US Steel Corp layoffs send contrarian signal

United States Steel Corp plans to lay off about 200 workers at a Michigan plant in coming weeks, a move that appears to undercut President Donald Trump's boast that the nation's steel industry is "thriving".

In a regulatory filing, the steelmaker said the layoffs are temporary but may last longer than six months. The cutback at the Great Lakes plant near Detroit follows the temporary closure of a blast furnace in Gary, Indiana. It's also idling a blast furnace in Europe.

"While market conditions have softened, we remain focused on executing the value creation strategy that is underway," U.S. Steel said in a statement. "We expect to decrease monthly blast furnace production by approximately 200,000 – 250,000 tons."

Andrea Hunter, president of the United Steelworkers Detroit local, wrote in an Aug 1 letter informing members of the layoffs, "If current market conditions continue, more layoffs unfortunately will be announced."

Bank of America analyst Timma Tammers expects prices for hot-rolled coil in 2022 to fall below current prices.

The layoffs in Michigan reflect worldwide oversupply rather than weakness in the US steel industry. Prices rose following Trump's tariffs on imports but fell as inventories increased and demand from the auto and farm machinery industries weakened.

Employment in the US steel industry has declined as efficiency increased. Employment peaked in 1953 at 650,000, and in 2018 stood at 83,276 compared with about 101,000 in 2008, the Bureau of Labor Statistics reported. The planned layoff of 200 steelworkers in Michigan represents about 0.24 percent of the industry's current workforce.

In the 1980s, steelmakers needed an average of 10.1 man-hours to produce a ton of steel compared with 1.5 man-hours today, according to S&P Global Platts. The difference is efficient mini-mills using electric arc furnaces to turn scrap metal into new steel. Traditional mills make steel from scratch, shoveling iron ore and coal into blast furnaces. About 70 percent of steel purchased for use in the US is made in the US, according to industry data.

The World Steel Association said global steel production, led by China, continues to expand, but a decline in US output has slowed the pace of growth. Global production hit 5.3 million metric tons per day in June, up 4.6 percent from the same period a year ago, but below the 5.4 percent growth seen in May and the 6.4 percent increase in April.

On a year-over-year basis, China led with a 10 percent production increase, and the US posted a 3.1 percent gain. Production in Russia, South Korea and the European Union fell.

Trump announced steel tariffs on March 1, 2018. In May 2019, he tweeted: "In one year tariffs have rebuilt our steel industry — it is booming!" Tariffs provided a short-term boost, but little long-term benefit, analysts said.

A Wall Street Journal editorial said Trump's tariffs have had little effect on Chinese imports, which were already subject to 28 anti-dumping duties, and noted, "Government can always help a politically connected few at the expense of the many. But on every other measure, the steel tariffs have been a bust."

Akers National Roll Co plans to close at the end of September, and about 78 workers will lose their jobs. As many as 100 could be laid off of NLMK's plant near Pittsburgh. Trump narrowly carried Pennsylvania in 2016.

American steel prices have dropped about 33 percent since last summer when strong demand pushed prices close to a 10-year high.

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