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U.S. Steel will lay off 25 percent of its salaried workers

| Wednesday, April 6, 2016, 10:48 a.m.
Cindy Shegan Keeley | Tribune-Review
A U.S. Steel employee starts the cold mill process for a roll of sheet metal being finished at the Irvin Plant in West Mifflin.

U.S. Steel Corp. is laying off a quarter of its salaried workforce in North America as the embattled steel producer grapples with weak demand and low metal prices.

The company also is making undisclosed employee cuts at its steel mill in Slovakia.

The move Wednesday to shed about 750 nonunion, administrative jobs cast doubt on signals that the domestic steel industry is beginning to recover from a severe downturn last year in which U.S. Steel lost $1.5 billion.

The downsizing punctuates U.S. Steel's steady decline in recent decades as America's industrial might has faded. The company was one of the nation's largest employers, with more than 300,000 workers, in the years after World War II. With the layoffs announced Wednesday, the company will employ about 20,000 workers in North America. It was ranked last year as the 15th-largest steel producer in the world.

The company's shrinking footprint has been particularly pronounced since the 2008 financial crisis, when a severe global recession caused a steep drop in demand for steel. U.S. Steel rebounded briefly in 2010, but its fortunes have diminished since then as steel prices remained weak, imports increased and sales to the slumping oil and gas industry fell.

The company's steel shipments last year were 36 percent lower than in 2008; sales fell 51 percent in the same period; and it swung from a profit of $2.1 billion in 2008 to a loss of $1.6 billion last year.

“U.S. Steel is just trying to survive,” said John Tumazos, a metals industry analyst from New Jersey. “There are a number of indicators in the steel market that aren't very good.”

Demand from heavy equipment manufacturing and the construction industry is weak, adding to sluggish sales of pipe to oil and gas drillers. Cheap imports from China and elsewhere have contributed to stubbornly low prices. The average price for benchmark hot-rolled coil was $437 a ton last year, down 48 percent compared with 2008 when the average price was $848 a ton.

Despite the headwinds, there had been signs this year that the domestic steel industry was headed toward recovery. The Commerce Department issued tariffs on steel imports from China and other foreign countries that the industry had accused of unfair trade. That led to several producers announcing price increases.

The Chinese government announced that it would reduce steelmaking capacity, giving American steel producers hope that a global glut of the metal would ease.

U.S. Steel's stock has nearly tripled since hitting a 52-week low of $6.15 a share in January. Shares closed Wednesday at $16.80, up 56 cents.

But the company's continued downsizing indicates executives don't believe the positive developments are strong enough to eliminate financial losses, said Andrew Lane, a Morningstar Inc. analyst in Chicago.

“I think management recognizes that they're not going to grow out of this downturn and they're using any tool at hand to reduce the cost structure and lower their break-even point,” Lane said.

CEO Mario Longhi warned of continued difficulty in 2016 during a January conference call with analysts, saying that the company was facing “significant headwinds and uncertainty.”

U.S. Steel has been cutting costs, streamlining operations and boosting efficiency under an initiative dubbed the Carnegie Way, which produced savings totaling $1.4 billion in the past two years.

Spokeswoman Sarah Cassella said the company's latest layoffs, which started Wednesday, are part of the Carnegie Way. The cuts won't affect union workers.

Cassella declined to say how many workers in Pittsburgh were affected.

“This is part of the ongoing adjustment to staff levels and operations due to challenging market conditions, including fluctuating oil prices, reduced rig counts, depressed steel prices and unfairly traded imports,” she said.

This latest downsizing follows several moves this year to reduce U.S. Steel's nonunion head count. In February, the company laid off 75 accounting workers. The company eliminated 120 salaried positions from its Tubular operations in March.

In November, the company dropped a plan to lease headquarters space Downtown at a development on the former Mellon Arena site.

As of the end of last year, the company had 21,000 workers in North America, including about 3,000 nonunion workers.

Union workers have been hit, too, as the company cut production during the past 12 months. In March, U.S. Steel warned 650 hourly workers at tubular plants in Texas and Alabama that they could be laid off when those facilities are temporarily idled. The company shut down a blast furnace at Fairfield Works near Birmingham, Ala., last year and laid off 1,100 workers. And it shelved a $230 million plan to build an electric arc furnace at Fairfield, a project that analysts predicted would help make the company more efficient and competitive.

U.S. Steel will restructure its steel mill in Slovakia by cutting an undisclosed number of hourly and salaried workers, Cassella said.

“The total number of employees impacted will depend on operational and business needs,” said Cassella, who declined to provide more detail on the restructuring.

The company employed 12,200 in Slovakia as of the end of last year.

Other steel companies are having trouble with European mills. India's Tata Steel last month said it will sell its money-losing United Kingdom plants, a move that is expected to result in significant job losses.

Alex Nixon is a Tribune-Review staff writer. Reach him at 412-320-7928 or anixon@tribweb.com.

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