Steel Industry Update/149
August/September 2000
Locker Associates, 225 Broadway, NY NY 10007 Tel: 212-962-2980
Despite the rosy shipment forecasts we presented
in the July Update, very dark clouds are now enveloping the North American steel industry. Imports are soaring, prices are plummeting -- especially sheet tags, inventories continue to climb,
stock prices are stuck at all-time lows and the first
shutdown and layoff announcements have been issued. This could be a painful fall and winter if the
economy continues to falter, especially the auto
and construction markets.
The tepid numbers generated in the second
quarter for integrated mills (see Table 2) could
worsen due to falling prices. HR sheet spot offerings have quickly slipped below $300/ton (down
from $340 in April) while CR prices are touching
$400/ton (down from $440). Gulf States shut its
plant this summer, Wheeling-Pitt has just announced its laying off 29 hourly workers due to a
decline in sales and LTV announced the closure of
its Minnesota iron ore mines. Most importantly, the
Clinton administration continues to largely ignore
the rising flood of low-priced imports.
On the more positive side, Europe, most of Asia
and Latin America continue to grow. Unlike the
early 1980's, the integrated mills have strengthened their balance sheets, dramatically reducing
their debt and pension bills. And scrap and pig iron
prices have edged up on the world market in the
last six weeks. If the world and U.S. economy can
maintain strong growth, then it's conceivable we
could witness a steel shortage that drives up prices
to new highs. In other words, we are at a crucial
crossroad. Over the next three months, if the negative volume and price trends accelerate, the steel
industry could take a real hit. But if demand recovers and prices rise, the downturn will be averted.
Stay tuned.
Fax: 212-608-3077
Inside This Issue......
Second Quarter Results ............................
Prices and Shipments ................................
End-Use Markets .......................................
Trade ..........................................................
Labor/Management ....................................
Raw Materials ............................................
Worthy of Note ...........................................
1
2
4
4
5
7
7
SECOND QUARTER RESULTS
The eight U.S. integrated producers in Table 2
generated $181 million in operating earnings in
second quarter 2000, up 330% from the same period last year. A healthy 11% jump in combined
shipments, to 12.7 million tons, and a $25 per ton
rise in average price, to $536 per ton, contributed
to the improved performance. On a per ton basis,
operating income rose from $4 per ton to a still
lackluster $14 per ton.
Non-recurring problems contributed to the subpar performance of several major mills. National,
for example, cited the unanticipated extension of
planned outages combined with a fire at the Great
Lakes caster for its $15 million operating loss, while
LTV cited an unplanned seven-day blast furnace
outage and computer problems at the Indiana Harbor tandem mill as factors in its $7 million loss.
Rouge, which set a new quarterly production record, appears to be overcoming the effects of its
powerhouse explosion and fire in the second quarter of 1999, but still had an operating loss of $20
million (before insurance recoveries of $40 million).
For the three Canadian integrated producers,
combined operating earnings rose 21% to C$179
Table 1: Selected U.S. Steel Industry Data, June & Year-To-Date
(thousand tons)
Raw Steel Production ...................
Capacity Utilization .....................
Mill Shipments ..............................
Exports ..........................................
Imports ..........................................
Apparent Steel Supply* ................
Imports as % of Supply* .............
Iron Ore Shipments (metric) .............
Average Spot Price** ($/ton)............
Scrap Price+ ($/gross ton) ..................
Month of June
2000
1999
9,593
89.6
9,758
543
3,346
12,016
23.3%
5,881
366
111
8,413
79.7
8,963
430
3,064
10,791
20.9%
5,935
340
108
% Chg
14.0%
-8.9%
26.7%
9.2%
11.4%
--0.9%
7.5%
2.8%
Year-to-Date
2000
1999
59,238
91.6
57,892
3,305
20,291
70,058
22.1%
25,836
365
129
50,249
80.4
50,453
2,399
16,815
61,085
21.3%
24,017
340
101
% Chg
17.9%
-14.7%
37.7%
20.7%
14.7%
-7.6%
7.4%
27.9%
Source: AISI, Purchasing Mag., & US Geo. Survey *Excludes semi-finished imports **Avg price of 8 carbon products +auto bundles
Steel Industry Update/149
million (US$121 mil) despite a modest 1% decline
in shipments. Stronger profits were the result of
higher average price, up C$32 per ton price to
C$667 per ton (US$451 per ton), which more than
offset a C$21 per ton rise in average operating
cost. Algoma -- which set new production records
on its DSPC in both May and June -- posted operating earnings of $C45 per ton (US$30), a marked
improvement compared to a C$27 per ton loss in
second quarter 1999.
