By John W. Miller
PITTSBURGH-- U.S. Steel Corp. said it would temporarily close
plants in Texas and Pennsylvania and blamed illegally-priced
imports, raising the volume on trade disputes with China and South
Korea.
The steelmaker said Monday it would indefinitely idle plants in
Bellville, Texas, and McKeesport, Pa., that make steel pipe and
tube for the oil and gas industries, affecting 260 workers.
TMK Ipsco, which is among the largest U.S. producers of such
lucrative tubular steel, is considering similar production cutbacks
as well.
The U.S. Steel closures require 60 days advance notice under
federal law so are scheduled for early August. That is also when a
final decision is expected from U.S. trade officials on whether to
impose tariffs on steel from South Korea, whose steel exports to
the U.S. increased 73% in the first four months of this year from a
year earlier.
U.S. trade officials in February found in a preliminary decision
that South Korea wasn't "dumping" steel, that is, selling it at
unfair prices.
The U.S. steel industry since has ratcheted up pressure to
impose tariffs on steel it says is being subsidized by the South
Korean government and sold at a 10% to 20% discount.
The industry won tariffs on Chinese imports of similar products
in 2010. That ruling resurfaced recently, when the U.S. government
accused Chinese officials of hacking U.S. Steel and unions and
stealing information related to the trade case. Chinese officials
have denied the allegations and couldn't be reached for comment
Monday.
The stakes in the trade disputes are big. The global steel
industry is struggling with an estimated 500 million tons of
overcapacity. So the U.S. market for steel pipe and tube, buoyed by
drilling for shale gas, represents a rare opportunity.
The U.S. imported $4.7 billion in steel for the oil and gas
industries last year, weighing on prices. Prices for energy-related
steel fell 2.4% last month even though demand increased 22%,
according the OCTG Situation Report, which compiles data on the
industry.
Even though prices are weakening, tubular steel remains far more
profitable than hot-rolled coil, which is used in cars and
appliances. U.S. Steel earns $108.14 a ton for tubular steel and
$7.17 a ton for hot-rolled coil.
TMK Ipsco in April reduced hours at plants in Iowa, Arkansas and
Kentucky and idled a Kentucky mill, citing what it said were
unfairly priced imports. The company, a unit of Russia's OAO TMK,
employs 2,650 at 11 plants in the U.S.
Chief Executive David Mitch said recently that he might have to
cut production at plants that produce welded pipe. "Right now,
South Korea is selling pipe 10%-20% cheaper than us, and that's
endangering jobs at our plants," Mr. Mitch said.
He watched recently as a company furnace in Koppel, Pa., melted
shredded steel from cars, cans and other items to turn into steel
pipes to be used for drilling in Pennsylvania's Marcellus Shale.
The steel is a high-tech alloy, and every pipe is inspected by hand
by journeymen machinists. Mr. Mitch called it "one of the most
engineered steel products in the world."
His company and other U.S. steelmakers increased capacity in the
last five years is response to higher demand from energy companies
drilling for natural gas. Horizontal drilling, which has become
increasingly popular, requires more pipe than traditional vertical
drilling. Oil and gas companies use 3,000 tons of pipe per rig
today, up from 1,400 tons a decade ago, said TMK Chairman Piotr
Galitzine.
U.S. labor leaders are worried. Because of imports, "the
domestic steel industry has yet to see the promised and expected
benefits brought about by increased shale-oil-and-gas energy
production throughout America's industrial heartland," said United
Steelworkers President Leo Gerard.
Distributors, which buy tubes and pipe from mills to supply the
energy; industry, don't share the steel industry's alarm. "South
Korea makes as good or better a product as anything made in North
America," said Kevin Beckmann, president of Trident Steel Corp., a
St. Louis distributor with $250 million in sales last year. He said
the market for many types of pipe isn't oversupplied and that when
he called two producers this year to buy pipe, his calls weren't
returned.
U.S. Steel said it would continue to make pipe and tube at
plants in Texas, Ohio, Alabama and Arkansas, which employ about
2,900 employees. "We will continue to fight unfair trade by foreign
competitors who are creating a detrimental impact and threat to
middle-class-paying manufacturing jobs," CEO Mario Longhi said in a
prepared statement.
Write to John W. Miller at john.miller@wsj.com