash requirements have been and in the future may be funded by intercompany loans, which may create intercompany monetary assets and liabilities in currencies other than the functional currencies of the entities involved, which can have a non-cash impact on income when they are remeasured at the end of each period. Procurement of equipment of announced strategic projects may be denominated in foreign currencies, which could adversely affect the costs of these projects.
In addition, foreign producers, including foreign producers of subsidized or unfairly traded steel with foreign currency denominated costs may gain additional competitive advantages or target our home markets if the U.S. dollar or euro exchange rates strengthen relative to those producers' currencies. Volatility in the markets and exchange rates for foreign currencies and contracts in foreign currencies could have a significant impact on our reported financial results and condition.
Financial regulatory frameworks introduced by U.S. and EU regulators may limit our financial flexibility or increase our costs.
We use swaps, forward contracts and similar agreements to mitigate our exposure to volatility, which entails a variety of risks. The Commodity Future Trading Commission’s Dodd Frank and the EU’s European Market Infrastructure Regulation and other government agencies' regulatory frameworks can limit the Company’s ability to hedge interest rate, foreign exchange (FX), or commodity pricing exposures, which could expose us to increased economic risk. These frameworks may introduce additional compliance costs or liquidity requirements. Some counterparties may cease hedging as a result of increased regulatory cost burdens, which in turn may reduce U. S. Steel’s ability to hedge its interest rate, FX or commodity exposures.
We are a party to various legal proceedings, the resolution of which could negatively affect our profitability and cash flows in a particular period.
We are involved at any given time in various litigation matters, including administrative and regulatory proceedings, governmental investigations, environmental matters and commercial disputes. Our profitability and cash flows in a particular period could be negatively affected by an adverse ruling or settlement in any legal proceeding or investigation that is pending against us or filed against us in the future.investigation. While we believe that we have taken appropriate actions to mitigate and reduceeffectively manage these risks, due to the nature of our operations, these risks will continue to exist and additional legal proceedings or investigations may arise from time to time.
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Additionally, we may be subject to product liability claims that may have an adverse effect on our financial position, results of operations and cash flows. Events such as well failures, line pipe leaks, blowouts, bursts, fires and product recalls could result in claims that our products or services were defective and caused death, personal injury, property damage or environmental pollution. The insurance we maintain may not be adequate, available to protect us in the event of a claim, or its coverage may be limited, canceled or otherwise terminated, or the amount of our insurance may be less than the related impact on our enterprise value after a loss. We establish reserves based on our assessment of contingencies, including contingencies for claims asserted against us in connection with litigation, arbitrations and environmental issues. Adverse developments in litigation, arbitrations, environmental issues or other legal proceedings may affect our assessment and estimates of the loss contingency recorded as a reserve and require us to make payments in excess of our reserves, which could negatively affect our operations, financial results and cash flows.See "Item 3. Legal Proceedings" and Note 26 to the Consolidated Financial Statements for further details.
Regulatory Risk Factors
Compliance with existing and new environmental regulations, environmental permitting and approval requirements may result in delays or other adverse impacts on planned projects, our results of operations and cash flows.
Steel producers in the U.S., along with their customers and suppliers, are subject to numerous federal, state and local laws and regulations relating to the protection of the environment. These laws and regulations concern the generation, storage, transportation, disposal, emission or discharge of pollutants, contaminants and hazardous substances into the environment, the reporting of such matters, and the general protection of public health and safety, natural resources, wildlife and the environment. Steel producers in the EU are subject to similar laws. These laws and regulations continue to evolve and are becoming increasingly stringent. The ultimate impact of complying with such laws and regulations is not always clearly known or determinable because regulations under some of these laws have not yet been promulgated or are undergoing revision. Additionally, compliance with certain of these laws and regulations, such as the CAA and similar state and local requirements, governing SO2 and otherair emissions, could result in substantially increased capital requirements and operating costs.costs and could change the equipment or facilities we operate. Compliance with current or future regulations could entail substantial costs for emission basedemission-based systems and could have a negative impact on our results of operations and cash flows. Failure to comply with the requirements may result in administrative, civil and criminal penalties, revocation of permits to conduct business or construct certain facilities, substantial fines or sanctions, enforcement actions (including orders limiting our operations or requiring corrective measures), natural resource damages claims, cleanup and closure costs, and third-party claims for property damage and personal injury as a result of violations of, or liabilities under, environmental laws, regulations, codes and common law. The amount and timing of environmental expenditures is difficult to predict, and, in some cases, liability may be imposed without regard to contribution or to whether we knew of, or caused, the release of hazardous substances.
In addition, the Company must obtain, maintain and comply with numerous permits, leases, approvals, consents and certificates from various governmental authorities in connection with the construction and operation of new production facilities or modifications to existing facilities.facilities. In connection with such activities, the Company may need to make significant capital and operating expenditures to detect, repair and/or control air emissions, to control water discharges or to perform certain corrective actions to meet the conditions of the permits issued pursuant to applicable environmental laws and regulations.
There can be no assurance that future approvals, licenses and permits will be granted or that we will be able to maintain and renew the approvals, licenses and permits we currently hold. Failure to do so could have a material adverse effect on our results of operations and cash flows. Furthermore, compliance with the environmental permitting and approval requirements may be costly and time consuming and could result in delays or other adverse impacts on planned projects, our results of operations and cash flows.
We have significant environmental remediation costs that negatively affect our results of operations and cash flows.
Some of U. S. Steel's current and former facilities were in operation before 1900.many federal and state environmental regulations were in place. Hazardous materials associated with those facilities have been and may continue to be releasedencountered at current or former operating sites or delivered to sites operated by third parties.
U. S. Steel is involved in numerous remediation projects at currently operating facilities, facilities that have been closed or sold to unrelated parties and other sites where material generated by U. S. Steel was deposited. In addition, there are numerous other former operating or disposal sites that could become the subject ofto remediation, which may negatively affect our results of operations and cash flows.
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Iron and steel producers around the world are facing mounting pressure to reduce greenhouse gas emissions from operations. The majority of greenhouse gas emissions from the production of iron and steel are caused by the combustion of fossil fuels, the use of electrical energy, and the use of coal, lime, and iron ore as feedstock. The two main production processes are the integrated route of blast furnace ironmaking in combination with basic oxygen furnace steelmaking (BOF) and the alternative route of electric arc furnace steelmaking. Both routes generate greenhouse gas emissions with the latter process, involving the electric arc melting of a majority of steel scrap, generating less than half that or less, of the traditional integrated steelmaking process.
Federal, state and local governmental agencies within the United States may introduce regulatory changes in response to the potential impacts of climate change, including the introduction of carbon emissions limitations or trading mechanisms. Any such regulation regarding climate change and GHG emissions could impose significant costs on our operations and on the operations of our customers and suppliers, including increased energy, capital equipment, emissions controls, environmental monitoring and reporting and other costs in order to comply with current or future laws or regulations concerning climate change and GHG emissions. Any adopted future climate change and GHG regulations could negatively impact our ability, and that of our customers and suppliers, to compete with companies situated in areas not subject to or not complying with such limitations. Inconsistency of regulations may also change the attractiveness of the locations of some of the Company's assets and investments. In addition, changes in certain environmental regulations, including those that may impose output limitations or higher costs associated with climate change or greenhouse gas emissions, could substantially increase the cost of manufacturing and raw materials to us and other steel producers. For additional details, see “Part I – Item 1, Business – New and Emerging Environmental Regulations – United States and European Greenhouse Gas Emissions Regulations” above.
Additionally, the European Union has established aggressive CO2 reduction targets of 40%40 percent by 2030, against a 1990 baseline, and full carbon neutrality by 2050. As part of the European Green Deal the Commission proposed in September 2020 to raise the 2030 reduction target to at least 55 percent compared to 1990. The new target has yet to be endorsed by the European Parliament. An emission trading system (ETS) was established to encourage compliance with set emissions reduction targets. These aggressive targets require drastic measures within the steel industry to comply. The price of CO2 emission allowances is currently at 24 euro per metric ton and forecasts call for potential price increase to 40 euro per metric ton. The transition to EAF technology, as well as incremental gains in energy reduction, use of renewable energy, hydrogen-based steelmaking and continued asset and process improvements (including EAF steelmaking), are expected to reduce our GHG footprint. However, the development of breakthrough technologies areis likely required to continue the path of low to no carbon footprint in the steel industry. Implementation of new technologies will most likely require significant amounts of capital and an abundant source of low costlow-cost hydrogen and/or green power, most likely leading to an increase in the cost of future steelmaking. In addition, the cost of emission allowances is forecast to increase, along with the number of allowances decreasing in the next several years.The price of CO2 emission allowances was 81 euro per metric ton as of December 31, 2022 and forecasts call for potential prices exceeding 100 euro per metric ton in future years.
In addition to the changing rules and regulations related to environmental, social and governance (ESG) matters imposed by governmental and self-regulatory organizations such as the SEC and the New York Stock Exchange, a variety of third-party organizations and institutional investors evaluate the performance of companies on ESG topics, and the results of these assessments are widely publicized. These changing rules, regulations and stakeholder expectations have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting such regulations and expectations. Reduced access to or increased cost of capital may occur as financial institutions and investors increase expectations related to ESG matters.
Developing and acting on initiatives within the scope of ESG, and collecting, measuring and reporting ESG-related information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards. We may also communicate certain initiatives and goals, regarding environmental matters, diversity, social investments and other ESG-related matters, in our SEC filings or in other public disclosures. These initiatives and goals within the scope of ESG could be difficult and expensive to implement, the technologies needed to implement them may not be cost effective and may not advance at a sufficient pace, and we could be criticized for the accuracy, adequacy or completeness of the disclosure. Furthermore, statements about our ESG-related initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve and assumptions that are subject to complex regulatorychange in the future. In addition, we could be criticized for the scope or nature of such initiatives or goals, or for any revisions to these goals. If our ESG-related data, processes and compliance frameworks.
New and changing data privacy laws and cross-border transfer requirements could have a negative impact on our business and operations.
Our business depends on the processing and transfer of data between our affiliated entities, to and from our business partners, and with third-party service providers, and of our employees, which may be subject to data privacy laws andand/or cross-border transfer restrictions. In North America and Europe, new legislation and changes to the requirements or applicability of existing laws, as well as evolving standards and judicial and regulatory interpretations of such laws, may impact U. S. Steel’s ability to effectively process and transfer data both within the United States and across borders in support of our business operations and/or keep pace with specific requirements regarding safeguarding and handling personal information. While U. S. Steel takes steps to comply with these legal requirements, non-compliance could lead to possible administrative, civil, or criminal liability, as well as
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reputational harm to the Company and its employees. For example, the European Union’s General Data Protection Regulation (GDPR), which went into effect in May 2018, created a range of new compliance obligations for subject companies and increases financial penalties for non-compliance. The costs of compliance with privacy laws such as the GDPR and the potential for fines and penalties in the event of a breach may have a negative impact on our business and operations.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 2. PROPERTIES
U. S. Steel and its predecessors have owned their properties for many years with no material adverse title claims asserted. In the case of Great Lakes Works, Granite City Works, the Midwest Plant and Keetac iron ore operations, U. S. Steel or its subsidiaries are the beneficiaries of bankruptcy laws and orders providing that properties are held free and clear of past liens and liabilities. In addition, U. S. Steel or its predecessors obtained title insurance, local counsel opinions or similar protections when significant properties were initially acquired or since acquisition.
At the Midwest Plant in Indiana, U. S. Steel has a supply agreement for various utility services with a company that owns a cogeneration facility located on U. S. Steel property. The Midwest Plant agreement expires in 2028.
U. S. Steel leases its headquarters office space in Pittsburgh, Pennsylvania.
For property, plant and equipment additions, including finance leases, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, – Financial Condition, Cash FlowsLiquidity and Liquidity – Cash Flows”Capital Resources” and Note 13 to the Consolidated Financial Statements.
Mining Properties
Summary Overview of Mining Operations
U. S. Steel isoperates two surface iron ore mining complexes in Minnesota consisting of the subjectMinntac Mine and Pellet Plant and the Keetac Mine and Pellet Plant, which are wholly owned by the Company. As of December 31, 2022, U. S. Steel owns a minority interest in the iron ore mining assets of Hibbing Taconite Company.
The following table provides a summary of the net book value of the land and PP&E at the Minntac and Keetac mines as of December 31, 2022:
| Gross | Accumulated | Net Book | |||||||||
| (in millions) | Value | Depreciation | Value | ||||||||
| Minntac Mine and Pellet Plant | |||||||||||
| Land | $ | 30 | $ | — | $ | 30 | |||||
| Other property, plant and equipment | 1,558 | 1,232 | 326 | ||||||||
| Total | $ | 1,588 | $ | 1,232 | $ | 356 | |||||
| Keetac Mine and Pellet Plant | |||||||||||
| Land | $ | 7 | $ | — | $ | 7 | |||||
| Other property, plant and equipment | 298 | 177 | 121 | ||||||||
| Total | $ | 305 | $ | 177 | $ | 128 | |||||
The following table provides a summary of our mineral production by mining complex for each reportable period:
| Iron Ore Pellets | Production | ||||||||||
| (Millions of short tons) | 2022 | 2021 | 2020 | ||||||||
| Iron Ore Pellets | |||||||||||
| Minntac Mine and Pellet Plant | 15.1 | 16.1 | 14.1 | ||||||||
| Keetac Mine and Pellet Plant | 5.9 | 6.0 | 2.0 | ||||||||
Hibbing Taconite Company (1) | 0.9 | 1.3 | 0.9 | ||||||||
| Total | 21.9 | 23.4 | 17.0 | ||||||||
(1) Represents U. S. Steel's proportionate share of production as these investments are unconsolidated equity affiliates.
In accordance with Regulation S-K, Items 1300-1305, we engaged DRA Global and Barr Engineering Co. to provide feasibility studies and technical report summaries for our material mining operations at Minntac and Keetac in 2021. The majority shareholders of the Hibbing Taconite Company separately engaged qualified persons to perform the same procedures at the Hibbing Taconite Mine in 2021. Accordingly, the figures below for the Hibbing Taconite Mine were provided by the majority shareholders using the reports provided by the qualified persons. The tables showing resources and reserves by mining property were prepared using the results of the procedures performed by the qualified persons designated by each organization, which have no affiliation with or a partyinterest in our material mining properties.