The six North American minimills in Table 2 also
enjoyed stronger earnings. Combined operating
income rose 33% to $207 million thanks to both a
6% rise in shipments and $22 per ton rise in average price to $390 per ton. Operating income per
ton increased to $36, up $7 per ton from the same
period last year.
All six minimills were profitable, but there was
significant variation among the group. Oregon
earned a paltry $1 per ton, while Steel Dynamics
earned $74 per ton, making it the most profitable
mill in North America on a per ton basis.
creased by 2.1% over May and were up by
21.6% over June of 1999. Figures released by
Pipe Logix, a consulting and information services
firm for the industry, showed a 3.2% jump in carbon ERW casing in June, from $647 to $668/ton
and another 1.5% hike in July to $678/ton. Carbon seamless casing moved up from $807 to
$817/ton in June and to $821/ton in July, a gain
of 1.2% and 0.5% respectively. Alloy ERW casing, at $785/ton in May, increased by 2.5% to
$805/ton in June, and 1.2% to $815/ton in July,
and alloy seamless casing went up 1%, from
$879 to 888/ton in June and 0.9% more to
$896/ton in July. Tubing also showed similar increases, with carbon seamless up 2.8% in June
and 1.1% in July, from $969 to $996 and
$1,007/ton respectively, carbon ERW ahead
1.5% and 1.3%, from $846 to $859 and $870/ton,
alloy seamless increasing 2.1% and 0.6%, from
$1,128 to $1,152/ton in June and $1,159/ton in
July, and alloy ERW up 2.3% in June and 0.6% in
July, from $1,016 to $1,039 and $1,045/ton respectively. Even as prices continued to move
ahead, spokesmen for the industry expressed
cautious hope that the highly attractive U.S. market does not result in a new surge of cut-rate imports from abroad, which could change the picture considerably (AMM 7/5, 8/1).
PRICES AND SHIPMENTS
OCTG: The unabated rise in energy prices sent
OCTG prices still higher this summer as oil drilling continued to increase. In August, U.S. Steel
led with a tag hike of $40/ton on high-strength alloy casing effective Sept. 1. In June, prices in-
Sheet: With both the U.S. economy and steel
Table 2: Performance of Major North American Steel Producers, 2Q00 & 2Q99
Shipments
Sales
Oper Income
Sales/Ton
(thousand tons)
($ millions)
($ millions)
($ per ton)
U.S Integrated
2Q00
2Q99
2Q00
2Q99
AK Steel ...........
1,710
1,736
1,226
1,114
Bethlehem ........
2,239
2,109
1,059
985
LTV Steel .........
2,273
1,987
1,279
1,014
National............
1,631
1,471
772
707
Rouge Steel .....
638
372
276
173
USSteel............
2,904
2,548
1,585
1,303
Weirton ............
653
606
293
267
WHX (W-P)* ....
615
568
294
256
U.S. Totals .......
12,663
11,397
$6,785
$5,819
Canadian Integrated (C$=US$.68)
Algoma.............
530
571
305
296
Dofasco............
1,128
1,141
842
784
Stelco ...............
1,267
1,245
804
798
Canada Totals ..
2,925
2,957 C$1,951 C$1,878
N.A. Minimills (US$)
Birmingham ......
734
Co-Steel ...........
750
Ipsco* ...............
559
Nucor* ..............
2,836
Oregon .............
417
Steel Dynamics
503
N.A Mini Totals
5,798
831
728
421
2,571
405
506
5,463
213
244
237
1,214
162
191
$2,260
258
212
185
997
189
167
$2,008
Oper Inc/Ton
($ per ton)
2Q00
116
25
(7)
(15)
(20)
68
12
2
$181
2Q99
89
(26)
(7)
3
(62)
43
0
2
$42
2Q00
717
473
563
474
433
546
449
478
$536
2Q99
641
467
510
481
466
511
441
451
$511
2Q00
68
11
(3)
(9)
(31)
23
19
3
$14
2Q99
51
(12)
(4)
2
(166)
17
0
3
$4
24
100
55
C$179
(15)
112
52
C$148
575
746
635
C$667
518
687
641
C$635
45
89
43
C$61
(27)
98
42
C$50
3
16
23
128
1
37
$207
7
8
23
79
10
28
$156
290
325
423
428
388
379
$390
310
291
439
388
467
329
$368
4
21
41
45
1
74
$36
9
12
55
31
25
55
$29
Source: Company documents. Note: Steel Segment, except Ipsco & Nucor. Includes profit-sharing; excludes non-recurring charges.
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Steel Industry Update/149
Table 3: U.S. Annual Product Spot Prices: Actual and Forecast
Actual
1999
($/ton)
Hot rolled sheet..........
Cold rolled sheet.........
HD galvanized sheet...
Coiled mill plate..........
Cold-finished bars......
Wide-flange beams....
Reinforced bars #6.....
