Tube City Almanac

December 03, 2012

Natural Gas Slump Hits City Plant Hard

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Recent TV commercials from a natural gas lobbying group have played up the benefit of increased drilling for U.S. Steel's pipe mill in Lorain, Ohio --- a sister plant to the electric-resistance weld mill in McKeesport.

But a nationwide glut of natural gas has caused drilling projects to slow down. Now, less than a month before Christmas, that appears to have taken a toll on workers at U.S. Steel's McKeesport Tubular Operations plant.

On Friday, the company announced that 142 people at the ERW mill in the First Ward will be laid off due to decreased demand for seamless steel pipe.

A U.S. Steel spokeswoman told the Daily News' Eric Slagle the company could not speculate on the duration of the layoffs. Workers at the plant are represented by the United Steelworkers union.

A story in the Post-Gazette by Len Boselovic noted that "competitive pressure from imports" also has depressed the market for steel pipe.

. . .

About 95 workers will remain working in McKeesport, the newspapers reported. McKeesport Tubular Operations has a capacity of 315,000 tons of steel pipe annually, according to the Post-Gazette.

The plant is the last remaining vestige of U.S. Steel's National Works, which once employed 7,000 to 10,000 people in pipe mills that spanned most of the city's Monongahela River shoreline between the Youghiogheny River and the McKeesport-Duquesne Bridge.

In 1987, National Works closed down, but the ERW mill re-opened one year later under the management of a new company, Camp-Hill Corp., which was founded by former U.S. Steel executives. U.S. Steel took over operation of the mill from Camp-Hill on May 2011.

. . .

A global battle over steel pipe is currently being fought among U.S., European and Japanese steel companies with low-wage producers in China, South Korea, Malaysia and Taiwan. Several countries have accused southeast Asian steel producers of "dumping" pipe onto their markets at below cost in order to capture the market from their domestic manufacturers.

The U.S. in 2009 imposed punitive tariffs of up to 99 percent on steel pipe imported from China. Australia and Mexico recently opened their own investigations into pipe exports from China and other countries. Mexican officials claim that Chinese pipe is being sold in their country at half the price of locally made pipe.

The Chinese government has made its own accusations that companies in the European Union and Japan are dumping high-quality stainless-steel pipes into their country below cost.

. . .

But U.S. Steel and other pipe manufacturers also have benefited from a boom in natural gas production spurred by exploration into the layers of "Marcellus shale" deep under Pennsylvania and other northeastern states.

That boom appears to be going bust, at least temporarily. The combination of a warm winter and new wells coming into production has caused natural gas prices to drop to a 10-year low this year, according to Reuters, and analysts say the market will be "flooded" for years to come.

A report in the Philadelphia Inquirer in October noted that drilling activity in Pennsylvania was down 29 percent from the previous year, and new wells drilled in the first quarter of 2012 was down 18 percent.

. . .

(Conflict-of-Interest Note: The writer is a U.S. Steel stockholder.)

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Feedback on “Natural Gas Slump Hits City Plant Hard”

Congressman Doyle needs to take action in the House of Representatives regarding imported steel..I recall this issue has been a major problem over the years yet we continue to give our industries away to China and other countries….most likely we taught them how to do it right and paid them handsomely to build new, modern plants while our National Tube Works rusted out …someone smarter than this old salt tell me how this was a good thing? Mr. Perot railed about “that sucking sound” of our jobs going down the “TUBES” (no pun) whenever NAFTA was approved by OUR legislators.

Come on Mike Doyle, take a stand against imported steel.
Donn Nemchick - December 03, 2012

I emailed Cong. Mike Doyle and asked him to sponsor legislation to curb steel imports —- he recently won another term because we Mon Valley voters are very loyal.. this is his “back yard” and I have yet to hear his comments on the layoff — I urge all of the august readers to this site to do the same — he must work for us or next term he is out the door!
Donn Nemchick - December 03, 2012

Not really a comment for the article, but rather to the way it was noted at the end:

“(Conflict-of-Interest Note: The writer is a U.S. Steel stockholder.)”

I felt this article was written in a very neutral manner and the disclaimer was probably not necessary. But glad to see that some folks still want to be neutral.

I am impressed with that level of integrity.

Wish the other news “sources” (and other authorities on our area)had that level of consciousness.

Kudos to you!
Shadango - December 03, 2012

Shadango: It’s also probably not necessary because I think I own like four shares. :D But thanks.
Webmaster - December 03, 2012

So, on to my comment about the issue in the article.

While I think it is a shame that Chinese-everything is making it very difficult for American companies to make it these days, why are we surprised this particular instance has happened?

US Steel CERTAINLY should have seen this coming….they were crying about “unfair steel dumping” back in the 70s and 80s when our steel industry died off.

They have had 30 years to reform and prepare for this.

Truth #1 -The American worker (especially unionized ones) insist on earning top dollar for “a fair day’s work”. I knew a guy who bragged about his US Steel job. He sits in a booth all day at the mill and gets up every 15-2o minutes or so, walks down to the steel rolls and marks them then goes back to his air conditioned booth. With some OT, he pulls down $80k a year. And that was about 10 years ago. “Fair pay for a fair day’s work”? Ok.

EVERY company, whether US based or Chinese based, is looking for maximum profits…that’s why one goes into business to begin with. There will ALWAYS be SOMEONE, SOMEWHERE willing to work harder and cheaper and the SMART companies will ALWAYS take advantage of that.

Truth #2 – and the more poignant fact – The American consumer wants everything dirt cheap. Walmart keeps making record profits NOT because of its wonderful store decor but because most of the products they sell are at rock bottom prices. How do you think that is made possible? CHEAPER LABOR and MATERIALS making the products.

The American worker mindset: Workers at company A want to earn top dollar for their work, saying that they deserve high wages for making quality products….but then want to buy products from every OTHER company for dirt cheap.

We are all guilty of it. But how can anyone believe that can POSSIBLY work?

Crying over cheap Chinese “whatever” will not stop it. It is inevitable as long as both of these truths are held to.

You cannot look only at the lowest bidders “stealing” business.

You have to look at both the industry leaders here in our country BUYING those cheap Chinese (or Mexican or whatever) products and the CONSUMERS insisting on the cheapest cost to them as possible.

As far as “being loyal” to party that has run the Mon Valley for decades….take a long look around. How far has that loyalty gotten us? Can you say that we are better off today than back in the 70s by keeping them in power?
Shadango - December 04, 2012

To Shadango,
I don’t know where your hearing this information from but a lot of these employees that work for US Steel do not sit around and make 80,000 a year unless your a salary man or working a lot of overtime. Down mckeesport a lot of these workers bust their balls for 12 hours a day 5 to 7 days a week for less pay than they deserve. These workers also have. Terrible contract that they voted “NO” to and the union overrided them on their votes. So please don’t try to give the employees a bad rep when you have never been in their shoes.
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