Regulation S-K, Item 1302, requires registrants to a number of threatened or pending legal actions, contingencies and commitments involving a variety of matters, including laws and regulations relatingfile the technical report summary as an exhibit to the environment, certain of which are discussedForm 10-K filing when disclosing for the first time mineral reserves or resources or when there has been a material change in the mineral reserves or resources since the last technical report summary filed for the properties. The Company did not have any material changes to its reserves or resources during 2022, nor is it disclosing any mineral reserves or resources for the first time. Accordingly, the technical report summary is not filed as an exhibit with the 2022 Form 10-K.
Minntac Mine and Pellet Plant
The Minntac Mine and Pellet Plant is located in Mountain Iron, Minnesota and is wholly owned and operated by U. S. Steel. On April 30, 2020, the Company granted Stelco Inc. (Stelco) a purchase option to acquire a 25 percent interest in the Minntac mining operations. The option can be exercised at any time before January 31, 2027. For more information regarding the purchase option, please see Note 2620 to the Consolidated Financial Statements. The ultimate resolutionMinntac Mine has 25,420 acres of these contingencies could, individually orsurface rights. The surface mine in the aggregate, be material toproduction stage whereby taconite iron ore is mined using the Truck-Shovel method. The mine is approximately 55 years old and has been operated by U. S. Steel financial statements. However, management believes thatsince 1967. For discussions regarding encumbrances, violations, fines, etc. related to the Minntac Mine, see Item 3. Legal Proceedings.
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The following table provides details of our iron ore resources and reserves at Minntac for the year ended December 31, 2022. Resources below are stated exclusive of reserves.
| Minntac Mine and Pellet Plant | ||||||||||||||||||||||||||||||||||||||
| Amount | Grades/Qualities | Cut-off Grades | Metallurgical Recovery | |||||||||||||||||||||||||||||||||||
| (Millions of short tons) | 2022 | 2021 | Change (%) | MagFe% | Concentrate Silica % | Min MagFe % | Max Concentrate Silica % | Weight Recovery % | ||||||||||||||||||||||||||||||
| Measured mineral resources | — | — | — | % | — | — | — | — | — | |||||||||||||||||||||||||||||
| Indicated mineral resources | 251.00 | 251.00 | — | % | 18.20 | 5.51 | 14.00 | 10.00 | 23.65 | |||||||||||||||||||||||||||||
| Measured + indicated mineral resources | 251.00 | 251.00 | — | % | 18.20 | 5.51 | 14.00 | 10.00 | 23.65 | |||||||||||||||||||||||||||||
| Inferred mineral resources | 149.10 | 149.10 | — | % | 18.05 | 6.27 | 14.00 | 10.00 | 22.50 | |||||||||||||||||||||||||||||
| Proven mineral reserves | — | — | — | % | — | — | — | — | — | |||||||||||||||||||||||||||||
| Probable mineral reserves | 266.10 | 281.20 | (5) | % | 19.29 | 5.59 | 14.00 | 10.00 | 25.11 | |||||||||||||||||||||||||||||
| Total mineral reserves | 266.10 | 281.20 | (5) | % | 19.29 | 5.59 | 14.00 | 10.00 | 25.11 | |||||||||||||||||||||||||||||
Keetac Mine and Pellet Plant
The Keetac Mine and Pellet Plant is located in Keewatin, Minnesota and is wholly owned and operated by U. S. Steel. The Keetac Mine has 18,020 acres of surface rights. The surface mine is in the production stage whereby taconite iron ore is mined using the Truck-Shovel method. The mine is approximately 55 years old and has been operated by U. S. Steel will remain a viablesince 2003, when it was acquired as part of the Company's purchase of National Steel Corporation. For discussions regarding encumbrances, violations, fines, etc. related to the Keetac Mine, see Item 3. Legal Proceedings.
The following table provides details of our iron ore resources and competitive enterprise even though it is possible that these contingencies could be resolved unfavorably to reserves at Keetac for the year ended December 31, 2022. Resources below are stated exclusive of reserves.
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| Keetac Mine and Pellet Plant | |||||||||||||||||||||||||||||||||||||||||
| Amount | Grades/Qualities | Cut-off Grades | Metallurgical Recovery | ||||||||||||||||||||||||||||||||||||||
| (Millions of short tons) | 2022 | 2021 | Change (%) | MagFe% | Concentrate Silica % | Min MagFe % | Max Concentrate Silica % | Weight Recovery % | |||||||||||||||||||||||||||||||||
| Measured mineral resources | — | — | — | % | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Indicated mineral resources | 192.90 | 192.90 | — | % | 18.93 | 3.40 | 14.00 | 9.00 | 27.34 | ||||||||||||||||||||||||||||||||
| Measured + indicated mineral resources | 192.90 | 192.90 | — | % | 18.93 | 3.40 | 14.00 | 9.00 | 27.34 | ||||||||||||||||||||||||||||||||
| Inferred mineral resources | 160.50 | 160.50 | — | % | 18.83 | 3.81 | 14.00 | 9.00 | 27.30 | ||||||||||||||||||||||||||||||||
| Proven mineral reserves | — | — | — | % | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Probable mineral reserves | 179.30 | 185.20 | (3) | % | 19.29 | 3.57 | 14.00 | 9.00 | 20.97 | ||||||||||||||||||||||||||||||||
| Total mineral reserves | 179.30 | 185.20 | (3) | % | 19.29 | 3.57 | 14.00 | 9.00 | 20.97 | ||||||||||||||||||||||||||||||||
Hibbing Taconite Mine
U. S. Steel.Steel maintains a minority interest in the Hibbing Taconite Mine, which is majority-owned by Cleveland-Cliffs, Inc. and located in Hibbing, Minnesota. The Hibbing Mine has 30,760 acres of surface rights, of which 1,150 acres are associated with mineral leases. The majority of the mineral rights are leased. 6,640 acres of mineral leases are expiring between 2023 and 2056. The taconite iron ore mine is currently in the production stage.
The following table provides details of our proportionate share of iron ore resources and reserves at Hibbing for the year ended December 31, 2022. Resources below are stated exclusive of reserves.
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Hibbing Taconite Company (1) | ||||||||||||||||||||
| Amount | Grades/Qualities | |||||||||||||||||||
| (Millions of short tons) | 2022 | 2021 | Change (%) | MagFe% | ||||||||||||||||
| Measured mineral resources | 0.40 | 0.40 | — | % | 19.20 | |||||||||||||||
| Indicated mineral resources | — | — | — | % | 18.70 | |||||||||||||||
| Measured + indicated mineral resources | 0.40 | 0.40 | — | % | 19.20 | |||||||||||||||
| Inferred mineral resources | — | — | — | % | — | |||||||||||||||
| Proven mineral reserves | 3.30 | 4.20 | (21.43) | % | 18.70 | |||||||||||||||
| Probable mineral reserves | 0.40 | 0.40 | — | % | 18.70 | |||||||||||||||
| Total mineral reserves | 3.70 | 4.60 | (19.57) | % | 18.70 | |||||||||||||||
(1) Represents U. S. Steel’s proportionate share of proven and probable reserves and production as these investments are unconsolidated equity affiliates.
Internal Controls
U. S. Steel estimates its iron ore resources and reserves using exploration drill holes, physical inspections, sampling, laboratory testing, 3-D computer models, economic pit analysis and fully-developed pit designs for its operating mines. Estimates for our share of unconsolidated equity affiliates are based upon information supplied by the joint ventures. Refer to sections 2 and 3 of the technical report summaries filed as Exhibit 96.1 to our 2021 Form 10-K for further details.
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Item 3. LEGAL PROCEEDINGS
General Litigation
On April 11, 2017, there was a process waste water release at our Midwest Plant (Midwest)June 8, 2021, JSW Steel (USA) Inc. and JSW Steel USA Ohio, Inc. (collectively, JSW), U.S. based subsidiaries of Indian steelmaker JSW Steel, filed suit in Portage, Indiana, that impacted a water outfall that discharges to Burns Waterway near Lake Michigan.the United States District Court for the Southern District of Texas against Nucor, U. S. Steel, identifiedAK Steel Holding Group and Cleveland-Cliffs (collectively, the sourceJSW Defendants) alleging that the Defendants operated as a cartel and formed a conspiracy to boycott JSW from obtaining semi-finished steel slabs. JSW alleges that the JSW Defendants acted in violation of Section 1 of the release and made the necessary repairs. We determined that all repairs were safely working as intended and, on April 14, 2017, resumed operations in a controlled, phased and highly monitored approach with extensive input from participating government agencies. The Company has since implemented substantial operational, process and notification improvements at Midwest. The Company has been presented with cost reimbursements, loss of use and penalty requests from the involved governmental agencies. In January of 2018, The Surfrider FoundationSherman Act and the CityClayton Act (federal antitrust), and violation of Chicago initiated suitsthe Texas Free Enterprise and Antitrust Act. JSW also alleges that the JSW Defendants formed a civil conspiracy in violation of Texas common law, and that the JSW Defendants tortiously interfered with JSW’s business relationships. The basis for JSW’s allegations relate to the JSW Defendants participation in the Northern DistrictDOC's Section 232 process, including the JSW Defendants’ support of Indiana alleging Clean Water Act (CWA) and Permit violations at Midwest. On April 2, 2018, the U.S. EPAenactment of the President’s Section 232 proclamation, statements made by the JSW Defendants after the enactment of Section 232, and the StateJSW Defendants’ participation in the Section 232 exclusion process. Plaintiffs seek monetary damages including $45 million for payment of Indiana initiated a separate action against the CompanySection 232 tariffs and lodged a Consent Decree negotiated betweenunspecified amounts for financial penalties, termination fees and lost profits as well as other damages. U. S. Steel, andalong with the relevant governmental agencies consisting of all material terms to resolve the CWA and National Pollutant Discharge Elimination System violations at the Midwest Plant. A public comment period for the Consent Decree ensued. The suits that the Surfrider Foundation and the City of Chicago filed are currently stayed. The Surfrider Foundation and the City of Chicago also filed motions, which were granted, to intervene in the Consent Decree case. The United States Department of Justice (DOJ)other JSW Defendants, filed a revised Consent Decree andMotion to Dismiss the case on August 17, 2021. On February 17, 2022, the Court issued an opinion dismissing JSW’s antitrust complaint with prejudice. JSW filed a motiontimely notice of appeal with the Court to enter the Consent Decree as final on November 20, 2019. Surfrider Foundation, City of Chicago and other non-governmental organizations filed objections to the revised Consent Decree. The DOJ and U. S. Steel made filings in support of the revised Consent Decree.
On October 2, 2017, an Amended Shareholder Class Action Complaint was filed in Federalthe United States District Court infor the Western District of Pennsylvania consolidating previously-filed actions. Separately, five related shareholder derivative lawsuits were filed in Statestate and Federalfederal courts in Pittsburgh, Pennsylvania and the Delaware Court of Chancery. The underlying consolidated class action lawsuit alleges that U. S. Steel, certain current and former officers, an upper levelupper-level manager of the Company and the financial underwriters who participated in the August 2016 secondary public offering of the Company's common stock (collectively, Defendants)the "Class Action Defendants") violated federal securities laws in making false statements and/or failing to discover and disclose material information regarding the financial condition of the Company. The lawsuit claims that this conduct caused a prospective class of plaintiffs to sustain damages during the period from January 27, 2016 to April 25, 2017 as a result of the prospective class purchasing the Company's common stock at artificially inflated prices and/or suffering losses when the price of the common stock dropped. The derivative lawsuits generally make the same allegations against the same officers and also allege that certain current and former members of the Board of Directors failed to exercise appropriate control and oversight over the Company and were unjustly compensated. The plaintiffs seek to recover losses that were allegedly sustained. The class actionClass Action Defendants moved to dismiss plaintiffs’ claims. On September 29, 2018 the Court ruled on those motions granting them in part and denying them in part. On March 18, 2019, the plaintiffs withdrew the claims against the Class Action Defendants related to the 2016 secondary offering. As a result, the underwriters are no longer parties to the case. The Company and the individual defendants are vigorously defending the remaining claims. On December 31, 2019, the Courtcourt granted Plaintiffs’the Plaintiffs' motion to certify the proceeding as a class action. The Company is pursuing anCompany's appeal of that decision.decision was denied. Discovery followed and concluded. On May 20, 2022, the Plaintiffs and Class Action Defendants agreed to settle the Shareholder Class Action in the amount of $40 million to be fully funded by the Company’s insurers. Court approval of the class action settlement is currently pending with a Final Approval Hearing set for March 20, 2023. The related derivative cases, which were previously stayed, are now proceeding and the Company will vigorously defend against the derivative lawsuits.
| Period ended | Opening Number of Claims | Claims Dismissed, Settled and Resolved (a) | New Claims | Closing Number of Claims | ||||
| December 31, 2017 | 3,340 | 275 | 250 | 3,315 | ||||
| December 31, 2018 | 3,315 | 1,285 | 290 | 2,320 | ||||
| December 31, 2019 | 2,320 | 195 | 265 | 2,390 | ||||
Asbestos Litigation
See Note 26 to our Consolidated Financial Statements, Contingencies and 2019, the Company engaged an outside valuation consultant to assist in assessing its ability to estimate an accrualCommitments for unasserted claims. This assessment was based on the Company's settlement experience, including recent claims trends. The analysis focused on settlements made over the last several years as these claims are likely to best represent future claim characteristics. After review by the valuation consultant and U. S. Steel management, it was determined that the Company could not estimate an accrual for unasserted claims. a description of our asbestos litigation.
ENVIRONMENTAL PROCEEDINGS
The following is a summary of the proceedings of U. S. Steel that were pending or contemplated as of December 31, 2019,2022, under federal and state environmental laws.laws, and which U. S. Steel reasonably believes may result in monetary sanctions of at
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least $1 million (the threshold chosen by U. S. Steel as permitted by Item 103 of Regulation S-K promulgated under the Securities Exchange Act of 1934, as amended). Information about specific sites where U. S. Steel is or has been engaged in significant clean up or remediation activities is also summarized below. Except as described herein, it is not possible to accurately predict the ultimate outcome of these matters.