Wire rod/low carbon...
Carbon Avg Price.....
Stainless 304 sheet...
Stainless 316 sheet...
Forecast
2001
2000
2002
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
283
303
327
335
331
330
328
326
324
323
321 318
397
403
437
437
432
430
427
425
423
421
419 415
423
467
430
440
435
433
430
428
426
424
421 418
300
300
323
330
326
325
323
321
319
318
316 314
460
460
460
467
462
460
457
455
452
450
448 444
270
287
307
313
310
308
306
305
303
302
300 297
310
307
322
327
324
322
320
318
316
315
313 311
295
315
300
300
297
295
293
292
290
289
287 285
342
355
363
369
365
363
361
359
357
355
353 350
1,555 1,750 1,750 1,958 1,936 1,927 1,915 1,906 1,894 1,887 1,875 1,860
1,792 1,821 2,200 2,300 2,275 2,263 2,250 2,238 2,225 2,216 2,203 2,185
Sources: Purchasing Magazine, Buying Strategy Forecast (7/24/00)
industry showing signs of a slowdown in the last
couple of months, flat-rolled sheet declined in
August with HR at about $290/ton, down some
$50-$60 from May and CR off about $70/ton to
about $380. Prices have been affected by typical
summer slowdowns and by the fact that service
centers are reportedly working off the higher inventory levels they built up late last year. Another factor is a bit of a slowdown -- though not a
major one -- in construction activity (AMM 7/17).
regional price policy and its attempts to gain a
larger share of the merchant bar market. AISI
figures reveal that imports of carbon structural
shapes went up by 30.4% this May over May of
last year, from 146,542 tons to 191,032 tons, although total imports of 709,789 tons in the first
five months were off this year by 2.2% compared
with the first five months last year (AMM 7/24).
Slab: After a rise of about $19/metric tonne earlier in the year, slab prices were falling off this
summer and the trend appears to be accelerating. California Steel Industries, the largest domestic slab buyer, was reported to be paying
$10/metric ton less in the third quarter, or about
$220 f.o.b., and prices were expected to be still
lower in the last quarter of this year. California
has also resumed buying slab from Cia Siderurgica de Tubarao (CST), the Brazilian company that
was formerly CSI’s biggest supplier. California
had stopped buying its slabs from CST earlier this
year when its prices were about $10/metric ton
higher than competitive suppliers. Although purchases have begun again, it is reported unlikely
that the Brazilian firm will regain its predominant
position with CSI.
Meanwhile, another Brazilian steelmaker, Cia
Siderurgica Paulista (Cosipa) is ready to start up
a new mill Oct. 1 to increase its raw steel output
to 4.5 million metric tons a year, up from 2.7 million metric tons. The third largest Brazilian steel
producer plans to turn out 900,000 metric tons of
slab annually, most of it for export, even as CST,
the country’s biggest slab exporter, will be reducing its shipments abroad (AMM 7/31, 8/3, 8/16).
Merchant Bar: Nucor’s recent aggressive pricing
stance in merchant bar is causing increasing
concern in the market, according to a July report.
In mid-July, the company announced that it was
cutting its tags on merchant bars and structural
shapes. Birmingham, North Star, SMI, and Auburn Steel quickly followed with cuts of their own.
Mills are now reportedly introducing a “foreignfighter” price, which has been devised to fight
against low-priced imports, and this is the price
merchant bar buyers were now paying. Basically,
it means that if a small buyer can purchase at the
foreign-fighter price, he will pay the same price as
the large buyer, since it is not likely that manufacturers will discount below this price. Some industry sources expressed doubt that the “foreignfighter” prices would last.
In mid-summer, a Midwestern buyer was reporting that 2 inch by 2 inch by 1/4 inch angles,
selling for $330/ton, were being discounted to
$316/ton. The foreign-fighter price for the product is $281. Industry and service center sources
said that a key factor behind Nucor’s cuts were its
Steel Industry Update (ISSN 1063-4339) published 10 times/year by Locker Associates, Inc. Subscriptions $395/yr; $725/two yrs; Multiple copy discounts available. Checks payable to Locker Associates in U.S. dollars drawn on a U.S. bank. Copyright © 2000 by Locker Associates Inc. All rights
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available by subscription by calling 800-247-8080. Locker Associates, 225 Bdwy, # 2625, NY NY 10007. E-Mail: lockerassociates@yahoo.com
-3-
Steel Industry Update/149
END-USE MARKETS
last year. Holding that the reduced-price imports
had caused, or threatened to cause, injury to domestic industry, the 4-2 commission decision levied anti-dumping duties of up to 95.29% on four
Japanese companies -- Nippon, Kawasaki, NKK,
and Toyo Kohan -- and 32.52% on “all others.” In
two years, from 1997 to 1999, imports of tin mill
goods had jumped by 74.4%, from 199,583 to
348,000 tons. The Japanese, who have been
handed a number of adverse anti-dumping decisions by the ITC this year, were particularly upset
by this one, which involved only one U.S. tin mill
manufacturer, Weirton Steel, and two unions, after other domestic mills declined to join. During
the hearings, they introduced testimony from four
U.S. can manufacturers that Weirton’s poor ontime delivery performance rather than lower import prices were the reason for their decision to
purchase Japanese tin mill products last year.
