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Oil/Gas Downturn Continues Beating Up Appalachian Oilfield Suppliers

The downturn in oil and natural gas prices that has prompted the industry to cut back in the field continues to weigh on the Appalachian Basin's supply chain as a new wave of layoffs and plant closures is set to take effect in the coming months.

Last week, Canton, OH-based Republic Steel Inc. said it would temporarily idle its rolling mill in Lorain, about 30 miles west of Cleveland, where it makes pipe for oil and gas wells. The company said it would lay off 200 employees in the coming months. Republic cited a decline in oil and gas market activity that has cut into orders, leaving it "no other option" but to close the facility.

CEO Jaime Vigil said the company hopes to restart operations at the Lorain facility "in the near future." Most of the layoffs are scheduled to be completed by the end of this quarter.

Shortly after Republic made its announcement, Pittsburgh-based U.S. Steel Corp, one of the nation's largest producers, confirmed it would likely lay off workers at its own facility in Lorain, which makes similar tubular goods for the oil and gas industry. The company said "challenging market conditions, including oil prices, reduced rig counts, depressed steel prices and unfairly traded imports" had cut into demand. Local union officials said they've been informed that more than 200 employees could be let go in the coming weeks.

Republic announced layoffs in other business segments last year. U.S. Steel began laying off more than 1,000 workers a year ago at plants in the Northeast and Texas, including more than 600 in Lorain, citing the slump in commodity prices and a slowdown in oil and gas fields across the country (see Shale Daily, Jan. 6, 2015).

Meanwhile, Exterran Corp. sent a letter to Youngstown, OH, Mayor John McNally in December to say it would shutter its new $13 million facility in the city by the end of March. The closure, the letter said, would affect 68 employees. Exterran opened that facility in 2013, hailing it at a ceremony attended by local and state officials, including Ohio Gov. John Kasich, as an example of the shale boom's role in lifting the economy. The city turned over the site, where Exterran has been manufacturing oilfield equipment such as compressors.

Exterran said the facility could reopen again depending on market conditions but said "the employment terminations are expected to be permanent."

After cost-cutting measures and temporarily shutting down its operations last year at a core pipe-making facility in Youngstown, Vallourec Star LP laid off more workers there in October.

In recent years, the shale boom has helped to revitalize parts of the Rust Belt's beleaguered industrial sector. Investments poured in, giving new life to shuttered factories and old brownfields. In addition to Vallourec and Exterran, TMK IPSCO, Valerus, Industrial Piping Specialists and steelmakers, among others, all announced investments in the region.

But as producers and oilfield services firms throughout the basin have been announcing job cuts since oil first plunged in mid-2014, so too have their suppliers (see Shale DailyJune 19, 2015Feb. 4, 2015). TMK IPSCO said last year that it would lay off workers at its plants in Western Pennsylvania that make tubular steel for the industry.

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