EAST CHICAGO | Nearly 700 steel industry jobs have vanished from Northwest Indiana over the past week as both of the region’s major steelmakers announced cutbacks.
The cuts have been deep, and the blood-letting severe. So far in January, U.S. Steel Corp. has announced the layoffs of more than 1,300 steelworkers nationwide, including 369 workers who will be sent home starting in March when East Chicago Tin is set to be temporarily idled. ArcelorMittal warned 304 jobs could be eliminated when it shuts down its electric arc furnace at Indiana Harbor Long Carbon March 1.
“Analysts have been predicting plants would close,” said Charles Bradford, a steel industry analyst with New York City-based Bradford Research Inc.
U.S. Steel recently shuttered two of its oldest and most outdated coke batteries at Gary Works, displacing 120 workers. ArcelorMittal mothballed the No. 2 galvanizing line, once the world’s most productive line, at ArcelorMittal Indiana Harbor West last year.
ArcelorMittal also warned workers it planned to idle the No. 1 aluminizing line at the former LTV steel mill in East Chicago near the end of 2015, when production will be shifted to a newer, more modern plant in Alabama. About 100 workers would be reassigned if that takes place.
“With companies like ArcelorMittal, the advantage of globalization is the company has more facilities and can pick and choose which are most efficient to operate,” Bradford said.
ArcelorMittal and U.S. Steel were supposed to be rebounding after the Great Recession dragged their fortunes down for years. They have lately been buoyed by U.S. auto sales that soared 5.9 percent to 16.5 million last year, the highest since 2007. Tubular steel product sales boomed along with crude oil production in Canada and the Dakotas. Construction — long considered the missing piece of the puzzle as it makes up 40 percent of the market for steel — has finally been climbing back up to its prerecession level.
But the upswing that’s expected in a cyclical, boom-and-bust industry hasn’t come to pass.
Cheap oil, a strong dollar, a record surge in imports, overcapacity and low prices have been battering the steel industry.
Oil just plunged under $50 a barrel, bringing oil and gas exploration to a screeching halt. That party was already ending anyway because overly bullish steelmakers had been adding too much tubular production capacity, Bradford said.
Hot-rolled coil prices have plunged from about $700 a ton a year ago to about $590 a ton last week, the first time it’s dropped below $600 a ton since 2010.
Imports have suppressed prices after apparently capturing a record 28 percent of the market share for finished steel in 2014. Foreign steelmakers used the United States as a dumping ground because of its strong automotive and energy sectors. Those companies often had the unfair advantage of government subsidies that U.S. companies don’t get, said Thomas Gibson, president of the American Iron and Steel Institute.
Worldwide steelmaking overcapacity — the amount of mills that aren't needed to satisfy the demand for steel — is estimated to be as high as 628 million tons.
The strength of the dollar puts U.S. steelmakers at a structural disadvantage by stifling exports and encouraging imports, Bradford said.
“The strong dollar is deadly for the steel industry,” he said. “The last time the dollar was this strong, half the unionized plants went bankrupt.”