Weirton, whose tin mill goods account for about
40% of its income and 22% of the domestic market, should now find it easier to obtain a loan
guarantee from a federal steel loan program.
The AISI hailed the ITC decision and repeated its
call for stronger and more-strictly enforced trade
laws (AMM 7/6, 8/4).
Steel Still King in Automaking: The outlook for
development of new lightweight steel for use in
car manufacturing looked rosier in July with the
issuance of a government report that neither
aluminum nor composite materials will be able to
be priced cheaply enough in the near future to rival steel costs in most major vehicles. The report
by the National Research Council urges the Partnership for a New Generation of Vehicles to
closely follow the development of the new lightweight steel by the Ultra Light Steel Auto Body
consortium. The consortium, created by the
American Iron and Steel Institute, has been developing the ultra-light, high-strength steel for the
next generation of cars to meet the competition
from lighter weight but higher priced metals.
”We’re encouraged that the National Research
Council recognized the contributions and potential that we have been able to demonstrate for the
next generation of vehicles,” said David Jeanes,
AISI senior VP of market development.
Later in the month, reports indicated that steel
products in some of its newer and higher forms
will be used in a significantly larger number of vehicles for 2001. Ford also announced that it intended to use new laminated steel door panels in
its 2001 Ranger trucks. The laminated panels cut
down vibrations and noise in the vehicles. About
350,000 Ford Ranger trucks are sold each year
(AMM 7/12, 7/14, 7/27).
Series of ITC Judgments Buoy U.S. mills: A
series of U.S. International Trade Commission
anti-dumping rulings in July has given a new lift to
a number of U.S. steel producers. In one case,
involving large diameter pipe from Mexico, the
commission held, by a unanimous 6-0 vote, that
imports of carbon seamless standard pipe and
pressure pipe caused or threatened injury to domestic producers. It also held, by a 5-1 vote that
imports of alloy seamless pipe did the same. In
addition, four commissioners found injury to the
domestic industry from small diameter carbon
and alloy pipe from Romania and the Czech Republic. In the critical circumstances portion of the
decision, four of the commissioners held that
such circumstances were not present during the
period of the investigation, so that duties will be
imposed from the date of the preliminary antidumping margins, or Aug. 23, rather than 90 days
before that. The ruling will result in duty margins
of 19.65% on imports from Mexico, 32.26% to
39.93% for the Czech Republic, and 11.08% to
19.11% for Romania.
Injury, or the threat of injury, to the U.S. market
was also found in the imports of structural steel
beams from S. Korea. The unanimous ITC holding will see final anti-dumping and subsidy rate
margins applied to Inchon Iron & Steel (25.51%
and 0.15%), Kangwon (49.73% and 3.88%), and
all others (37.72% and 3.87%) (AMM 7/14).
Freight Car Sales Derailed in Second Quarter:
It looks like someone has pulled the emergency
brake on railway freight cars. During the second
quarter of this year, sales orders plummeted by
20.4% from the first quarter, with deliveries the
lowest in nearly three years. Although second
quarter orders for 11,595 cars was still 73.9%
higher than the 6,658 cars ordered in the second
quarter of 1999, it was considerably off the
14,551 orders placed in the first quarter of this
year. American Railway Car Institute President
Robert A. Matthews, however, predicted a turnaround toward higher sales again “as railroads
continue to recover from recent merger-related
problems and fuel prices remain high.” The more
the railroads are used, he said, the more need
there will be for new freight cars (AMM 7/27).
TRADE
ITC Hits Japanese Tin Mill Imports: An antidumping ruling August 2 by the U.S. International
Trade Commission struck sharply at the imports
of Japanese tin-and chromium-coated steel sheet
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Steel Industry Update/149
U.S. Trade Study Gets Mixed Reviews: The
long-awaited government report on the recent crisis in steel imports was issued July 26 to a variety
of reviews, mostly lukewarm, on its formula for
preventing future disasters. While most praised
the study as a well-documented, fact-filled description of the import problem, they noted that it
was quite short on any conspicuous new
measures that would prevent future occurrences.