CERCLA Remediation Sites
Claims under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) have been raised with respect to the cleanup of various waste disposal and other sites. Under CERCLA, potentially responsible parties (PRPs)(each, a PRP) for a site include current owners and operators, past owners and operators at the time of disposal, persons who arranged for disposal of a hazardous substance at a site and persons who transported a hazardous substance to a site. CERCLA imposes strict and joint and several liabilities. Because of various factors, including the
ambiguity of the regulations, the difficulty of identifying the responsible parties for any particular site, the complexity of determining the relative liability among them, the uncertainty as to the most desirable remediation techniques, and the amount of damages and cleanup costs and the time period during which such costs may be incurred, we are unable to reasonably estimate U. S. Steel’s ultimate liabilities under CERCLA.
As of December 31, 2019,2022, U. S. Steel has received information requests or been identified as a PRP at a total of sevenfour CERCLA sites, three of which have liabilities that have not been resolved. Based on currently available information, which is in many cases preliminary and incomplete, management believes that U. S. Steel’s liability for CERCLA cleanup and remediation costs at the other four sitessite will be between $100,000 and $1 million for three of the sites, and over $5 million for one site as described below.
Duluth Works
The former U. S. Steel Duluth Works site was placed on the National Priorities List under CERCLA in 1983 and on the State of Minnesota’s Superfund list in 1984. Liability for environmental remediation at the site is governed by a Response Order by Consent executed with the MPCA in 1985 and a Record of Decision signed by MPCA in 1989. U. S. Steel has partnered with the Great Lakes National Program Office (GLNPO) of the U.S. EPA Region 5 to address contaminated sediments in the St. Louis River Estuary and several other Operable Unitsoperable units that could impact the Estuaryestuary if not addressed. An amendment to the Project Agreement between U. S. Steel and GLNPO was executed during the second quarter of 2018 to recognize the initial costs associated with implementing the first two phases of the proposed remedial plan at the site.
Resource Conservation Recovery Act (RCRA) and Other Remediation Sites
U. S. Steel may be liable for remediation costs under other environmental statutes, both federal and state, or where private parties are seeking to impose liability on U. S. Steel for remediation costs through discussions or litigation. There are 18nine such sites where remediation is being sought involving amounts in excess of $100,000.$1 million. Based on currently available information, which is in many cases preliminary and incomplete, management believes that liability for cleanup and remediation costs in connection with eight sites have potential costs between $100,000 and $1 million per site, five sites may involve remediation costs between $1 million and $5 million per site and fivefour sites are estimated to, or could have, costs for remediation, investigation, restoration or compensation in excess of $5 million per site.
For more information on the status of remediation activities at U. S. Steel’s significant sites, see the discussions related to each site below.
Gary Works
On October 23, 1998, the U.S. EPA issued a final Administrative Order on Consent (Order) addressing Corrective Action for Solid Waste Management Units (SWMU) throughout Gary Works. This Order requires U. S. Steel to perform a RCRA Facility Investigation (RFI), a Corrective Measures Study (CMS) and Corrective Measure Implementation. Evaluations are underway at six groundwater areas on the east side of the facility and it is likely that corrective measures will be required, but it is not possiblefacility. A remedial groundwater treatment system has been operating at this time to define a scope or estimate costs for what may be requiredone of the six areas since 2021. An Interim Stabilization Measure work plan was recently approved by the U.S. EPA.EPA for a second area and a contractor has begun installation of the remedial system. Until the remaining Phase I work and Phase II field investigations are completed, it is not possible to assess what additional expenditures will be necessary for Corrective Action projects at Gary Works. In total, the accrued liability for Corrective Action projects is approximately $25$28 million as of December 31, 2019,2022, based on our current estimate of known remaining costs. Significant additional costs associated with the six groundwater areas at this site are possible and are referenced in Note 26 to the Consolidated Financial Statements “Contingencies and Commitments - Environmental Matters - Remediation Projects - Projects with Ongoing Study and Scope Development.”.
Geneva Works
At U. S. Steel’s former Geneva Works, liability for environmental remediation, including the closure of three hazardous waste impoundments and facility-wide corrective action, has been allocated between U. S. Steel and the current property owner pursuant to an agreement and a permit issued by the Utah Department of Environmental Quality
(UDEQ). Having completed the
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investigation on a majority of the remaining areas identified in the permit, U. S. Steel hashad determined the most effective means to address the remainingmajority of impacted material ismaterials was to manage those materials in a previously approved on-site Corrective Action Management Unit (CAMU). U. S. Steel awarded a contract for the implementation of the CAMU project during the fourth quarter of 2018. Construction, waste stabilization and placement along with closure of the CAMU are scheduled to be completewere substantially completed in the fourth quarter of 2020. U. S. Steel has an accrued liability of approximately $48$19 million as of December 31, 2019,2022, for our estimated share of the remaining costs of remediation.remediation at the site.
USS-UPI LLC (UPI)
In February 2020, U. S. Steel purchased the remaining 50 percent interest in USS-POSCO Industries, (UPI)
Cherryvale, (KS)KS Zinc
In April 2003, U. S. Steel and Salomon Smith Barney Holdings, Inc. (SSB) entered into a Consent Order with the Kansas Department of Health & Environment (KDHE) concerning a former zinc smelting operation in Cherryvale, Kansas. Remediation of the site proper was essentially completed in 2007. The Consent Order was amended on May 3, 2013 to require investigation (but not remediation) of potential contamination beyond the boundary of the former zinc smelting operation. On November 22, 2016, KDHE approved a State Cooperative Final Agency Decision Statement that identified the remedy selected to address potential contamination beyond the boundary of the former zinc smelting site. The Removal Action Design Plan was approved during the second quarter of 2018. The Waste Deposition Area design and the Interim Risk Management Plan (which includes institutional controls) were approved by KDHE during the fourth quarter of 2018. An amended consent order for remediation was signed in May 2019 and a remediation contract was executed in June 2019. Remediation work was substantially completed in the 4th quarter of 2022. U. S. Steel has an accrued liability of approximately $10 million$908,000 as of December 31, 2019,2022, for our estimated share of the remaining cost of remediation.
Air Related Matters
Granite City Works
In October 2015, Granite City Works received a Violation Notice from IEPAIllinois Environmental Protection Agency (IEPA) in which the IEPA alleges that U. S. Steel violated the emission limits for nitrogen oxides (NOx) and volatile organic compounds from the Basic Oxygen Furnace Electrostatic Precipitator Stack. In addition, the IEPA alleges that U. S. Steel exceeded its natural gas usage limit at its CoGeneration Boiler. U. S. Steel responded to the notice and is currently discussing resolution of the matter with IEPA.
Although discussions with IEPA regarding the foregoing alleged violations are ongoing and the resolution of these matters is uncertain at this time, it is not anticipated that the result of those discussions will be material to U. S. Steel.
Minnesota Ore Operations
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On February 6, 2013, the U.S. EPA published a FIP that applies to taconite facilities in Minnesota. The FIP establishes and requires emission limits and the use of low NOx reduction technology on indurating furnaces as Best Available Retrofit Technology (BART). While U. S. Steel installed low NOx burners on three furnaces at Minntac and is currently obligated to install low NOx burners on the two other furnaces at Minntac pursuant to existing agreements and permits, the rule would require the installation of a low NOx burner on the one furnace at Keetac for which U. S. Steel did not have an otherwise existing obligation. U. S. Steel estimates expenditures associated with the installation of low NOx burners of as much as $25 million to $30 million. In 2013, U. S. Steel filed a petition for administrative reconsideration to the U.S. EPA and a petition for judicial review of the 2013 FIP and denial of the Minnesota SIPState Implementation Plan (SIP) to the Eighth Circuit. In April 2016, the U.S. EPA promulgated a revised FIP with the same substantive requirements for U. S. Steel. In June 2016, U. S. Steel filed a petition for administrative reconsideration of the 2016 FIP to the U.S. EPA and a petition for judicial review of the 2016 FIP before the Eighth Circuit Court of Appeals. While the proceedings regarding the petition for judicial review of the 2013 FIP remained stayed, oral arguments regarding the petition for judicial review of the 2016 FIP were heard by the Eighth Circuit Court of Appeals on November 15, 2017. Thus, both petitions for judicial review remain with the Eighth Circuit. On December 4, 2017, the U.S. EPA published a notification in the Federal Register in which the U.S. EPA denied U. S. Steel’s administrative petitions for reconsideration and stay of the 2013 FIP and 2016 FIP. On February 1, 2018, U. S. Steel filed a petition for judicial review of the U.S. EPA’s denial of the administrative petitions for reconsideration to the Eighth Circuit Court of Appeals. The U.S. EPA and U. S. Steel reached a settlement regarding the five indurating lines at Minntac. Notice ofAfter proposing a 30-day comment period ofrevised FIP and responding to public comments, on March 2, 2021, the settlement agreement was published inU.S. EPA promulgated a final revised FIP incorporating the September 11, 2019, Federal Register. The comment period expired on October 11, 2019.conditions and limits for Minntac to which the parties agreed. U. S. Steel will work with U.S. EPA to address any comments. U. S. Steel and the U.S. EPA continue to negotiate resolution for Keetac.
Mon Valley Works
On November 9, 2017, the U.S. EPA Region III and the Allegheny County Health Department (ACHD)ACHD jointly issued a Notice of Violation (NOV) regarding the Company’s Edgar Thomson facility in Braddock, PA.Pennsylvania. In addition, on November 20, 2017, ACHD issued a separate, but related, NOV to the Company regarding the Edgar Thomson facility. In the NOVs, based upon their inspections and review of documents collected, throughout the last two years, the agencies allege that the Company has violated the CAA by exceeding the allowable visible emission standards from certain operations during isolated events. In addition, the agencies allege that the Company has violated certain maintenance,
reporting, and recordkeeping requirements. U. S. Steel met with the U.S. EPA Region III and ACHD several times. ACHD,On May 17, 2022, the United States Department of Justice (the DOJ), the U.S. EPA Region III and the ACHD filed a Complaint in the United States District Court for the Western District of Pennsylvania and lodged a proposed Consent Decree negotiated in good faith between U. S. Steel, continueDOJ, the U.S. EPA Region III and ACHD that will resolve this matter. On December 16, 2022, the Court approved the Consent Decree and it is currently in effect.
On March 2, 2022, the Company received a stipulated penalty demand for $0.9 million from the Allegheny County Health Department (ACHD) pursuant to negotiatethe June 2019 Settlement Agreement and Order (SAO) between the Company and ACHD. In the demand notice, ACHD alleges that based upon daily visible emission observation inspections occurring April 1, 2021 through December 31, 2021, the Company’s Clairton plant violated applicable opacity standards from coke battery fugitive emission sources. The Company disagrees with the bases for the demand. The Company has initiated dispute resolution in accordance with the SAO and is attempting to reach a potentialnegotiated resolution of the matter.
On June 27, 2019, U. S. Steel and ACHD entered into a Settlement Agreement that is now in effect resolving four appeals of four separate Enforcement Orders issued byMarch 7, 2022, the Company received an enforcement order from the ACHD in 2018 and 2019. A comment period expired on July 31, 2019 after a public hearing that was held on July 30, 2019. The Settlement Agreement requires that U. S. Steel payincludes a civil penalty demand for $1.8 million. In the Order, the ACHD alleges that the Company’s Clairton plant is solely and create a Community Benefit Trust totaling $2,732,504, with 90% of this value going into the trust; and 10% going into ACHD’s Clean Air Fund. In addition, U. S. Steel agreed to complete several actions which are aimed at reducing emissions including: complete refractory repairs on Batteries 1, 2, 3 and 15; enhance trainingentirely culpable for certain coke plant employees; have third-party audits conducted; complete projects on B Battery to reduce the potential for fugitive emissions, and complete upgrades on the Pushing Emission Control devices for Batteries 13-15; and 19-20. U. S. Steel is working with ACHD in responding to comments.
Item 4. MINE SAFETY DISCLOSURE
The information concerning mine safety violations and other regulatory matters required by Section 1501503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Form 10-K.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of U. S. Steel and their ages as of February 1, 2020,2023, are as follows:
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| Name | Age | Executive Officer Since | ||||||||||||
| 50 | Senior Vice President - Advanced Technology Steelmaking & Chief | |||||||||||||
| James E. Bruno | 57 | Senior Vice President - European Solutions and President | December 1, 2014 | |||||||||||
| Scott D. Buckiso | 55 | Senior Vice President and Chief Manufacturing Officer North American Flat-Rolled | May 31, 2015 | |||||||||||
| David B. Burritt | 67 | President & Chief Executive Officer | September 1, 2013 | |||||||||||
| Richard L. Fruehauf | 55 | Senior Vice President - | March 1, 2019 | |||||||||||
| Jessica T. Graziano | 49 | Senior Vice President & Chief Financial Officer | August 8, 2022 | |||||||||||
| Manpreet S. Grewal | 43 | Vice President, Controller & Chief Accounting Officer | March 30, 2020 | |||||||||||
| Duane D. Holloway | 50 | Senior Vice President, General Counsel and Chief Ethics & Compliance Officer | April 16, 2018 | |||||||||||
| 55 | Senior Vice President and Chief Commercial | |||||||||||||
Messrs. Brown, Bruno, Buckiso, Burritt Bruno and Matthews and Ms. BrevesFruehauf have held responsible management or professional positions with U. S. Steel or its subsidiaries for more than the past five years. Ms. Fast joinedPrior to joining U. S. Steel in 20072022, Ms. Graziano spent eight years with United Rentals, Inc, culminating in her position as manager - external reporting,Executive Vice President and progressedChief Financial Officer. Prior to her work with United Rentals, Ms. Graziano spent five years at Revlon, Inc. where she advanced through rolespositions of increasing responsibility beforeculminating in her being named assistant corporate controller in December 2014. She was named Acting ControllerSenior Vice President, Chief Accounting Officer and the Company’s principal accounting officer on April 1, 2019. Mr. Fruehauf joinedCorporate Controller. Prior to joining U. S. Steel in September 20142020, Mr. Jaycox served as assistant general counsel - commercial andVice President, Transformation at Sysco Corporation where during his seven-year tenure, he progressed through rolesa series of increasing responsibilityexecutive responsibilities including transformation, sales development and support, and revenue management. Prior to joining U. S. Steel in the legal department, ultimately being named Interim General Counsel in December 2017. He was named2020, Mr. Grewal served as vice president, - strategicbusiness finance, controller and chief accounting officer at Covanta since February 2017. Prior to Covanta, Mr. Grewal spent fourteen years at Johnson Controls Incorporated (formerly Tyco International) in increasingly responsible roles, including internal audit, accounting, controllership, and financial planning and corporate development in April 2018 and advanced to senior vice president in March 2019. Effective January 1, 2020, he has been appointed senior vice president - strategic planning and chief strategy & development officer.analysis. Prior to joining U. S. Steel in 2018, Mr. Holloway served as executive vice president and general counsel at Ascena Retail Group Inc., the largest women’s specialty retail and fashion company in the U.S. During his time at Ascena, Mr. Holloway served as global chief legal, compliance, sustainability and diversity officer. Prior to his work at Ascena, Mr. Holloway served as vice president and deputy general counsel for CoreLogic Inc., the leading global residential property information, analytics and data-enabled solutions provider. Prior to joining CoreLogic, Mr. Holloway spent nine years at Caesars Entertainment Corp., where he progressed through increasingly responsible roles in the legal department before being named senior vice president and chief counsel, operations and litigation. Prior to joining U. S. Steel in 2017, Mr. Melnkovic served as executive vice president and chief human capital officer, labor relations, diversity and lean enterprise solutions for National Railroad Passenger Corporation / Amtrak. Prior to joining Amtrak, Mr. Melnkovic served as the top human resources leader at Lilly Industries, Motor Coach Industries and Holland America Line. He also held senior corporate leadership and officer roles at Owens Corning, including vice president - human resources, vice president - talent management and organizational effectiveness, and interim chief operating officer for one of the company’s business units.
