After posting a $391 million loss in the first quarter, U.S. Steel plans to idle Blast Furnace #6 at Gary Works and temporarily lay off up to 6,500 workers nationwide in response to the coronavirus pandemic, including thousands of workers in Northwest Indiana.
The Pittsburgh-based steelmaker, one of the Calumet Region's biggest employers, made an 8-K filing with the U.S. Securities and Exchange Commission on Thursday, saying it planned to issue a Worker Adjustment and Retraining Notification that it would temporarily lay off up to 6,500 employees nationwide, or more than a third of its total workforce of 16,000 in North America. U.S. Steel said it currently expects the actual number of employees affected to be closer to 2,700.
U.S. Steel spokeswoman Meghan Cox said the company already filed 850 WARNs to workers at Lorain Tubular Operations in Ohio and Lonestar Tubular Operations in Texas, which are idled, and another 550 at its Minnesota Ore Operations, which is partially idled.
At its Gary Works steel mill and the Midwest Plant in Portage, U.S. Steel issued WARNs to about 3,800 employees who may be affected. The company expects only a few hundred workers may end up actually being laid off.
"This includes both represented and non-represented employees," Cox said. "The exact numbers of impacted employees have not yet been finalized. At this time, we anticipate they will be lower, approximately 10% of that number."
The company is making drastic cutbacks in response to the COVID-19 crisis that has shuttered auto plants and crippled oil companies — some of its biggest customers — across the nation.
"The company will temporarily idle #6 blast furnace at Gary Works and #1 blast furnace at Mon Valley Works, effective immediately," U.S. Steel said in the 8-K filing. "As a result of reduced blast furnace production, the corporation also will indefinitely idle iron ore production at Keetac after the completion of a planned outage in mid-May and has extended coking times at Clairton Works to align coke production with steel production.
"The corporation will also adjust production at its Minntac operations in line with the blast furnace idlings. Currently, in its North-America flat-rolled operations, the corporation plans to continue to operate blast furnace #14 at Gary Works, blast furnace #3 at Mon Valley Works and blast furnace 'B' at Granite City Works."
"Additionally, the corporation will indefinitely idle Lone Star Tubular Operations, including all heat-treat and finishing operations and support departments. The corporation is accelerating the previously announced indefinite idling of #1 and #2 electric resistance welded mills, to begin immediately," U.S. Steel said in the SEC filing. "These actions will result in a complete indefinite idling of the facility. The corporation will also indefinitely idle the Hughes Springs coupling production facility in Texas."
The troubled steelmaker, which has been reeling as the COVID-19 crisis caused demand for steel to crater, posted a loss of $391 million, or $2.30 per share, in the first quarter. That compares to a profit of $54 or 31 cents per share in the first quarter of 2019.
“Market activity was beginning to improve prior to the emergence of COVID-19 and the sudden changes in global oil and gas markets," U.S. Steel President and CEO David Burritt said. "As the impacts from these unprecedented market dynamics became apparent, we adjusted our footprint, fortified our balance sheet and aggressively cut costs. While these decisive actions helped us exceed our first-quarter guidance, we have quickly turned our attention to the second quarter to not only ensure the safety and health of our employees but also to preserve cash and liquidity.”
To raise cash in the crisis, U.S. Steel granted Stelco Inc. an option to purchase a 25% stake in its Minntac iron ore mine for $100 million, which it could acquire for a price of $600 million before 2027. The temporarily idled mine in northern Minnesota's Iron Range sends iron ore via lake freighter to the Gary Works steel mill in Northwest Indiana.
"Today's announcement demonstrates the continued execution of our strategy and delivers $100 million of incremental cash to the balance sheet in 2020," Burritt said. "We are pleased that this transaction validates the competitive advantage of our iron ore mining assets and gives us a path to an additional $500 million of capital to support continued execution of our strategy."
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