Others noted that, at least it laid to rest the denials from some sources that there was a real problem from abroad, or that domestic industry was
the source of the blame. The United Steelworkers of America called the study “the result of a
massive grassroots effort by our union and others,” and said that it looked to Congress for legislative action “to put teeth into the report’s findings.” Others, like the American Iron and Steel
Institute, welcomed the report but said that it is
“less than what is needed to address the global
steel structural problems and to achieve the Steel
Action Program’s stated goal of ‘zero tolerance of
unfair trade.’” Most of the remedies against future dumping surges recommended in the 235page study were those already in the hopper, according to some industry and congressional
sources. They included:
Rebar Cases Get Mixed ITC Verdict: In another
action this summer, the ITC dismissed cases of
anti-dumping against producers of rebar in four
countries, even as it voted to carry on the investigation into charges of injury by imports from eight
others. The 5-1 preliminary injury vote held that
imports from Russia, Venezuela and Austria were
negligible and that imports from Japan did not
cause or threaten injury to the U.S. rebar industry. It did, however, decide to proceed with the
probe of imports from China, Korea, Indonesia,
Poland, Ukraine, Belarus, Latvia, and Moldava.
A final vote on these countries is expected next
spring.
Allegations of critical circumstances were filed
Aug 21 by the Rebar Trade Action Coalition, representing eight U.S. rebar mills. They charged
that last December producers in several of these
countries, believing that anti-dumping cases
would be filed imminently, engaged in “a massive
increase in dumped imports.” An attorney representing the industry said that “importers should
be put on notice that we are requesting the U.S.
government to impose duties as rapidly as the
law allows in order to address the harm caused
by these import surges.” If critical circumstances
are upheld, rebar producers in these countries
would be subject to retroactive duties on goods
coming into the country up to 90 days before the
preliminary determination of anti-dumping duties,
now scheduled for Dec. 5 (AMM 8/14, 8/15, 8/16, 8/23).
● A system of early warnings through the expedited issuance of steel import statistics a
month early and closer coverage of raw steel
production, consumption, capacity utilization,
import penetration, average weekly overtime
hours and other employment data.
LABOR/MANAGEMENT
AK’s “Safety” and “Citizenship” Citations
Leave Lots of Heads Shaking: The National
Safety Council’s selection of AK Chairman and
CEO Richard Wardrop for its first Green Cross for
Safety Medallion has left lots of people scratching
their heads in disbelief. The company was cited
for turning around a poor safety record into one
with a very low rate of plant accidents. The NSC
also cited Wardrop for his “corporate citizenship.”
Blasting the award almost as soon as it was announced, the United Steelworkers of America
said that it called into question the very integrity
and credibility of the NSC. It pointed to the fact
that AK and its contractor, Motorized Assisted
Deliveries, have been assessed for over $50,000
in fines by OSHA just this summer for numerous
health and safety violations at its Mansfield plant.
In one violation that resulted in a $44,000 fine
against MAD, an employee’s clothing caught fire
when he was not given, nor required to wear, protective equipment to guard against burns. The
union also charged that the company’s intimidating practices inside the plant had prevented
workers from reporting accidents and safety viola-
● Expediting investigations of dumping, antiduty actions, and critical-circumstance findings
to speed up relief for industries and communities affected by the actions.
● Making sure the U.S. trade laws, while consistent with WTO regulations, are strengthened
to increase the ability to litigate dumping abuses.
● Conducting negotiations and bi-lateral discussions with Japan, Russia, Brazil and South
Korea to correct structural problems in the industry and broadening the discussions to include extensive monitoring.
● Seeking a moratorium on lending by multilateral development banks for enterprises that
significantly increase overseas steel production
capability.
● Energizing the international steel policy
agenda through meetings attended by highlevel government officials (AMM 7/27, 7/28, 7/31).
-5-
Steel Industry Update/149
tions, and that many of the violations were being
committed by contractors working at the AK
plants so that they are not reported as being the
responsibility of AK.
But the clearest irony in the “corporate citizenship” citation is the development, reported in the
July Update, that AK was cited twice in June for
polluting the waters of two towns in Ohio and
Pennsylvania. The company was ordered by the
EPA to supply and pay for supplementary drinking water for an entire town after it found that nitrate waste from AK’s Butler steel mill, dumped
into a local river, had permeated the town’s water
supply. The waste dumping has resulted in a nitrate level 10 times above the national standard
which could cause serious illness and death in infants under six months of age. The EPA order
carried a penalty of $15,000 a day for noncompliance. AK is appealing the order.
In another legal action, the U.S. Justice Department also filed a lawsuit in June charging AK
with polluting the air and water at its Middletown,
Ohio, plant for seven years by repeatedly dumping pollutants, including heavy metals, nitrogen
ammonia, cyanide, and PCBs, into a local river.
