U.S. Steel Industry Faces Headwinds, Steelmaker Warns Of 255 Job Cuts In Pine Bluff

The nation’s steel industry has come under increasing price pressure in the first quarter of fiscal 2015, which could create a backlash in the Arkansas Delta as the nation’s steel producers consider possibly laying off or furloughing workers.

Last week, U.S. Steel Corp. issued notices under the federal Worker Adjustment and Retraining Notification (WARN) Act that it may cut more than 1,400 jobs nationally, including 255 workers at Wheeling Machine Product plant in Pine Bluff, according to several news reports by Pennsylvania media outlets.

Nucor Corp., which operates three steel mills in Mississippi County, however, has continued its highly-admired corporate policy of not laying off employees during economic downturns because of lack of work.

By contrast, U.S. Steel has issued three WARN act notices in the first quarter of 2015, disclosing that more than 2,000 steel workers in Texas, Minnesota, Alabama, Arkansas and Ohio could be let go or furloughed over the next two months. Companywide, the nation’s largest steel producer has more than 35,000 employees.

Under the federal WARN act, employers with 100 or more employees must be given at least 60 days of notice of a mass layoff or plant closing in order to give workers and their families some transition time to adjust to the prospective loss of employment, seek other jobs, or enter a retraining program that will allow these workers to compete successfully to re-enter the job market.

U.S. Steel’s Pine Bluff plant, located at 5111 Industrial Drive South, manufactures steel couplings to connect casings and tubing for use in the oil and gas industry. Oil and gas companies – along with oilfield drilling and equipment companies that support one of the nation’s largest industrial sectors – are caught in the midst of a major economic downturn due to historically low crude oil and natural gas prices.

Besides the Pine Bluff steel tubing plant, U.S. Steel’s WARN act notice also said the Pennsylvania-based steel producer may make further cuts in its tubular division that is closely tied to the oil and gas industry, including included 404 management employees located in Houston and throughout U.S. Steel’s tubular facilities; 579 employees in Lone Star Tubular Operations; and 166 in Offshore Operations Houston.

But U.S. Steel is not the only steel producer to face economic headwinds over the last year. Nucor Steel Chairman and CEO John Ferriola and other U.S. steel industry executives went to Washington, D.C. in late March to testify before Congress about record levels of Chinese “dumping” of steel imports in the U.S. and international marketplace.

American Iron and Steel Institute (AISI), the steel industry’s lobbying arm, said recently that “the very high level of Chinese steel exports in 2014 and 2015 are of great concern” to the U.S. steel industry. AISI said China’s global exports reached a record level of 93.78 million metric tons of steel in 2014, a 51% increase over the previous year.

“Since 2000, over 5.6 million U.S. manufacturing jobs have been lost because of the lack of aggressive policies to promote manufacturing here in America. A concerted pro-manufacturing policy agenda is needed to reverse this troubling trend,” the AISI said in a policy statement.

To date, Nucor has not announced any major cuts, although company officials said in its first quarter conference call on Thursday current steel industry challenges are “significant,” citing cheap steel imports and declining energy prices. The nation’s second-largest steel producer has nearly 24,000 employees.

Company CFO Jim Frias told analysts when reviewing the company’s first quarter financial statements that the steel giant was in a strong position financially and operationally, despite the flood of cheap imports and declining sales. He said the company expects earnings to improve for the remainder of the year as steel prices rise and inventories become more balanced.

“Our focus is not survival, but growing stronger,” Frias said.

Still, during Nucor’s conference call, Frias noted that the hot roll sheet market was the weakest of all the steelmaker’s business segments in terms of production and shipments. He said shipments from the company’s hot roll steel mills, including sheet plants in Blytheville, Hickman and Armorel, fell 14% year-over-year due to an ”unprecedented level of imports flooding the market in late 20014 and early 2015.”

For the period ended March 31, Nucor profits fell 39% to $67.8 million, or 21 cents per share, compared to profits of $111 million, or 35 cents a year ago. Revenues also fell by 5.4% to $4.4 billion from $5.1 billion in the first quarter of 2014. Wall Street had expected the Charlotte, N.C.-based steelmaker to report first quarter earnings of 33 cents on revenue of $4.65 billion, according to Thomson Reuters.

Still, Ferriola told analysts that the company will continue to remain profitable and competitive, due to its low-cost operations, strong balance sheet and durable workforce.

“Nucor’s culture has always been defined by our willingness to tackle and overcome challenges. We don’t ignore problems,” the Nucor CEO said. “That’s not an effective strategy for success or even survival. When confronted by challenges, we grow stronger by fixing or mitigating the problem.”

U.S. Steel, the nation’s largest steelmaker, is expected to post its first quarter financial results on Wednesday, April 29.