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Common Stock Information
The principal market on which United States Steel Corporation (U. S. Steel) common stock is traded is the New York Stock Exchange, where the common stock trades under trading symbol "X". U. S. Steel common stock is also traded on the Chicago Stock Exchange under the symbol "X".
As of February 10, 2020,January 30, 2023, there were 12,04810,657 registered holders of U. S. Steel common stock.
The Board of Directors currently intends to declare and pay dividends on shares of U. S. Steel common stock based on the financial condition and results of operations of U. S. Steel out of legally available funds and in accordance with the requirements set forth by applicable law. Quarterly dividends were declared by U. S. Steel in 2019 and 20182022 in the amount of $0.05five cents per share. In December 2019Quarterly dividends were declared by U. S. Steel in 2021 in the Company announced a change in its dividend policy, that it intends to reduce its quarterly dividend to $0.01amount of one cent per share beginning in 2020.the first, second and third quarters and five cents per share in the fourth quarter.
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Purchases of Equity Securities by the Issuer and the Affiliated Purchasers
On November 1, 2018,October 25, 2021, the Company announced that its Board of Directors authorized a share repurchase program that allowed for the repurchase of up to $300 million of its outstanding common stock from time to time in the open market or privately negotiated transactions. On January 24, 2022 the Board of Directors authorized an additional $500 million under the share repurchase program.
On July 25, 2022, following the completion of the previously authorized $800 million share repurchase programs, the Board of Directors authorized a new share repurchase program that allows for the repurchase of up to $500 million of its outstanding common stock from time to time in the open market or privately negotiated transactions at the discretion of management. The Company's share repurchase program does not obligate it to acquire any specific number of shares.
Approximately $50 million of common stock was repurchased in January 2023, and there is currently approximately $251 million remaining under the current authorizations.
Share repurchase activity under the Company's stock repurchase authorization during the three months ended December 31, 2022 was as follows:
| Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs in effect at December 31, 2022 (a) | |||||||||||||||||||
| October 1 - 31, 2022 | — | $ | — | — | $ | 451,000,800 | |||||||||||||||||
| November 1 - 30, 2022 | 2,243,200 | $ | 24.61 | 2,243,200 | $ | 395,788,300 | |||||||||||||||||
| December 1 - 31, 2022 | 3,673,509 | $ | 25.80 | 3,673,509 | $ | 301,000,800 | |||||||||||||||||
| Quarter ended December 31, 2022 | 5,916,709 | $ | 25.35 | 5,916,709 | $ | 301,000,800 | |||||||||||||||||
(a) On October 25, 2021, the Board of Directors authorized a share repurchase program to repurchase up to $300 million of itsour outstanding common stock over a two-year period at the discretion of management,management. On January 24, 2022 the Board of which $163Directors authorized an additional $500 million was utilized. There wereunder the share repurchase program. Each of the repurchase programs have no stock repurchases duringexpiration date. On July 25, 2022, following the fourth quartercompletion of 2019 and on December 19, 2019 U. S. Steel announcedthe previously authorized $800 million share repurchase programs, the Board of Directors authorized a new share repurchase program that it formally terminated this program.allows for the repurchase of up to $500 million of its outstanding common stock. The Company’s stockshare repurchase program diddoes not obligate it to acquire any specific number of shares. Under this program, the shares werewill be purchased from time to time at prevailing market prices, through open market or privately negotiated transactions, depending upon market conditions. The repurchase program has no expiration date.
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Stockholder Return Performance
The graph below assumes $100 invested on December 31, 2017 and compares the yearly change in cumulative total stockholder return of our common stock with the cumulative total return of the Standard & Poor’s (S&P’s)&P) 500 Stock Index and the S&P 600 Steel Index.Index, and assumes that all dividends were reinvested.
Comparison of Cumulative Total Return
on $100 Invested in U. S. Steel Stock on December 31, 20142017
vs
S&P 500 and S&P 600 Steel Index(a)
For information on securities authorized for issuance under our equity compensation plans, see "Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters."
Unregistered Sales of Equity Securities
Item 6. SELECTED FINANCIAL DATARESERVED
Dollars in millions (except per share data)(a) | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
| Statement of Operations Data: | ||||||||||||||||||||
| Net sales | $ | 12,937 | $ | 14,178 | $ | 12,250 | $ | 10,261 | $ | 11,574 | ||||||||||
(Loss) earnings before interest and income taxes (b) | (230 | ) | 1,124 | 669 | (201 | ) | (1,142 | ) | ||||||||||||
| (Loss) net earnings attributable to United States Steel Corporation | (630 | ) | 1,115 | 387 | (440 | ) | (1,642 | ) | ||||||||||||
| Per Common Share Data: | ||||||||||||||||||||
(Loss) net earnings attributable to United States Steel Corporation(c) | ||||||||||||||||||||
| – basic | (3.67 | ) | 6.31 | 2.21 | $ | (2.81 | ) | $ | (11.24 | ) | ||||||||||
| – diluted | (3.67 | ) | 6.25 | 2.19 | (2.81 | ) | (11.24 | ) | ||||||||||||
| Dividends per share declared and paid | 0.20 | 0.20 | 0.20 | 0.20 | 0.20 | |||||||||||||||
| Balance Sheet Data – December 31: | ||||||||||||||||||||
Total assets (d) | $ | 11,608 | $ | 10,982 | $ | 9,862 | $ | 9,160 | $ | 9,167 | ||||||||||
| Capitalization: | ||||||||||||||||||||
Debt (d) | $ | 3,641 | $ | 2,381 | $ | 2,703 | $ | 3,031 | $ | 3,138 | ||||||||||
| United States Steel Corporation stockholders’ equity | $ | 4,092 | 4,202 | 3,320 | 2,274 | 2,436 | ||||||||||||||
| Total capitalization | $ | 7,733 | $ | 6,583 | $ | 6,023 | $ | 5,305 | $ | 5,574 | ||||||||||
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated Financial Statements and the related notesNotes that appear elsewhere in this document. Please refer to Item 7 of our 20182021 Form 10-K for further discussion and analysis of our 20172020 financial condition and results of operations.
Overview
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•Mini Mill: Mini Mill results declined primarily due to lower sales prices and balanced capital strategy has positioned our balance sheet to support investments in our business. We continue to take steps to improve and secure our long-term position as an industry leader by reducing our vulnerabilities during down cycles, accentuating our advantages in up cycles, and enabling the creation of value - and the related rewards - for all higher raw material costs.
•U. S. Steel stakeholders throughEurope (USSE): USSE results declined primarily due to lower sales volume, increased raw material and energy costs and the weakening euro exchange rate, partially offset by higher sales price.
•Tubular: Tubular results improved primarily due to increased volume, higher sales price and improved premium product mix, driven by the steady increase of drilling activity, partially offset by continued high levels of imports.
Fluctuations in the market price of raw materials and other inflationary impacts have affected the results of each of our reportable segments, and fluctuations going-forward are reasonably likely to have a material impact on future results. We could experience inflation related headwinds in 2023 for certain raw materials and other costs.
In February 2022, Russia invaded Ukraine and active conflict continues in the country. The war in Ukraine will likely continue to cause disruption and instability in Russia, Ukraine, as well as the markets in which we operate. The Company is constantly monitoring the situation for impacts and risks to the business cycles.and is implementing risk mitigating strategies where possible.
USSE purchases certain raw materials from sources that procure supply from Russia, including natural gas and iron ore. Since the bestonset of the mini mill steelmaking model, we will transform our business to drive long-term cash flowwar, and before, USSE has been building its inventory of iron ore and coal and procuring them through industry cycles. We aim to offer an unparalleled product platformalternate sources. Current levels of iron ore and coal are sufficient to serve customers, achieve world-competitive positioningcustomer demand through the end of the first quarter 2023.
With the EU prohibiting purchases of coal from suppliers in strategic, high-margin end markets,Russia, new purchases of coal originating from Russia have stopped. The Company has built up sufficient inventory on site or in-transit to meet current customer demand. Efforts to secure alternate sources of supply are underway to continue meeting demand.
Additionally, Russian supply of natural gas to Europe has decreased significantly in response to enacted sanctions. However, Slovakia has natural gas storage and deliver high-quality, value-added productsaccess to additional supply from countries including Norway, the U.S. and innovative solutions that address our customers' most challenging steel needs. To become a “best of both” company, weAfrica. Together, these sources are enhancing our focus on operational and commercial excellence and promoting technological innovation, so we can establish a more competitive cost structure and enhance our capabilities … two key driversenough to support the country's expected consumption through the 2023 winter season, which includes demand for natural gas for our strategy.USSE segment operations.
Critical Accounting Estimates
Management’s discussion and analysis of U. S. Steel’s financial condition and results of operations is based upon U. S. Steel’s financial statements, which have been prepared in accordance with accounting standards generally accepted in the United States (U.S. GAAP). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at year-end and the reported amount of revenues and expenses during the year. Management regularly evaluates these estimates, including those related to employee benefits liabilities and assets held in trust relating to such liabilities; the carrying value of property, plant and equipment; intangible assets; valuation allowances for receivables, inventories and deferred income tax assets; liabilities for deferred income taxes; potential tax deficiencies; environmental obligations; potential litigation claims and settlements and put and call option assets and liabilities. Management’s estimates are based on historical experience, current business and market conditions, and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from current expectations under different assumptions or conditions.
Management believes that the following are the more significant judgments and estimates used in the preparation of the financial statements.
Goodwill and intangible assets – Goodwill represents the excess of the cost over the fair value of acquired identifiable tangible and intangible assets and liabilities assumed from businesses acquired. Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject to impairment testing annually, or more frequently if events or changes in circumstances indicate the asset might be impaired. We perform our annual goodwill impairment test as of October 1 and monitor for interim triggering events on an ongoing basis.
We review goodwill for impairment utilizing either a qualitative assessment or a quantitative goodwill impairment test. If we choose to perform a qualitative assessment and we determine that the fair value of the reporting unit more likely than not exceeds the carrying value, no further evaluation is necessary. For reporting units where we perform the quantitative goodwill impairment test, we compare the fair value of each reporting unit, which we primarily determine using an income approach based
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on the present value of discounted cash flows, to the respective carrying value, which includes goodwill. If the fair value of the reporting unit exceeds its carrying value, we do not consider the goodwill impaired. If the carrying value is higher than the fair value, we recognize the difference as an impairment loss.
A quantitative goodwill impairment testing process requires valuation of the respective reporting unit, which we primarily determine using an income approach based on a discounted five year forecasted cash flow including a terminal value. We compute the terminal value using the constant growth method, which values the forecasted cash flows in perpetuity. The assumptions about future cash flows and growth rates are based on the respective reporting unit's long-term forecast and are subject to review and approval by senior management. A reporting unit's discount rate is a significant assumption and is a risk-adjusted weighted average cost of capital, which we believe approximates the rate from a market participant's perspective. The estimated fair value could be impacted by changes in market conditions, interest rates, growth rates, tax rates, costs, pricing and capital expenditures. We categorize the fair value determination as Level 3 in the fair value hierarchy due to its use of internal projections and unobservable measurement inputs.
Our Mini Mill reporting unit holds the goodwill recognized as a result of the Company's acquisition of Big River Steel and currently is our only reporting unit that has a significant amount of goodwill. This goodwill is primarily attributable to Big River Steel's operational abilities, workforce and the anticipated benefits from their recent expansion. U. S. Steel completed its annual goodwill impairment test using a quantitative analysis during the fourth quarter of 2022 and determined there was no impairment of goodwill.
Intangible assets with indefinite lives are also subject to at least annual impairment testing, which compares the fair value of the intangible assets with their carrying amounts. U. S. Steel has determined that certain of its acquired intangible assets have indefinite useful lives. These assets are also reviewed for impairment annually in the fourth quarter and whenever events or circumstances indicate the carrying value may not be recoverable. U. S. Steel completed its annual evaluation of its indefinite-lived water rights using a qualitative assessment and determined there was no indication of impairment. Key assumptions included in this test relate to the relevant market rate of an acre foot of water.
If business conditions deteriorate or other factors have an adverse effect on our qualitative and quantitative estimates, inclusive of discounted future cash flows or assumed growth rates, or if we experience a sustained decline in our market capitalization, future assessments of goodwill for impairment may result in impairment charges.
Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives and are tested for impairment when events occur that indicate that the net book value will not be recovered over future cash flows.