The Justice Department acted after investigations
by the U.S. EPA and the Ohio attorney general’s
office. A spokesperson for the state attorney
general’s office also announced its intention to
file a lawsuit on behalf of the state EPA. The
federal suit is seeking the maximum penalties of
$25,000 a day for each day of violation before
January 31, 1997 and $27,500 for each day
since. The state suit will reportedly ask for fines
of $25,000 a day for clean air violations and
$10,000 a day for clean water and hazardous
waste violations.
AK is currently involved in a bitter labor dispute
with USWA at its Mansfield, Ohio, plant after it
locked out the workers there more than a year
ago. The “corporate citizenship” citation is also
paradoxical in light of the comment by an AK
spokesman earlier this year on the fact that the
company’s action has been deeply resented by
the Mansfield community. “I see no evidence anyone is jumping on the AK bandwagon saying,
‘You’re doing the right thing,” he said, but the
company is responsible to its stockholders, not to
the community’s feelings. And when 10 members
of Ohio’s Congressional delegation sought a
meeting with Wardrop, to discuss the situation
they were turned down. The lawmakers then
"branded AK’s conduct “an embarrassment to the
state of Ohio and harmful to both the company
and the city of Mansfield.”
was not guilty of unfair labor practices in its lockout of the Mansfield workers, declaring the lockout a “legitimate economic weapon.” It also dismissed a USWA charge that the company had
unlawfully engaged in surveillance of union members and of the union hall in Mansfield, holding
that AK’s concerns about its security justified its
actions. The union promptly announced that it
would appeal the decision with the NLRB general
counsel in Washington. The decision did hold
that if a settlement was not reached with the union, the company should be held in violation of
the National Labor Relations Act by trying to
pressure employees into accepting its contract
last August when it prematurely distributed a version of it to union members.
All of this AK-USWA conflict did not prevent the
company and USWA Local 1865 at the Ashland
plant from reaching a tentative agreement on a
new five-year pact containing a $2-an-hour wage
increase over the life of the contract (AMM 7/12,
7/18, 8/3, 9/4; USWA Local 169 Strike Bulletins: Our Struggle
for Justice 8/2, 8/17; Yahoo Finance Newswire 8/1).
Rouge & UAW Sign Pact: After rejecting a contract negotiated by their leaders in July, members
of UAW Local 600 approved a new four-year
agreement with Rouge Steel a month later. The
new contract includes a 3-cent-an-hour base pay
increase in each of its four years in addition to inflation pay raises tied to the Consumer Price Index. It also includes a $1,000 lump-sum payment
to all workers completing their 90-day probationary periods, and an additional $100 lump-sum
payment to all workers, including those still on
probation. There is also a lump-sum payment for
retirees and their surviving spouses and a pension increase of $4-a-month for every year of service for all future retirees. It also adds several
health care benefits for employees. The contract,
by avoiding a possible strike, was particularly important for Rouge, still recovering from serious financial problems caused by the fatal explosion
and fire at its plant last February (AMM 7/12, 8/14).
Rocky Mountain Hit with Half-a-Million in
OSHA Fines: Citing 107 violations of health and
workplace standards, OSHA has proposed penalties against Rocky Mountain Steel to the tune of
$487,000. The violations include 22 repeat citations after a comprehensive inspection of the
company’s Pueblo, Colo., mill following the death
of a worker there in February. It was the second
accident-related death at the plant in a year. Assistant U.S. Secretary of Labor Charles N. Jeffress declared in Washington in August that even
after being repeatedly cited for violations, the
company “has continued to disregard employee
NLRB Hands Down AK Decision: In another
AK development, an NLRB ruling said that AK
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Steel Industry Update/149
safety.” Since 1972, he said, 31 out of 42 inspections had resulted in citations. Just three years
ago, the mill was fined $1.1 million by OSHA -- a
sum later negotiated down to $400,000 -- and
$111,500 in penalties. The OSHA decision was
welcomed by USWA, which has been involved in
a labor dispute with the steelmaker since Rocky
Mountain’s parent company, Oregon Steel, in violation of current labor law, refused to rehire workers that had struck the plant three years ago.
In a development related to the labor dispute,
both sides claimed a victory in a recent NLRB ruling that found USWA guilty of about 80 violations,
but the Board refused to impose any sanctions or
fines, or command the union to apologize, as the
company had sought. The judge also rejected
Oregon Steel’s demand that the union be decertified and the union noted that the NLRB had found
the company guilty of “massive violations of federal labor law” making it liable for restitution of
back pay that could come to as much as $120
million (AMM 8/10, 8/24; Oregon Steel Press Release 8/8).
not only costs less to set up and run but provides
a melt with substantially reduced residuals.
