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U.S. Steel Idles Two Tubular Pipe Plants, Lays Off Up to 770

U.S. Steel Corp. is laying off up to 770 people and idling plants in Texas and Alabama that make tubular pipe products for the energy industry.

The second largest domestic steel producer plans to shutter Lone Star Tubular Operations in East Texas on Friday (March 25) and lay off up to 450 jobs. Another 200 people will lose their jobs at the Fairfield, AL, tubular manufacturing site when it is closed in April.

Another 120 salaried employees are losing their jobs in the tubular unit because of low production levels. Layoffs occurred at Fairfield and Lone Star, as well as in Lorain, OH, and in Houston.

The tubular division sales traditionally has been U.S. Steel’s most profitable business. However, the company posted an operating loss in 2015 of $179 million after sales declined by 68%.

Last December the company postponed building a 1.6 million net ton electric arc furnace at its Fairfield Works in Birmingham, AL, because of “continued challenging market conditions in both the oil and gas and steel industries” (see Shale Daily, Dec. 22, 2015).

In January the company had indicated it would lay off some employees in Lorain after rival Republic Steel Inc. idled its Lorain rolling mill tubular facility and laid off 200 (see Shale Daily, Jan. 12).

U.S. Steel last year also idled an Illinois factory that made flat-rolled steel, citing adverse market conditions including cheap imports and lower oil prices. The company said at the time it had notified 2,080 workers at the Granite City plant about potential layoffs.

U.S. Steel’s sales in its tubular division, typically the most profitable, posted an operating loss of $179 million in 2015 as sales plunged by 68%.

The Federal Reserve Bank of Dallas in December estimated that close to 70,000 U.S. energy sector jobs had been lost since October 2014, a 14.5% decline year/year (see Shale Daily, Dec. 28, 2015).

The layoffs have continued into this year, with Halliburton Co. and Anadarko Petroleum Corp. alone cutting close to 6,000 more people since January (see Shale Daily, March 10; Feb. 25). Schlumberger Ltd. reduced its global workforce by another 10,000 in the final months of last year following big job reductions through 2015 (see Shale Daily, Jan. 22). Weatherford International plc expects to lay off another 6,000 by the end of June, bringing the total number of job losses globally at about 20,000 (see Shale Daily,Feb. 5).

Jefferies LLC has downgraded U.S. Steel and several other steel manufacturers citing seasonal restocking, slow demand and trade barriers.

Even though there is evidence the market was improving, “we fear momentum may run out of steam this summer,” analysts said. “Following a strong run of equity performance for U.S. steelmakers, valuations are increasingly hard to justify."

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