Business combinations – We account for business combinations under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations, which requires an allocation of the consideration we paid to the identifiable assets, intangible assets and liabilities based on the estimated fair values as of the closing date of the acquisition. The excess of the fair value of the purchase price over the fair values of these identifiable assets, intangible assets and liabilities is recorded as goodwill.
Purchased intangibles are initially recognized at fair value and amortized over their useful lives unless those lives are determined to be indefinite. The valuation of acquired assets will impact future operating results. The fair value of identifiable intangible assets is determined using an income approach on an individual asset basis. Specifically, we use the multi-period excess earnings method to estimate the fair value of the customer relationships intangible asset. Determining the fair value of the customer relationships intangible asset involves significant judgements and assumptions, including expected realized price, base year metallic costs, contributory asset charges, and customer attrition rate.
Inventories – Inventories are carried at the lower of cost or market for last-in, first-out (LIFO) inventories, moving average and lower of cost and net realizable value for first-in, first-out (FIFO) method inventories. LIFO is theThe predominant method of inventory costing for inventories in the United StatesFlat-Rolled and Tubular is LIFO. The Mini Mill segment uses FIFO for raw materials and a moving average costing method to account for semi-finished and finished products. FIFO is the predominant inventory costing method used in Europe.by the USSE segment. The LIFO method of inventory costing was used on 7543 percent and 7446 percent of consolidated inventories at December 31, 20192022 and 2018,2021, respectively. Since the LIFO inventory valuation methodology is an annual calculation, interim estimates of the annual LIFO valuation are required. We recognize the effects of the LIFO inventory valuation method on an interim basis by estimating the year endyear-end inventory amounts. The projections of annual LIFO inventory amounts are updated quarterly. Changes in U.S. GAAP rules or tax law, such as the elimination of the LIFO method of accounting for inventories, could negatively affect our profitability and cash flow.
Pensions and Other Benefits – The recording of net periodic benefit costs for defined benefit pensions and Other Benefits is based on, among other things, assumptions of the expected annual return on plan assets, discount rate, mortality, escalation or other changes in retiree health care costs and plan participation levels. Changes in the assumptions or differences between actual and expected changes in the present value of liabilities or assets of U. S. Steel’s plans could cause net periodic benefit costs to increase or decrease materially from year to year as discussed below.
U. S. Steel’s investment strategy for its U.S. pension and Other Benefits plan assets provides for a diversified mix of high qualityhigh-quality bonds, public equities and selected smaller investments in private equities, private credit, timber and mineral interests. For its
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U.S. pension, plan, U. S. Steel has a target allocation for plan assets of 4550 percent in corporate bonds, government bonds and
For its Other Benefits plan, assets, U. S. Steel employsis employing a liability driven investment strategy. The plan assets are allocated to match the plan cash flows with maturing investments. To achieve this strategy, U. S. Steel has a target allocation for plan assets of 9088 percent in high quality bonds with thefixed income and private credit. The balance is primarily invested in equity securities, timber, private equity and real estate partnerships. U. S. Steel will use a 4.254.50 percent assumed rate of return on assets for the development of net periodic cost for its Other Benefits plans.Benefit plans for 2023. The 20202023 assumed rate of return has been conservatively set, taking into account the intendedwas updated after a review of capital market forecasted returns based on target allocations. The expected asset mix.return for 2023 will continue to be 4.50 percent.
The expected long-term rate of return on plan assets is applied to the market value of assets as of the beginning of the period less expected benefit payments and considering any planned contributions.
To determine the discount rate used to measure our pension and Other Benefit obligations for U.S. plans we utilize a bond matching approach to select specific bonds that would satisfy our projected benefit payments. At December 31, 2019,2022, the weighted average discount rate used for our pension and Other Benefit obligations was determined to be 3.355.55 percent and 3.435.66 percent, respectively, compared to the weighted average discount rate used of 4.413.01 percent and 4.473.11 percent, respectively, at December 31, 2018.2021. The discount rate reflects the current rate at which we estimate the pension and Other Benefits liabilities could be effectively settled at the measurement date.
U. S. Steel reviews its actual historical rate experience and expectations of future health care cost trends to determine the escalation of per capita health care costs under U. S. Steel’s benefit plans. Approximately three quarters75 percent of our costs for the domestic United Steelworkers (USW) participants’ retiree health benefits in the Company’s main domestic benefit plan are limited to a per capita dollar maximum calculation based on 2006 base year actual costs incurred under the main U. S. Steel benefit plan for USW participants (cost cap). The full effect of the cost cap is expected to be realized around 2028.2030. After 2028,2030, the Company’s costs for a majority of USW retirees and their dependents are expected to remain fixed and as a result, the cost impact of health care escalation for the Company is projected to be limited for this group (See(see Note 18 to the Consolidated Financial Statements). For measurement of its domestic retiree medical plans where health care cost escalation is applicable, U. S. Steel has assumed an initial escalation rate of 6.506.00 percent for 2020.2023. This rate is assumed to decrease gradually to an ultimate rate of 4.50 percent in 20282038 and remain at that level thereafter.
Net periodic pension benefit cost (credit), including multiemployer plans, is expected to total approximately $141$39 million in 20202023 compared to $179$6 million in 2019.2022. Excluding settlement and special termination losses totaling $11$12 million in 2019,2022, the decreaseincrease in expectednet periodic pension expensebenefit cost in 20202023 is primarily due the 2019to 2022 asset performance and a changean increase in mortality assumptions, partially offset by the decreaseprior service cost. Net periodic other benefit (credit) in discount rates. Total Other Benefits income in 20202023 is expected to be approximately $29$(83) million, compared to $57$(108) million of expense in 2019.2022. The expected improvementdecrease in the 2020 Other Benefit expense (income)2023 net periodic other benefit (credit) is primarily due to the expirationtransfer of a prior service cost$595 million in surplus funds from the 2008 labor agreementPost Retirement Benefit Trust (VEBA) assets to be used for active insurance benefits. See Note 18 to the Consolidated Financial Statements, “Pensions and projected decreases in future healthcare costs and assumed participant enrollments.Other Benefits.”
The tablestable below projectprojects the incremental effect of a hypothetical one percentage point change in significant assumptions used in determining the funded status and expensenet periodic benefit cost for pension and Other Benefits:other benefits:
| Hypothetical Rate Change Increase (Decrease) | ||||||||||||||
| (In millions) | 1% | (1)% | ||||||||||||
| Expected return on plan assets | ||||||||||||||
| Incremental (decrease) increase in: | ||||||||||||||
| Net periodic pension and other benefits costs for 2023 | $ | (60) | $ | 60 | ||||||||||
| Discount rate | ||||||||||||||
| Incremental (decrease) increase in: | ||||||||||||||
| Net periodic pension and other benefits costs for 2023 | $ | (4) | $ | 11 | ||||||||||
| Pension & other benefits obligations at December 31, 2022 | $ | (411) | $ | 474 | ||||||||||
| At December 31, 2019 | ||||||||
| Hypothetical Rate Change | ||||||||
| (In millions) | 1% | (1)% | ||||||
| Discount rates and Interest rates | ||||||||
| Incremental change in: | ||||||||
| Pension & other benefits obligations, increase/(decrease) | $ | (671 | ) | $ | 799 | |||
| Fixed Income Assets, (increase)/decrease | 433 | (524 | ) | |||||
| Net impact on funded status, increase/(decrease) | $ | 238 | $ | (275 | ) | |||
Hypothetical Rate Increase (Decrease) | ||||||||
| (In millions) | 1% | (1)% | ||||||
| Expected return on plan assets | ||||||||
| Incremental (decrease) increase in: | ||||||||
| Net periodic pension & other benefits costs for 2020 | $ | (68 | ) | $ | 68 | |||
| Discount rates | ||||||||
| Incremental (decrease) increase in: | ||||||||
| Net periodic pension & other benefits costs for 2020 | $ | (16 | ) | $ | 17 | |||
Changes in the assumptions for expected annual return on plan assets and the discount rate used for accounting purposes do not impact the funding calculations used to derive minimum funding requirements for the pension plan. However, the discount rate required for minimum funding purposes is also based on corporate bond related indices and as such, the same general
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sensitivity concepts as above can be applied to increases or decreases to the funding obligations of the plans assuming the same hypothetical rate changes. (SeeSee Note 18 to the Consolidated Financial Statements for a discussion regarding legislation enacted in NovemberMarch of 20152021 that impacts the discount rate used for funding purposes.) For further cash flow discussion see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, – Financial Condition, Cash FlowsLiquidity and Liquidity – Liquidity.Capital Resources.”
Long-lived assets – U. S. Steel evaluates long-lived assets, primarily property, plant and equipment for impairment whenever changes in circumstances indicate that the carrying amounts of those productive assets exceed their recoverable amount as determined by the asset group's projected undiscounted cash flows. We evaluate the impairment of long-lived assets at the asset group level. Our primary asset groups are Flat-Rolled, Mini Mill, USSE, welded tubular and seamless tubulartubular.
In the second quarter of 2022, the Company recognized charges of $151 million for the write-off of the blast furnaces and related fixed assets for the permanent idling of the iron making process at our Great Lakes Works facility, which had been idled on an indefinite basis during 2020. There were no other triggering events that required an impairment evaluation of our long-lived asset groups during the year-ended December 31, 2022.
In the fourth quarter of 2021, U. S. Steel Europe (USSE).decided to permanently idle the steelmaking assets at Great Lakes Works, which had been indefinitely idled since 2020, resulting in an impairment of $128 million for property, plant and equipment.
Taxes - U. S. Steel records a valuation allowance, related to certain state net operating losses, state tax credits and unused capital losses, to reduce deferred tax assets to the amount that is more likely than not to be realized. A valuation allowance is recorded if, based on the weight of all available positive and negative evidence, it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. Each quarter U. S. Steel analyzes the likelihood that our deferred tax assets will be realized.
At the end of both 20192022 and 2018,2021, U. S. Steel did not have any undistributed foreign earnings and profits for which U.S. deferred taxes have not been provided.
For further information on management’s judgment of the risk of loss for items that have been or may be challenged by taxing authorities. If U. S. Steel determines that tax-related items would not be considered uncertain tax positions or that items previously not considered to be potential uncertain tax positions could be considered potential uncertain tax positions (as a result of an audit, court case, tax ruling or other authoritative tax position), an adjustmentincome taxes see Note 11 to the liability would be recorded through income in the period such determination was made.Consolidated Financial Statements.
Environmental remediation – U. S. Steel has been identified as a potentially responsible party (PRP)PRP at sevenfour sites under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) as of December 31, 2019.2022. Of these, there are three sites where information requests have been received or there are other indications that U. S. Steel may be a PRP under CERCLA, but where sufficient information is not presently available to confirm the existence of liability or to make a reasonable estimate with respect to any potential liabilities. There are also 18nine additional sites where U. S. Steel may be liable for remediation costs in excess of $100,000$1 million under other environmental statutes, both federal and state, or where private parties are seeking to impose liability on U. S. Steel for remediation costs through discussions or litigation. At many of these sites, U. S. Steel is one of a number of parties involved and the total cost of remediation, as well as U. S. Steel’s share, is frequently dependent upon the outcome of ongoing investigations and remedial studies. U. S. Steel accrues for environmental remediation activities when the responsibility to remediate is probable and the amount of associated costs is reasonably determinable. As environmental remediation matters proceed toward ultimate resolution or as remediation obligations arise, charges in excess of those previously accrued may be required.
U. S. Steel's accrual for environmental liabilities for U.S. and international facilities as of December 31, 20192022 and 20182021 was $186$126 million and $187$158 million, respectively. These amounts exclude liabilities related to asset retirement obligations, disclosed in Note 19 to the Consolidated Financial Statements.
U. S. Steel is the subject of, or a party to, a number of pending or threatened legal actions, contingencies and commitments involving a variety of matters, including laws and regulations relating to the environment. The ultimate resolution of these contingencies could, individually or in the aggregate, be material to the Consolidated Financial Statements.
For discussion of relevant environmental items, see “Part I. Item 3. Legal Proceedings—Environmental Proceedings.”
Segments
U. S. Steel has threefour reportable segments: North American Flat-Rolled, (Flat-Rolled), U. S. Steel Europe (USSE)Mini Mill, USSE and Tubular Products (Tubular). The results of our 49.9% ownership interest in Big River Steel and our railroad and real estate businesses that do not constitute reportable segments are combined and disclosed in the Other Businesses category.
Products. For further description of segment operations and information see Item 1 Segments and Note 4 to the Consolidated Financial Statements.Statements, respectively.