However, the liquid pig iron works has been
plagued by problems almost from the time it
opened in the spring of 1999. After operating
successfully for about five weeks, it was forced to
shut down. The whole highly advanced technological process came grinding to a halt when a refractory break-out occurred in the submerged-arc
furnace. The company acknowledged at the time
that the breakout was caused by the use of the
wrong type of brick lining in the of the submerged-arc furnace. It reopened shortly afterward, but problems still persisted. The plant will
now undergo equipment retrofits and is not expected to resume production until the end of next
year (AMM 7/20).
WORTHY OF NOTE
Guaranteed Loans Go to Four U.S. Mills:
Wheeling-Pittsburgh, Northwestern Steel & Wire,
Geneva Steel, and GS Technologies have been
approved for $365 million in loan guarantees by
the U.S. Government. The loans were guaranteed under the authority of the 1999 Emergency
Steel Loan Guarantee Act, passed by Congress
last year to help steel companies in the wake of
the foreign dumping crisis. As approved by the
Emergency Steel Loan Guarantee Board, Northwestern got $170 million, Geneva received $110
million, GS was approved for $50 million, and
Wheeling-Pitt received $35 million. Other applications still being considered are those from
Weirton, Gulf States, and Acme Steel. For Geneva and Acme, the loan will help the companies,
now in Chapter 11 bankruptcy, to become solvent
again. Northwestern will use the loan to fund
some major projects, like the construction of a
new structural mill. Citicorp USA is the lending
institution for Wheeling-Pitt, Geneva and GS
Technologies, while Bankers Trust will fund the
Northwestern loan (AMM 7/5).
RAW MATERIALS
Whither the Scrap Market?: After a summer of
mixed signals and contradictory predictions, industry analysts could only express puzzlement at
the direction of the scrap market and a reluctance
to make any predictions for the future. The end of
July saw a very slight upturn in the auto bundles
market as prices inched up a little over $1 to
$108.50/metric ton. In the first six months of this
year, bundles lost nearly 30% of their value as
they tumbled from a high of over $150 last December. But no one was willing to say if he
thought it was the beginning of a real turnaround
or just a plateau before scrap went into a new
tailspin. At the beginning of the summer, falling
ferrous scrap prices of $2 to $5/gross ton in many
of the major scrap markets had produced a
gloomy outlook among observers. But two weeks
later, some were expressing cautious optimism
that ferrous scrap exports, suffering from an extreme case of the blahs for months, may show
some upward swing. They pointed to the slowing
pace of scrap shipments from Russia and
Ukraine into Asian steel markets as a good sign
for future U.S. exports. However, as of the beginning of this month, everyone seemed to agree
that the jury was still out (AMM 7/12, 7/25, 7/31, 8/7).
Acominas to Spend $133 Million: Acos de Minas Gerais (Acominas), Brazil’s biggest bloom
and billet maker, launched a program of new investments in July to upgrade quality and increase
output in its plant in Minas Gerais state. The investment program will total $133 million. The improvements, which are expected to raise its steel
production from 2.5 million to 2.7 million metric
tons, include a one-million-metric-ton-a-year continuous billet caster (already in operation), a ladle
furnace, installation of a pulverized coal injection
system in one blast furnace and the upgrading of
its sinter feed plant.
Acominas plans to use $63 million of the
SDI Suspends Pig Iron Facility: Steel Dynamics, over the summer, suspended the production
of liquid pig iron at its Butler, Ind. mill. The pig
iron facility was operated by its subsidiary, Iron
Dynamics. Liquid pig iron, used in the plant melt
shop, is a substitute for scrap, and the process
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Steel Industry Update/149
Table 4: Selected Canadian Steel Industry Data, May & Year-To-Date
(thousand tons)
2000
Mill Shipments ............................. 1,458
Exports ......................................... 552
Imports ......................................... 839
Apparent Steel Supply ................. 1,745
Imports as % of Supply .............. 48.1
Month of May
1999
1,363
457
528
1,434
36.8
% Chg
2000
7.0%
20.8%
58.9%
21.7%
7,139
2,496
3,831
8,474
45.2
Year-to-Date
1999
6,887
2,239
2,288
6,937
33.0
% Chg
3.7%
11.5%
67.4%
22.2%
Source: CSPA 8/25/00
amount to renovate a sections rolling mill it
bought from Germany in 1988 but never installed
for lack of financing. The mill, with a capacity to
turn out 450,000 metric tons of 6-inch by 24-inch
sections a year, should be installed in the next
year or two. The $133 million investments actually are only the first phase of a $500 million expansion that Acominas eventually expects will
produce 3.5 million tons of steel annually. The
company, which now exports about 60% of its
production to Southeast Asia and North America,
plans to increase shipments to these markets after its expansion.
