TPT March 2009

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From the AmericaS
March 2009 92 ›
not,” he said. “We really haven’t said whether we will or we won’t
need money after that period.”
Ford Motor Co is in better shape than GM and Chrysler and did not
need an emergency infusion of federal cash. But the second-largest
US automaker, after GM, has asked for a multibillion-dollar backstop
in the event that North American auto sales continue to collapse.
Steel
Light order books mean production
curtailments at steel plants across the US
Economy measures announced by steel makers include the
following:
› Severstal North America Inc said 8 January that it would
continue the temporary ‘rolling’ layoffs, begun in December,
that affect operations in Wheeling, West Virginia; Warren, Ohio;
Sparrows Point, Maryland; and Dearborn, Michigan. The company
is a subsidiary of Russia’s OAO Severstal, which completed its
acquisition of the former Wheeling-Pittsburgh Steel from Esmark
Inc last summer, pledging a $250 million capital investment in US
operations including the strip mill at Wheeling.
› AK Steel Corp(West Chester, Ohio), which employs 6,000
company-wide, is laying off an undisclosed number of workers
at all plants and offices. Its network of mills includes the Middletown
Works and smaller plants in Mansfield, Coshocton, and Zanesville –
all in Ohio; Butler, Pennsylvania; and Ashland, in Kentucky.
AK Steel in November halted production and shipping at Mansfield,
and blast furnace, steel making, casting, and coating operations at
Ashland. Most of the suspended workers had not been called back
by early January. The company said in December that it would
impose a 5 per cent pay cut on salaried workers including its CEO
and other top executives. (Pittsburgh Business Times, 9 January).
› Roughly 1,600 workers have been laid off at US Steel’s Granite
City Works plant, in southern Illinois. The plant, which makes
hot rolled and coated sheet steel products, is one of five integrated
facilities that the Pittsburgh steel giant operates in the United States.
It has annual raw steel making capability of 2.6 million tons.
Russ Saltsgaver, president of the United Steelworkers local at
Granite City, told the Alton (Illinois) Telegraph on 10 January that
within days the plant, which had not been idled in its 130-year
history, would be run by a ghost crew of about 60 people. Relating
the plant’s troubles to those of customers in the tube and pipe
industry, the union representative said, “We need the price of gas
to increase so the oil companies will start putting in more pipelines
and doing exploratory drilling.”
Of related interest . . .
› US Steel Corp, on 7 January, said it had reduced production
at its plant in the eastern Slovakian town of Kosice following a
halt imposed on gas deliveries from Russia via Ukraine. It was not
disclosed how much production was cut at US Steel Kosice, which is
rated to produce 4.5 million metric tons of pig iron a year. A company
spokesman said, “[We] have adjusted our production in line with the
restrictions” imposed by the Slovakian government.
A brighter outlook for steel in the second half?
As President Barack Obama works out the details of his plan for
stimulating the weakest US economy in living memory, early
indications are that the greater part of the government outlay will
be in the form of spending on infrastructure – mass transit systems,
bridges, electric power grids – rather than tax breaks. If so, steel
companies would be substantially better positioned to benefit than
their counterparts in the domestic automobile industry.
Despite the drum-beat of bad news from the steel industry
(‘Production curtailments,’ see above), there are encouraging
signs here and there. The Wall Street Journal, in a recent article,
cited movement by steel producers around the world toward the
selective opening of mills as signaling revitalization. Neil Malkin,
an analyst-blogger for Zack’s Investment Research, endorses the
WSJ view and foresees upward momentum in iron ore and steel
prices as early as the second half of this year. (‘Signs steel may
have bottomed,’ 7 January).
If these expectations seem rosier than warranted by the stirrings of
a few steelmakers, a more compelling rescue model is suggested
by the Reuters headline ‘Steel companies may gain if buyers
restock inventories’. Stockists, having depleted their inventories to
supply construction customers, will likely increase their orders for
new steel as their own supplies shrink.
Bob Richard, an analyst with the equity research firm Longbow
Research (Independence, Ohio), told Reuters (7 January), “I think a
more timely catalyst is not necessarily the stimulus package. Service
centres have pared down their inventories to an unprecedented
level.”
› This is not to say that steel producers will not be trying their
luck in Washington. They will. To help revive steel demand, the
US industry is pressing the Obama administration on public works
plans that would reach $1 trillion over two years. And at least some
of the pressure will be couched in terms reminiscent of the George
W Bush era.
Daniel DiMicco, chairman and chief executive of Nucor, the largest
steel mini-mill operator in the country, told the New York Times that
the steel industry in the US was asking the incoming administration
to “deal with the worst economic slowdown in our lifetime through
a recovery program that has in every provision a ‘Buy American’
clause.”
› If the optimists are right, and steel picks up in second-half of
2009, the coal mining industry in the depressed Appalachian
region of the US stands to benefit. With metallurgical coal a vital
element in the making of steel, any increase in steel demand should
push coal prices higher.
Oil and gas
Plunging oil prices derail a Venezuelan
philanthropy in the United States
As Venezuela’s oil income falls, President Hugo Chávez has ended
a three-year-old program under which his country provided heating
oil to low-income Americans. Citgo Petroleum, the US refining unit
of the state oil company Petróleos de Venezuela SA (PDVSA),