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Net Sales
Net Sales by Segment
Net sales by segment for the years ended December 31, 2022 and 2021 are set forth in the following table:
| (Dollars in millions, excluding intersegment sales) | 2019 | 2018 | 2017 | |||||||||
| Flat-Rolled | $ | 9,279 | $ | 9,681 | $ | 8,297 | ||||||
| USSE | 2,417 | 3,205 | 2,949 | |||||||||
| Tubular | 1,188 | 1,231 | 944 | |||||||||
| Total sales from reportable segments | 12,884 | 14,117 | 12,190 | |||||||||
| Other Businesses | 53 | 61 | 60 | |||||||||
| Net sales | $ | 12,937 | $ | 14,178 | $ | 12,250 | ||||||
| Years Ended December 31, | |||||||||||||||||
| (Dollars in millions, excluding intersegment sales) | 2022 | 2021 | % Change | ||||||||||||||
| Flat-Rolled | $ | 12,522 | $ | 12,180 | 3 | % | |||||||||||
Mini Mill (a) | 2,681 | 3,008 | (11) | % | |||||||||||||
| USSE | 4,243 | 4,262 | — | % | |||||||||||||
| Tubular | 1,611 | 789 | 104 | % | |||||||||||||
| Total sales from reportable segments | 21,057 | 20,239 | 4 | % | |||||||||||||
| Other | 8 | 36 | (78) | % | |||||||||||||
| Net Sales | $ | 21,065 | $ | 20,275 | 4 | % | |||||||||||
(a) Mini Mill segment added after January 15, 2021 with the purchase of the remaining equity interest in BRS. | |||||||||||||||||
Management’s analysis of the percentage change in net sales for U. S. Steel’s reportable business segments is set forth in the following tables:
Steel Products(a) | |||||||||||||||||||||||
| Year Ended December 31, 2022 versus Year Ended December 31, 2021 | Volume | Price | Mix | Acquisition Variance | FX(b) | Other(c) | Net Change | ||||||||||||||||
| Flat-Rolled | (6) | % | 7 | % | — | % | n/a | — | % | 2 | % | 3 | % | ||||||||||
Mini Mill (d) | (2) | % | (11) | % | — | % | 2 | % | — | % | — | % | (11) | % | |||||||||
| USSE | (13) | % | 22 | % | 1 | % | n/a | (11) | % | 1 | % | — | % | ||||||||||
| Tubular | 17 | % | 87 | % | (1) | % | n/a | — | % | — | % | 103 | % | ||||||||||
(a) Excludes intersegment sales. | |||||||||||||||||||||||
(b) Foreign currency translation effects. | |||||||||||||||||||||||
(c) Primarily consists of sales of raw material and coke making by-products | |||||||||||||||||||||||
(d) Mini Mill segment added after January 15, 2021 with the purchase of the remaining equity interest in BRS. | |||||||||||||||||||||||
Steel Products(a) | ||||||||||||||||||
| Volume | Price | Mix | FX(b) | Coke, Pellets & Other(c) | Net Change | |||||||||||||
| Flat-Rolled | 1 | % | (5 | )% | (1 | )% | — | % | 1 | % | (4 | )% | ||||||
| USSE | (19 | )% | (3 | )% | 3 | % | (5 | )% | (1 | )% | (25 | )% | ||||||
| Tubular | (1 | )% | (1 | )% | (1 | )% | — | % | — | % | (3 | )% | ||||||
•For the Flat-Rolled segment the increase in sales primarily reflects lowerresulted from higher average realized prices (decrease of $58($89 per ton) and a less favorable product mix. In 2019 to adjust production to declining customer demand a blast furnace at Gary Works was temporally idled (subsequently restarted in December 2019) and a blast furnace at Great Lakes Works was temporarily idled (subsequently to be indefinitely idled in early 2020 along with remainder ofprimarily from higher value-added products, partially offset by decreased shipments (645 thousand tons) across most products.
•For the iron and steel making facilities at Great Lake Works).
•For the USSE segment the consistent sales primarily resulted from higher average realized prices ($124 per net ton) across most products, offset by decreased shipments (543 thousand tons) across most products.
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•For the Tubular segment the increase in sales primarily resulted from higher average realized prices ($1,282 per net ton) and decreased netincreased shipments (decrease of 11(79 thousand net tons) from lower demand for tubular products..
Operating Expenses
Union profit-sharing costs
| Year Ended December 31, | ||||||||||||||
| (Dollars in millions) | 2022 | 2021 | ||||||||||||
| Allocated to segment results | $ | 442 | $ | 430 | ||||||||||
| Year Ended December 31, | ||||||||
| (Dollars in millions) | 2019 | 2018 | ||||||
| Allocated to segment results | $ | 12 | $ | 92 | ||||
The amounts above represent profit-sharing amounts paid to active USW-represented employees and are included in cost of sales on the Consolidated Statement of Operations.
Profit-based amounts are calculated and paid on a quarterly basis as a percentage of consolidated earnings (loss) before interest and income taxes based on 7.5 percent of profit between $10 and $50 per ton and 15 percent of profit above $50 per ton. There were no changes to the calculation of profit-based amounts in the 2022 Labor Agreements.
Pension and other benefit costs (other than service cost) are reflected within net interest and other financial costs and the service cost component is reflected within cost of sales in the Consolidated Statements of Operations.
Defined benefit and multiemployer pension plan costs included in cost of sales totaled $121$119 million in 20192022 and $109$128 million in 2018.2021.
Other benefit expenseservice cost included in cost of sales totaled $13$9 million in 20192022 and $17$11 million in 2018.2021.
Costs related to defined contribution plans totaled $48$47 million in 20192022 and $44$45 million in 2018.2021.
Selling, general and administrative expenses
Selling, general and administrative expenses were $289consistent for the years ended December 31, 2022 and December 31, 2021 at $422 million in 2019 and $336$426 million, in 2018. The decrease from 2018 to 2019 is primarily related to decreased variable compensation.respectively.
Operating configuration adjustments
Idled Operations
In December 2019, U. S. Steel announcedthe second half of 2022, we took actions to adjust our footprint by temporarily idling certain operations to better align production with market conditions. The operations that it would indefinitely idle a significant portionwere idled in the second half of Great Lakes Works. The Company expects to begin idling the iron2022 and steelmaking facilities on or around April 1, 2020, and the hot strip mill rolling facility before the end of 2020. The carrying value of the Great Lakes Works facilities that we intend to indefinitely idle was approximately $385 millionremained idled as of December 31, 2019.2022, along with their carrying values included:
•Blast furnace #8 at Gary Works, $30 million
•Blast furnace #3 at Mon Valley Works, $45 million (restarted in January 2023)
•Blast furnace #2 at USSE, $25 million (restarted in January 2023)
The following operations were initially idled in 2020 and remained idle as of December 31, 2022. These facilities and their respective carrying values as of December 31, 2022 included:
•Blast Furnace A at Granite City Works, $55 million
•Lone Star Tubular Operations, $5 million
•Lorain Tubular Operations, $60 million
•Wheeling Machine Products coupling production facility at Hughes Springs, Texas, immaterial
In December 2019, the Company completed the indefinite idlingfourth quarter of its East Chicago Tin (ECT) operations within its Flat-Rolled segment. ECT was indefinitely idled primarily due to increased tin import levels in the U.S. Additionally,2022, U. S. Steel indefinitely idled its finishing facilitythe majority of the tin mill operations at Gary Works. This included the Tin Line #5, which was previously temporarily idled in Dearborn, Michigan (which operates an electrolytic galvanizing line), duringthe third quarter of 2022, and the Tin Line #6 indefinitely idled the fourth quarter of 2019. The carrying value of these facilities was approximately $20 million as of December 31, 2019.
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At Great Lakes Works, the Company permanently idled the steelmaking operations in 2021 and announced the indefinite idling on or around April 1, 2020ironmaking operations in 2022 which resulted in non-cash impairments of $128 million and $151 million, respectively. The coil finishing process at Great Lakes Works continues to operate and remains a component of the other. The production at the idled blast furnace in Europe may resume when market conditions improve.Company's operating plans.
Depreciation, depletion and amortization
Depreciation, depletion and amortization expenses were $616$791 million in 2019both years ended December 31, 2022 and $521 million in 2018. The increases from 2018 to 2019 are primarily due to increased capital spending in recent years.December 31, 2021.
Earnings from investees
Earnings from investees were $79$243 million in 2019 and $612022 versus earnings from investees of $170 million in 2018.2021. The increase in 2022 from 2018 to 2019the prior year is primarily due to increasedcurrent year earnings from our iron ore investee and our PRO-TEC joint venture partially offset by an equity loss related to our investment in Big River Steel.from higher realized prices.
Restructuring and Other Charges
During 2019, U. S. Steel2022, the Company recorded restructuring and other charges of $275$48 million, which consists of charges of $25$30 million related to the planned disposition of a component within the Flat-Rolled segment, severance-related charges at USSK for headcount reductionsdomestic facilities of $4 million, charges under the Company's voluntary retirement programs at U. S. Steel Košice (USSK) of $23 million and planta $9 million favorable adjustment to the expected exit costs $227 million for the indefinite idling of ECT, our finishing facility in Dearborn, Michigan, and the intended indefinite idling of a significant portion of Great Lakes Works and $23 million for Company-wide headcount reductions.indefinitely idled facilities.
Charges for restructuring and ongoing cost reduction initiatives are recorded in the period U. S. Steel commits to a restructuring or cost reduction plan, or executes specific actions contemplated by the plan and all criteria for liability recognition have been met. Charges related to restructuring and cost reductions are reported in restructuringRestructuring and other charges in the Consolidated Statements of Operations.
Earnings (loss) before interest and income taxes by segment (a) | Year Ended December 31, | |||||||||||||
| (Dollars in Millions) | 2022 | 2021 | ||||||||||||
| Flat-Rolled | $ | 1,951 | $ | 2,630 | ||||||||||
| Mini Mill | 481 | 1,206 | ||||||||||||
| USSE | 444 | 975 | ||||||||||||
| Tubular | 544 | 1 | ||||||||||||
| Total earnings from reportable segments | 3,420 | 4,812 | ||||||||||||
| Other | $ | 22 | (11) | |||||||||||
| Segment earnings before interest and income taxes | 3,442 | 4,801 | ||||||||||||
| Other items not allocated to segments: | ||||||||||||||
Restructuring and other charges (b) | (48) | (128) | ||||||||||||
Asset impairment charges (c) | (163) | (273) | ||||||||||||
| United Steelworkers labor agreement signing bonus and related costs | (64) | — | ||||||||||||
| Gains on assets sold & previously held investments | 6 | 118 | ||||||||||||
Gain on sale of Transtar (d) | — | 506 | ||||||||||||
| Environmental remediation charge | — | (43) | ||||||||||||
| Other items, net | (13) | (35) | ||||||||||||
| Total earnings before interest and income taxes | $ | 3,160 | $ | 4,946 | ||||||||||
(a) See Note 4 to the Consolidated Financial Statements for reconciliations and other details. | ||||||||||||||
(b) Included in restructuring and other charges on the Consolidated Statements of Operations. See Note 25 to the Consolidated Financial Statements for further details. | ||||||||||||||
(c) See Note 1 to the Consolidated Financial Statements for further details. | ||||||||||||||
(d) See Note 5 to the Consolidated Financial Statements for further details. | ||||||||||||||
| Year Ended December 31, | ||||||||
| (Dollars in Millions) | 2019 | 2018 | ||||||
| Flat-Rolled | $ | 196 | $ | 883 | ||||
| USSE | (57 | ) | 359 | |||||
| Tubular | (67 | ) | (58 | ) | ||||
| Total earnings (loss) from reportable segments | 72 | 1,184 | ||||||
| Other Businesses | 23 | 55 | ||||||
| Segment earnings (loss) before interest and income taxes | 95 | 1,239 | ||||||
| Other items not allocated to segments: | ||||||||
| December 24, 2018 Clairton coke making facility fire | (50 | ) | — | |||||
Restructuring and other charges (b) | (275 | ) | — | |||||
| USW labor agreement signing bonus and related costs | — | (81 | ) | |||||
| Granite City Works restart and related costs | — | (80 | ) | |||||
| Granite City Works temporary idling charges | — | 8 | ||||||
| Gain on equity investee transactions (Note 12) | — | 38 | ||||||
| Total (loss) earnings before interest and income taxes | $ | (230 | ) | $ | 1,124 | |||
| Year Ended December 31, | ||||||
| 2019 | 2018 | |||||
| Flat-Rolled | 8 | % | 15 | % | ||
| USSE | 3 | % | 15 | % | ||
| Tubular | (1 | )% | 1 | % | ||
Segment results for Flat-Rolled
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| Year Ended December 31, | % Change | ||||||||||
| 2022 | 2021 | ||||||||||
| Earnings before interest and taxes ($ in millions) | $ | 1,951 | $ | 2,630 | (26) | % | |||||
| Gross margin | 20 | % | 27 | % | (7) | % | |||||
| Raw steel production (mnt) | 8,846 | 9,881 | (10) | % | |||||||
| Capability utilization | 67 | % | 58 | % | 9 | % | |||||
| Steel shipments (mnt) | 8,373 | 9,018 | (7) | % | |||||||
| Average realized steel price per ton | 1,261 | 1,172 | 8 | % | |||||||
•decreased shipments, including volume inefficiencies (approximately $570$290 million), increased spending on operating and maintenance costs
•decreased non-prime sales (approximately $110$95 million),
•higher raw material costs, primarily coal and alloys (approximately $65$680 million) and
•higher energy costs (approximately $365 million)
•increased other operating costs primarily depreciationfor purchased products and services, including costs at our mining operations (approximately $90$515 million). These charges,
these changes were partially offset by decreasedby:
•increased average realized prices, including mix (approximately $960 million)
•increased coke, iron ore and other non-steel sales (approximately $55 million)
•favorable equity investees income (approximately $60 million)
•lower other costs, which was primarily related to decreasedcommodity derivatives and variable compensation (approximately $135$190 million) and lower energy costs (approximately $15 million).
Gross margin for 20192022 as compared to 20182021 decreased primarily as a result of lower sales volume and increased input costs, partially offset by higher average realized prices.
Segment results for Mini Mill (a)
| Year Ended December 31, | % Change | ||||||||||
| 2022 | 2021 | ||||||||||
| Earnings before interest and taxes ($ in millions) | $ | 481 | $ | 1,206 | (60) | % | |||||
| Gross margin | 25 | % | 47 | % | (22) | % | |||||
| Raw steel production (mnt) | 2,650 | 2,688 | (1) | % | |||||||
| Capability utilization | 80 | % | 81 | % | (1) | % | |||||
| Steel shipments (mnt) | 2,287 | 2,230 | 3 | % | |||||||
| Average realized steel price per ton | 1,134 | 1,314 | (14) | % | |||||||
(a) Mini Mill segment added after January 15, 2021 with the purchase of the remaining equity interest in BRS.
The decrease in Mini Mill results for 2022 compared to 2021 was primarily due to:
•decreased average realized prices (approximately $440 million)
•decreased shipments (approximately $35 million)
•higher raw material costs (approximately $275 million),
these changes were partially offset by:
•lower other costs, primarily variable compensation (approximately $25 million).
Gross margin for 2022 as compared to 2021 decreased primarily as a result of lower average prices due to lower spot pricesrealized sales price and adjustable, spot market index-based contract prices, bothincreased raw material costs, partially offset by the partial period of which consistently decreased throughout 2019.the Company's controlling interest in Big River Steel in January of 2021.