In a related development, the Gerdau Group,
Brazil’s largest steel manufacturer and owner of
36.6% of Acominas stock, is currently negotiating
to buy 17.2% more. The acquisition would give it
a better than 50% stake in Acominas and would
make it one of the world’s largest and most profitable steel companies. The purchase price of the
stock was said to range between $150 million
and $250 million (AMM 7/7, 7/11, 8/9).
of 749-223. Company officials had said, at that
point, that obtaining a positive vote on the labor
agreement was the key as to whether it would
continue operations. However, the die seemed to
be cast a month earlier, in July, when Gulf States
was not on the list of those approved for loans by
the Emergency Steel Loan Guarantee Board. It
had applied for a credit of $130 million, with 85%
guaranteed by the federal government, and had
let it be known that it would shut down if it did not
receive the loan (AMM 7/11, 8/2, 8/9, 8/11).
Kawasaki to Build Rail Cars in Nebraska: Kawasaki Heavy Industries revealed plans in late
August that it would build a plant to manufacture
railway cars in Lincoln, Nebraska. The plant
would be built on the site of its subsidiary, Kawasaki Motor Manufacturing, which now produces
motorcycles, jet skis, parts for construction machinery and industrial robots. Its present railway
car manufacturing is done at its Kobe, Japan, facility. The company said it was investing about 5
billion yen ($47 million) to build the Lincoln mill,
which would produce 200 rail cars annually, starting in April 2002.
Several weeks before this announcement, it
was also revealed that Kawasaki is currently in
talks with France’s giant steelmaker, Usinor, in an
effort to get a global cooperation agreement to
supply steel sheet to automakers. Earlier reports
in the European press speculated that Germany’s
Thyssen Krupp Steel may have floated merger offers to Usinor but high officials at Thyssen dismissed the reports. Officials of both Thyssen
Krupp and Usinor acknowledged, however, that
talks had been held some months ago on the
possible formation of alliances in the cobalt and
nickel markets, but nothing further has been
made public. Thyssen Krupp now has a 40%
share of the European stainless market, prompting fears of the possible formation of a large European cartel.
Actually, of all the large basic industries, steel
is among the least heavily concentrated. Compared with the tire industry, for example, in which
the top five producers turn out 70% of production,
the auto industry where the top five make 57% of
Steel Union Blasts Gulf States Shutdown: In
the wake of the bankruptcy shutdown of Gulf
States Steel last month, the United Steelworkers
of America reacted strongly to a report that the
company’s bankruptcy filings included cuts to
health-care benefits, long-term disability payments, and the elimination of all benefits for the
surviving spouses of retirees. The proposals,
said USWA District 9 Director Homer Wilson,
“were not even part of the company’s negotiations with us.” He charged that Gulf States was
attempting to scapegoat the union for the company’s closing. "Gulf States executives,” he said,
“are trying to build a bankruptcy case on the
backs of the workers and their families, when our
members have already made significant sacrifices in contract negotiations to keep the company
from going under.” Management, he said, had
made no similar effort to reduce benefits for itself,
but rather had plans to pay its executives bonuses if the company had worked its way out of
bankruptcy.
Earlier, the union’s Local 2176 membership
had rejected a Gulf States contract offer by a vote
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Steel Industry Update/149
all cars, or aluminum in which the top five manufacture 44% of the world’s output, only 14% of all
raw steel is produced by the world’s top five
steelmakers (AMM 7/11, 8/25).
Family Health Center, will be developed and run
by CHD Meridian Healthcare of Nashville, Tenn.
It would minister to 45,000 patient visits a year
along with a full-service pharmacy. Construction
of a new center is now underway with the opening planned for January 1, 2001 (AMM 8/25).
Companies Join to Provide Better Health
Coverage: Three of the biggest steelmakers in
the country have combined -- no, not to fix prices
or drive out competition, but to provide better
health care for their employees. U.S. Steel, Bethlehem and National have formed an equal partnership to build a health center in Chesterton,
Pa., to provide health care for employees, retirees, and families of the three companies who live
in the vicinity. The new facility, called The Steel
NOTES ON STEEL TRACK EXHIBITS
Performance data is from monthly AISI sources. Spot Prices (except
OCTG) are from Purchasing Magazine and are FOB Midwest, with no
extras. Hot rolled sheet, 48 inch, temper rolled, ASTM 569; Cold
Rolled Sheet, 48 inch, AISI 366; HD Galvanized Sheet, 120 inch AISI
525, G90; Coiled Plate, A36, 1/2x96x240 inch; Cold Finished Bar,
SBQ 1018; Wide-Flange Beam, A36, W8, 18 lbs; Wire Rod, low carbon; Rebar, carbon, no. 6. OCTG spot prices are from Pipe Logix,
FOB Houston for J55 8REUE Seamless Tube.
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President, E&E Corporation
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Secretary Treasurer , United Steelworkers of America
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