Segment results for USSE
| Year Ended December 31, | % Change | ||||||||||
| 2022 | 2021 | ||||||||||
| Earnings before interest and taxes ($ in millions) | $ | 444 | $ | 975 | (54) | % | |||||
| Gross margin | 13 | % | 26 | % | (13) | % | |||||
| Raw steel production (mnt) | 3,839 | 4,931 | (22) | % | |||||||
| Capability utilization | 77 | % | 99 | % | (22) | % | |||||
| Steel shipments (mnt) | 3,759 | 4,302 | (13) | % | |||||||
| Average realized steel price per ton | 1,090 | 966 | 13 | % | |||||||
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•decreased shipments, including volume inefficiencies (approximately $130$160 million), lower average realized prices (approximately $100 million),
•higher raw material costs, primarily coal and coke (approximately $115$760 million)
•increased operating costs (approximately $125 million)
•higher energy costs (approximately $200 million)
•weakening of the euro versus the U.S. dollar (approximately $160 million),
these changes were partially offset by:
•increased average realized prices, including mix (approximately $845 million)
•increased non-steel sales (approximately $10 million)
•lower other costs, primarily variable compensation (approximately $20 million).
Gross margin for 2022 as compared to 2021 decreased primarily as a result of lower sales volume, higher raw material and energy costs and negative impacts from the weakening of the euro versus the U.S. dollar, (approximately $70 million), higher energy costs ($35 million). These charges were partially offset by lower spending for operating and maintenance (approximately $10 million) and other costs (approximately $25 million).
Segment results for Tubular
| Year ended December 31, | % Change | ||||||||||
| 2022 | 2021 | ||||||||||
| Earnings before interest and taxes ($ in millions) | $ | 544 | $ | 1 | NM | ||||||
| Gross margin | 37 | % | 7 | % | 30 | % | |||||
| Raw steel production (mnt) | 634 | 464 | 37 | % | |||||||
| Capability utilization | 70 | % | 52 | % | 18 | % | |||||
| Steel shipments (mnt) | 523 | 444 | 18 | % | |||||||
| Average realized steel price per ton | 2,978 | 1,696 | 76 | % | |||||||
The increase in Tubular segmentresults for 2022 compared to 2021 was primarily due to:
•increased average realized prices (approximately $580 million)
•increased shipments (approximately $40 million),
these changes were partially offset by:
•higher raw material costs (approximately $15 million)
•increased operating costs (approximately $10 million)
•higher energy costs (approximately $10 million)
•higher other costs, primarily variable compensation (approximately $40 million).
Gross margin for 2022 as compared to 2021 increased primarily as a result of higher average realized prices and sales volume.
Results for Other
The Other category had a lossearnings of $67$22 million for the year ended December 31, 20192022 compared to a losslosses of $58$11 million for the year ended December 31, 2018. The decrease in Tubular results in 2019 as compared to 2018 was primarily due to lower average realized prices (approximately $15 million), decreased shipments (approximately $15 million), increased spending on operating costs (approximately $35 million) and increased costs associated with the continued execution of Tubular's commercial and technology strategy (approximately $25 million). Theses charges were partially offset by lower substrate and rounds costs (approximately $80 million).
Net Interest and Other Financial Costs
| Year Ended December 31, | ||||||||||||||
| (Dollars in millions) | 2022 | 2021 | ||||||||||||
| Interest expense | 159 | 313 | ||||||||||||
| Interest income | (44) | (4) | ||||||||||||
| Loss on debt extinguishment | — | 292 | ||||||||||||
| Other financial costs | 32 | 46 | ||||||||||||
| Net periodic benefit income | (246) | (45) | ||||||||||||
| Net interest and other financial (benefits) costs | $ | (99) | $ | 602 | ||||||||||
| Year Ended December 31, | ||||||||
| (Dollars in millions) | 2019 | 2018 | ||||||
| Interest income | $ | (17 | ) | $ | (23 | ) | ||
| Interest expense | 142 | 168 | ||||||
| Net periodic benefit cost (other than service cost) | 91 | 69 | ||||||
| Loss on debt extinguishment | — | 98 | ||||||
| Other financial costs | 6 | — | ||||||
| Net interest and other financial costs | $ | 222 | $ | 312 | ||||
For additional information on U. S. Steel’s foreign currency exchange activity see Note 16 to the Consolidated Financial Statements and Item 7A. "Quantitative and Qualitative Disclosures about Market Risk – Foreign Currency Exchange Rate Risk.”
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Income TaxesTax
The income tax expense for the year ended December 31, 20192022 was $178$735 million compared to an income tax benefitexpense of $303$170 million in 2018.2021. The tax provision in 2019 does not reflect anychange from the prior year period was primarily due to the tax benefit in the U.S. as a valuation allowance was recorded againstprior year period resulting from the net domestic deferred tax asset (excluding a portion of deferred tax liability related to an asset with an indefinite life, as well as a deferred tax asset related to refundable Alternative Minimum Tax (AMT) credits). Included in the 2018 tax benefit is a benefit of $374 million related to the reversal of a portionrelease of the valuation allowance recorded against the Company’s neton domestic deferred tax asset, as well asassets.
In the third quarter of 2022, Pennsylvania House Bill 1342 was enacted, which in part phased in a benefitcorporate net income tax (CNIT) rate reduction over nine years. The CNIT rate for the 2022 tax year is 9.99%. The CNIT rate will be reduced to 8.99% for the 2023 tax year. Starting with the 2024 tax year, the rate is reduced by 0.5% annually until it reaches 4.99% for the 2031 tax year and each year thereafter. The Company assessed the impact of $38the law change and recorded an additional expense for it of $13 million relatedin 2022 on its Consolidated Financial Statements.
On August 16, 2022, H.R. 5376 (commonly called the Inflation Reduction Act of 2022) was signed into law, which, among other things, implemented a corporate alternative minimum tax (CAMT) of 15 percent on book income of certain large corporations. The CAMT imposes a minimum tax on net income adjusted for certain items prescribed by the legislation and is effective for tax years beginning after December 31, 2022. Although management is currently assessing the impact of the law change and awaiting guidance from the Department of Treasury, the Company anticipates being subject to the reversal of the valuation allowance for current year activity.new CAMT but does not believe that it will have a material impact on its Consolidated Financial Statements.
For further information on income taxes see Note 11 to the Consolidated Financial Statements.
Net earnings/(loss)earnings attributable to U. S. Steel
Net lossearnings attributable to U. S. Steel in 20192022 was $(630)$2,524 million compared to net earnings of $1,115$4,174 million in 2018.2021. The changes primarily reflected the factors discussed above.
Cash Flows and Liquidity
Net Cash Provided by $482 million from December 31, 2018 primarily as a result of lower average realized prices in all of our segments and lower shipments in our European segment.Operating Activities
Net cash provided by operating activities was $682$3,505 million in 20192022 compared to $938$4,090 million in 2018.2021. The decrease in 20192022 compared to 20182021 was primarily due to decreased operating results,net earnings, losses on debt extinguishments and income taxes and pension and other post-retirement benefits payables, partially offset by changes in working capital.capital, deferred taxes payable and gains on sale of assets. Changes in working capital can vary significantly depending on factors such as the timing of inventory production and purchases, which is affected by the length of our business cycles as well as our captive raw materials position, customer payments of accounts receivable and payments to vendors in the regular course of business.
Our keycash conversion cycle increased by 6 days in the fourth quarter of 2022 from the fourth quarter of 2021 as shown below:
| Cash Conversion Cycle | 2022 | 2021 | |||||||||||||||
| $ millions | Days | $ millions | Days | ||||||||||||||
Accounts receivable, net (a) | $ | 1,634 | 39 | $ | 2,089 | 37 | |||||||||||
+ Inventories (b) | $ | 2,359 | 60 | $ | 2,210 | 51 | |||||||||||
- Accounts Payable and Other Accrued Liabilities (c) | $ | 2,831 | 70 | $ | 2,684 | 65 | |||||||||||
= Cash Conversion Cycle (d) | 29 | 23 | |||||||||||||||
(a) Calculated as Average Accounts Receivable, net divided by total Net Sales multiplied by the number of days in the period.
(b) Calculated as Average Inventory divided by total Cost of Sales multiplied by the number of days in the period.
(c) Calculated as Average Accounts Payable and Other Accrued Liabilities less bank checks outstanding and other current liabilities divided by total Cost of Sales multiplied by the number of days in the period.
(d) Calculated as Accounts Receivable Days plus Inventory Days less Accounts Payable Days.
The cash conversion cycle is a non-GAAP financial measure. We believe the cash conversion cycle is a useful measure in providing investors with information regarding our cash management performance and is a widely accepted measure of working capital components include accounts receivable and inventory.management efficiency. The accounts receivable and inventory turnover ratios for the years ended December 31, 2019 and 2018 arecash conversion cycle should not be considered in isolation or as follows:an alternative to other GAAP metrics as an indicator of performance.
| Year Ended December 31, | ||||||
| 2019 | 2018 | |||||
| Accounts Receivable Turnover | 9.1 | 9.3 | ||||
| Inventory Turnover | 6.2 | 6.4 | ||||
The decrease in accounts receivable turnover approximates one day for 2019 as compared to 2018 and is primarily due to decreased sales as a result of decreased shipments in our USSE segment and lower average realized prices across all segments. The decrease in inventory turnover approximates two days for 2019 as compared to 2018 and is primarily due to lower inventory levels from reduced production in our Flat-Rolled and USSE segments.
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FIFO method is the LIFOpredominant inventory costing method accounted for 75 percent and 74 percent of total inventory values, respectively.our USSE segment. In the U.S., management monitors the inventory realizability by comparing the LIFO cost of inventory with the replacement cost of inventory. To the extent the replacement cost (i.e., market value) of inventory is lower than the LIFO cost of inventory, management will write the inventory down. As of December 31, 20192022 and 2018,2021, the replacement cost of the LIFO inventory was higher by approximately $735$1,154 million and $1,038$896 million, respectively.
| Cash Conversion Cycle | 2019 | 2018 | ||||||||||
| $ millions | Days | $ millions | Days | |||||||||
Accounts receivable, net (a) | $ | 1,177 | 42 | $ | 1,659 | 42 | ||||||
+ Inventories (b) | $ | 1,785 | 64 | $ | 2,092 | 58 | ||||||
- Accounts Payable and Other Accrued Liabilities (c) | $ | 1,970 | 69 | $ | 2,477 | 72 | ||||||
= Cash Conversion Cycle (d) | 37 | 28 | ||||||||||
Net cash provided by operating activities for 20192022 and 20182021 reflects employee benefits payments as shown in the following table.
| Year Ended December 31, | ||||||||
| (Dollars in millions) | 2019 | 2018 | ||||||
| Other employee benefits payments not funded by trusts | $ | 45 | $ | 48 | ||||
| Payments to a multiemployer pension plan | 77 | 60 | ||||||
| Pension related payments not funded by trusts | 8 | 20 | ||||||
| Reductions in cash flows from operating activities | $ | 130 | $ | 128 | ||||
| Benefits Payments for Employees | Year Ended December 31, | |||||||||||||
| (Dollars in millions) | 2022 | 2021 | ||||||||||||
| Other employee benefits payments not funded by trusts | $ | 32 | $ | 46 | ||||||||||
| Payments to a multiemployer pension plan | 74 | 75 | ||||||||||||
| Pension related payments not funded by trusts | 2 | 11 | ||||||||||||
| Reductions in cash flows from operating activities | $ | 108 | $ | 132 | ||||||||||
Net Cash Used in 2019 were $1.252 billionInvesting Activities
Net cash used in investing activities was $1,679 million in 2022 compared to $1.001 billion$840 million in 2018.2021. The increase in net cash used in investing activities was primarily due to increased capital expenditures (discussed in more detail below) and receipt of $627 million in the prior year for the sale of Transtar, partially offset by the payment of $625 million in the prior year period for the purchase of the remaining equity interest in Big River Steel and proceeds of $54 million in the current year period from government grants.
Total capital expenditures for 20192022 were $1.252 billion.$1,769 million. Flat-Rolled capital expenditures were $943$503 million and included spending for the Mon Valley No. 3 Blast Furnace outage, Mon Valley Endless Castingconstruction of a pig iron facility at Gary Works, Keetac DR-grade pellet capability, as well as mining equipment, infrastructure and Rolling, Gary Hot Stripenvironmental projects across the Flat-Rolled footprint. Mini Mill upgrades, Great Lakes B2 Blast Furnace, Midwest Tin Cold Mill upgrades, and various other infrastructure, environmental and strategic projects. Tubular capital expenditures were $145$1,159 million and included $780 million, exclusive of the air separation unit, for the new Big River 2 (BR2) 3 million ton per year facility being built in Osceola, Arkansas, as well as spending for the new continuous galvanizing line (CGL) and non-grain oriented electrical steel facility being built at the existing Big River Steel facility. USSE capital expenditures were $90 million and included spending for the Fairfield Electric Arc Furnace (EAF) project, Offshore Operations threading line and swage extensionblast furnace stoves, 5-stand control system upgrades, wastewater quality improvements, rail bridge upgrades and various other strategic capital projects. USSETubular capital expenditures of $153were $17 million consisted ofand included spending for improved Sinter Strand Emission control, improved Ore Bridges Emission control, the new Dynamo line and various otherto support steelmaking, infrastructure and environmental projects.projects within the Tubular footprint.
Net Cash used in Financing Activities
Net cash used in financing activities was $868 million for the twelve months ended December 31, 2022 compared to net cash used by financing activities of $2,747 million for the same period in 2021. The period over period decrease in cash used in financing activities was primarily due to higher debt repayments made during the prior year, partially offset by the cash received from common stock issuances in the prior year period and repurchases of common stock made in the current year period.
Debt Financing
In 2022, U. S. Steel made payments of debt and redemption premiums of approximately $382 million. The following is a summary of debt repayments for our Senior Secured Notes, Senior Notes and other debt obligations made during the twelve months ended December 31, 2022:
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| Year Ended December 31, 2022 | ||||||||
| Debt Instrument (in millions) | Date | Debt Extinguished | ||||||
2037 Senior Notes (a) | Third quarter 2022 | 76 | ||||||
2029 Senior Notes (b) | Third quarter 2022 | 225 | ||||||
| Hoover, AL Environmental Revenue Bonds | Second quarter 2022 | 14 | ||||||
2029 Senior Notes (b) | Second quarter 2022 | 48 | ||||||
2029 Senior Notes (b) | First quarter 2022 | 2 | ||||||
| Total | $ | 365 | ||||||
(a) There were redemption discounts and unamortized debt issuance cost write-offs of $6 million and $1 million , respectively, included in (gain) loss on debt extinguishment on the Consolidated Statement of Operations related to the repayment.
(b) During the twelve months ended December 31, 2022, there were no redemption premiums paid and a net loss of $4 million for the write-off of unamortized discounts and debt issuance costs, included in (gain) loss on debt extinguishment on the Consolidated Statement of Operations, as a result of these debt repayments.
Certain of our credit facilities, including the Credit Facility Agreement, the Big River Steel ABL Facility, the USSK Credit Agreement and the Export Credit Agreement, contain standard terms and conditions including customary material adverse change clauses. If a material adverse change was to occur, our ability to fund future operating and capital requirements could be negatively impacted. The €300 million USSK Credit Agreement contains certain USSK specific financial covenants. There are currently no amounts outstanding under the facility. The USSK Credit Agreement requires USSK to maintain a net debt to earnings before interest, taxes, depreciation and amortization (EBITDA) ratio of less than 3.50:1 for the rolling twelve months ending June 30, 2023. The Company has determined that it may not be able to comply with this covenant at June 30, 2023 based on the currently forecasted EBITDA for the twelve-month period ending June 30, 2023. This could partially or fully limit USSK's ability to borrow under the USSK Credit Agreement. Any amendment or waiver may lead to additional lender protections, including a reduction of loan commitments or less favorable terms, and there can be no assurance that USSK can obtain waivers or amendments in timely fashion, or on acceptable terms or at all. The Company believes that USSK will have adequate cash on hand as of June 30, 2023, and will not need to borrow under the USSK Credit Agreement.
We assumed additional indebtedness in connection with the acquisition of Big River Steel on January 15, 2021. Most of Big River Steel’s prior financing arrangements were secured transactions, with many of the assets of BRS Intermediate Holdings LLC, Big River Steel LLC and BRS Finance Corp. secured as collateral. Until we repay, refinance or otherwise amend the debt arrangements, we remain subject to the restrictive terms of the indentures.
We use surety bonds, trusts and letters of credit to provide financial assurance for certain transactions and business activities. The use of some forms of financial assurance and cash collateral have a negative impact on liquidity. U. S. Steel has committed $178 million of liquidity sources for financial assurance purposes as of December 31, 2022. Increases in certain of these commitments which use collateral are reflected within cash, cash equivalents and restricted cash on the Consolidated Statement of Cash Flows.
The maximum guarantees of the indebtedness of unconsolidated entities of U. S. Steel totaled $7 million at December 31, 2022. If any default related to the guaranteed indebtedness occurs, U. S. Steel has access to its interest in the assets of the investees to reduce its potential losses under the guarantees.
We may from time to time seek to retire or repurchase our outstanding long-term debt through open market purchases, privately negotiated transactions, exchange transactions, redemptions or otherwise. Such purchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements and other factors and may be commenced or suspended at any time. The amounts involved may be material. See Note 17 to the Consolidated Financial Statements for further details regarding U. S. Steel's debt.
Share Repurchases
In the third quarter of 2022, following the completion of the previously authorized $800 million share repurchase programs, the Board of Directors authorized a new share repurchase program that allows for the repurchase of up to $500 million of its outstanding common stock from time to time in the open market or privately negotiated transactions at the discretion of management. The Company's share repurchase program does not obligate it to acquire any specific number of shares. Common stock repurchased under our share repurchase programs totaled 37.6 million shares and approximately $849 million in the twelve months ended December 31, 2022. See Note 27 to the Consolidated Financial Statements, “Common Stock Issued and Repurchased” for further details.
Capital Requirements
Our major cash requirements in 2023 are expected to be for capital expenditures, including strategic priorities, employee benefits and operating costs, which includes purchases of raw materials. We ended 2022 with $3,504 million of cash and cash
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equivalents and $5,925 million of total liquidity. Available cash is left on deposit with financial institutions or invested in highly liquid securities with parties we believe to be creditworthy.
Capital expenditures for 20202023 are expected to total approximately $875 million and remain$2.5 billion which are focused largely on strategic infrastructure and environmental projects, as well as continued reinvestment inwe work to increase our equipment to improve our operating reliabilitycapacity and efficiency,raw material and product quality and costfinishing capabilities by focusing on investments in our Mini Mill and Flat-Rolled segment.segments.
U. S. Steel’s contractual commitments to acquire property, plant and equipment at December 31, 2019,2022 totaled $880$2,235 million.
Liquidity
The following table summarizes U. S. Steel’s liquidity as of December 31, 2019:2022:
| (Dollars in millions) | |||||
| Cash and cash equivalents | $ | 3,504 | |||
| Amount available under Credit Facility Agreement | 1,746 | ||||
| Amount available under Big River Steel - Revolving Line of Credit | 350 | ||||
| Amounts available under USSK Credit Agreement and USSK Credit Facility | 325 | ||||
| Total estimated liquidity | $ | 5,925 | |||
| (Dollars in millions) | |||
| Cash and cash equivalents | $ | 749 | |
| Amount available under $2.0 Billion Credit Facility | 1,380 | ||
| Amounts available under USSK credit facilities | 155 | ||
| Total estimated liquidity | $ | 2,284 | |
As of December 31, 2019, $2552022, $405 million of the total cash and cash equivalents was held by our foreign subsidiaries. Substantially all of the liquidity attributable to our foreign subsidiaries can be accessed without the imposition of income taxes as a result of the election effective December 31, 2013 to liquidate for U.S. income tax purposes a foreign subsidiary that holds most of our international operations.
| (Dollars in millions) | |||||||||||||||||||||
| Payments Due by Period | |||||||||||||||||||||
| Contractual Obligations | Total | 2020 | 2021 through 2022 | 2023 through 2024 | Beyond 2024 | ||||||||||||||||
Long-term debt (including interest) and finance leases(a) | $ | 5,751 | $ | 226 | $ | 450 | $ | 1,463 | $ | 3,612 | |||||||||||
Operating leases(b) | 289 | 74 | 104 | 60 | 51 | ||||||||||||||||
Contractual purchase commitments(c) | 4,197 | 2,400 | 741 | 445 | 611 | ||||||||||||||||
Capital commitments(d) | 880 | 663 | 217 | — | — | ||||||||||||||||
Environmental commitments(d) | 186 | 53 | — | — | 133 | (e) | |||||||||||||||
Steelworkers Pension Trust(f) | 430 | 79 | 172 | 179 | — | ||||||||||||||||
Pensions(g) | 264 | — | — | 101 | 163 | ||||||||||||||||
Other benefits(h) | 228 | 48 | 93 | 87 | — | ||||||||||||||||
| Total contractual obligations | $ | 12,225 | $ | 3,543 | $ | 1,777 | $ | 2,335 | $ | 4,570 | |||||||||||
| (Dollars in millions) | |||||||||||||||||||||
| Scheduled Reductions by Period | |||||||||||||||||||||
| Commercial Commitments | Total | 2020 | 2021 through 2022 | 2023 through 2024 | Beyond 2024 | ||||||||||||||||
Standby letters of credit(a) | $ | 36 | $ | 25 | $ | 1 | $ | — | $ | 10 | (b) | ||||||||||
Surety bonds(a) | 109 | — | — | — | 109 | (b) | |||||||||||||||
Funded Trusts(a) | 3 | — | — | — | 3 | (b) | |||||||||||||||
| Total commercial commitments | $ | 148 | $ | 25 | $ | 1 | $ | — | $ | 122 | |||||||||||
U. S. Steel management believes that U. S. Steel’s liquidity will be adequate to satisfy our obligations for the foreseeable future, including obligations to complete currently authorized capital spending programs. Future requirements for U. S. Steel’s business needs, including the funding of acquisitions and capital expenditures, scheduled debt maturities, repurchase of debt, share buybacks, dividends, contributions to employee benefit plans and any amounts that may ultimately be paid in connection with contingencies, are expected to be funded by a combination of internally generated funds (including asset sales), proceeds from the sale of stock, borrowings, refinancings and other external financing sources. The following table summarizes the Company's contractual obligations at December 31, 2022, and the effect such obligations are expected to have on our liquidity and cash flows in future periods.
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| (Dollars in millions) | |||||||||||||||||||||||||||||||||||
| Payments Due by Period | |||||||||||||||||||||||||||||||||||
| Contractual Obligations | Total | 2023 | 2024 through 2025 | 2026 through 2027 | Beyond 2027 | ||||||||||||||||||||||||||||||
Debt (including interest) and finance leases(a) | $ | 6,940 | $ | 297 | $ | 628 | $ | 1,029 | $ | 4,986 | |||||||||||||||||||||||||
Operating leases(b) | 177 | 58 | 74 | 35 | 10 | ||||||||||||||||||||||||||||||
Contractual purchase commitments(c) | 6,262 | 4,707 | 610 | 552 | 393 | ||||||||||||||||||||||||||||||
Capital commitments(d) | 2,235 | 1,683 | 552 | — | — | ||||||||||||||||||||||||||||||
Environmental commitments(d) | 126 | 32 | — | — | 94 | ||||||||||||||||||||||||||||||
Steelworkers Pension Trust(e) | 430 | 84 | 170 | 176 | — | ||||||||||||||||||||||||||||||
Employee related benefits(f) | 177 | 38 | 71 | 68 | — | ||||||||||||||||||||||||||||||
| Total contractual obligations | $ | 16,347 | $ | 6,899 | $ | 2,105 | $ | 1,860 | $ | 5,483 | |||||||||||||||||||||||||
(a) See Note 17 to the Consolidated Financial Statements.
(b) See Note 24 to the Consolidated Financial Statements.
(c) Reflects estimated contractual purchase commitments under purchase orders and “take or pay” arrangements. “Take or pay” arrangements are primarily for purchases of gases and certain energy and utility services.
(d) See Note 26 to the Consolidated Financial Statements.
(e) While it is difficult to make a prediction of cash requirements beyond the term of the 2022 Labor Agreements with the USW, which expire on September 1, 2026, projected amounts shown through 2027 assume the contribution rate per hour included in the 2022 Labor Agreements of $4.00 per hour worked.
(f) The amounts reflect corporate cash outlays for expected benefit payments to be paid by the Company. (See Note 18 to the Consolidated Financial Statements.) The accuracy of this forecast of future cash flows depends on future medical health care escalation rates and restrictions related to our trusts for retiree healthcare and life insurance (VEBA) that impact the timing of the use of trust assets. Projected amounts have been reduced to reflect withdrawals from the USW VEBA trust available under its agreements with the USW. Due to these factors, it is not possible to reliably estimate cash requirements beyond five years and actual amounts experienced may differ significantly from those shown.
Other Commercial Commitments
The following table summarizes U. S. Steel’s commercial commitments at December 31, 2022, and the effect such commitments could have on our liquidity and cash flows in future periods.
| (Dollars in millions) | |||||||||||||||||||||||||||||||||||
| Scheduled Reductions by Period | |||||||||||||||||||||||||||||||||||
| Commercial Commitments | Total | 2023 | 2024 through 2025 | 2026 through 2027 | Beyond 2027 | ||||||||||||||||||||||||||||||
Standby letters of credit(a) | $ | 53 | $ | 32 | $ | 1 | $ | — | $ | 20 | (b) | ||||||||||||||||||||||||
Surety bonds(a) | 95 | — | — | — | 95 | (b) | |||||||||||||||||||||||||||||
Funded Trusts(a) | 31 | — | — | — | 31 | (b) | |||||||||||||||||||||||||||||
| Total commercial commitments | $ | 179 | $ | 32 | $ | 1 | $ | — | $ | 146 | |||||||||||||||||||||||||
(a)Reflects a commitment or guarantee for which future cash outflow is not considered likely.
(b)Timing of potential cash outflows is not determinable.
Off-Balance Sheet Arrangements
U. S. Steel has invested in several joint ventures that are reported as equity investments. Several of these investments involved a transfer of assets in exchange for an equity interest. U. S. Steel has supply arrangements with several of these joint ventures.
U. S. Steel’s other off-balance sheet arrangements include guarantees, indemnifications, unconditional purchase obligations, surety bonds, trusts and letters of credit disclosed in Note 26 to the Consolidated Financial Statements.
Derivative Instruments
See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” for discussion of derivative instruments and associated market risk for U. S. Steel.
Environmental Matters
U. S. Steel’s environmental expenditures were as follows:
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| (Dollars in millions) | (Dollars in millions) | |||||||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2022 | 2021 | 2020 | |||||||||||||||||||||||||||
| North America: | North America: | |||||||||||||||||||||||||||||||
| Capital | $ | 96 | $ | 105 | $ | 6 | Capital | $ | 38 | $ | 27 | $ | 36 | |||||||||||||||||||
| Compliance | Compliance | |||||||||||||||||||||||||||||||
| Operating & maintenance | 213 | 198 | 176 | Operating & maintenance | 255 | 201 | 188 | |||||||||||||||||||||||||
Remediation(a) | 22 | 6 | 9 | Remediation(a) | 18 | 57 | 37 | |||||||||||||||||||||||||
| Total North America | $ | 331 | $ | 309 | $ | 191 | Total North America | $ | 311 | $ | 285 | $ | 261 | |||||||||||||||||||
| USSE: | USSE: | |||||||||||||||||||||||||||||||
| Capital | $ | 27 | $ | 20 | $ | 46 | Capital | $ | 6 | $ | — | $ | 6 | |||||||||||||||||||
| Compliance | Compliance | |||||||||||||||||||||||||||||||
| Operating & maintenance | 10 | 12 | 11 | Operating & maintenance | 11 | 10 | 6 | |||||||||||||||||||||||||
Remediation(a) | 8 | 9 | 7 | Remediation(a) | 6 | 7 | 5 | |||||||||||||||||||||||||
| Total USSE | $ | 45 | $ | 41 | $ | 64 | Total USSE | $ | 23 | $ | 17 | $ | 17 | |||||||||||||||||||
| Total U. S. Steel | $ | 376 | $ | 350 | $ | 255 | Total U. S. Steel | $ | 334 | $ | 302 | $ | 278 | |||||||||||||||||||
