The “temporary” closing of United States Steel’s Granite City Works, announced Wednesday, sent a wave of worry through 2,000 soon-to-be-laid-off steelworkers and a city that depends on its mill.
“It’s been the heart and soul of this community,” Granite City schools Superintendent Jim Greenwald said.
The move comes as tumbling oil prices hit the country’s second-largest steelmaker hard. Much of Granite City’s steel is used to make pipe for the oil industry at U.S. Steel’s Lone Star Tubular plant in Texas, and demand for drilling pipe is falling fast.
U.S. Steel, and the United Steelworkers union, also blamed imported steel, which they claim is being “dumped” unfairly on the American market. The steelmaker has been hit by a surge in Chinese imports.
The company issued layoff notices to 2,080 workers at the sprawling Granite City plant. Company spokesman Courtney Boone said the layoffs were effective May 28 and the shutdown is considered temporary. The duration of the layoffs is unknown. “It’s based upon market conditions,” she said.
Granite City Mayor Ed Hagnauer learned of the closing in an early-morning call from plant managers. He said the company held out hope that layoffs might not happen. “Anytime within 60 days things could change,” Hagnauer said. “It depends on their orders.”
The United Steelworkers union also noted that layoffs might be canceled.
“Hopefully the market can recover,” preserving jobs, said USW International Vice President Tom Conway. The 60-day notice given Wednesday is required by law when mass layoffs are expected.
However, Morningstar equity analyst Andrew Lane said steel imports to the U.S. rose 38 percent in 2014 versus 2013. He doesn’t expect imports to moderate until the second half of 2015, making a reversal of the Granite City idling unlikely before its effective date in late May.
“The combination of low oil prices and rising import volumes constitute significant headwinds that lead to adverse market conditions,” Lane said. “The first half of 2015 is likely to signify the low point for the U.S. steelmaking space.”
The country’s domestic steelmaking capacity utilization is currently about 70 percent, the lowest level in several years, Lane said. Basically that means steel mills are producing only 70 percent of what they could make.
“We expect a more gradual recovery for steel prices and oil prices from current levels,” he said.
At the plant, workers were optimistic that they will return to steel making in Granite City, even if they must go without paychecks for a while. They noted that U.S. Steel is installing a caster in the plant, a major project that is expected to be completed in June.
“They’re not wasting money on that new caster,” said worker Mark Papp of Granite City, who sees it as a sign that the plant has a future. A caster shapes steel into slabs.
Still, the news cast gloom around Granite City.
“These are great, family-supporting jobs,” said Doug May, 60, of Collinsville, a trustee at Steelworker Local 1899 and a crane operator at the plant. “With it being one of the biggest employers in the Metro East, I think it will have a big impact throughout the St. Louis region.”
“I pray every day that I don’t get laid off,” said Mark Lotts, 58, of north St. Louis County as he entered the mill. “It would be tough. I have grandkids, and I try to provide for them.”
The mill is Granite City’s largest employer. It is also an employer of employers.
“There are several other businesses tied to the steel industry,” Hagnauer said. Those include trucking firms and businesses that help maintain the plant. The closing will have a “domino effect” reaching beyond the laid-off workers, he said.
The Granite City mill was idled for six months beginning in December 2008 — the only other time it was completely idled in more than a century in operation, said May, a 42-year mill employee.
During the 2008 shutdown, the city found that 39 percent of the plant’s workers lived in the Granite City area.
“We have food banks that we need to pay attention to. The last time, there was a 10-fold increase in people in line,” the mayor said.
Business owners around the mill are worried. At Jim’s Pawn and Jewelry, sales people expect more business on the pawn side, but perhaps lower jewelry sales.
“It’s more bad than good,” said owner Jim Hudson.
Behind the pawn counter, Murle Lutes remembered the last big mill shutdown. “We did see people coming in to pawn who had never done it before. They’d never been that low. They were concerned that someone would see them,” he said.
The retail businesses that suffered most in 2008 were those who served people commuting to and from Granite City, such as the QuikTrip and Walmart. Laid-off workers who live in town became “very parochial” in their shopping, which cushioned the impact on other area retailers, he said.
The layoffs come at a sensitive time for the Granite City School District, which is seeking a tax increase in the April 7 balloting. Greenwald, the school superintendent, thinks the prospects of more joblessness could influence the vote. He said the increase was necessary to avoid cuts in district programs.
Granite City workers had already been feeling the effects of tumbling oil prices and imports. Worker say hours have been reduced, with some workers on 32-hour weeks.
In late January, U.S. Steel announced it was temporarily shutting one of two blast furnaces at its Granite City Works as it replaces the caster. Earlier that same month, the company said it would permanently close its coke-making operation in Granite City, cutting 176 jobs.
The irony of lower oil prices — a boon for most consumers — costing mill jobs isn’t lost on its workers.
“It feels good when you pull up to the gas pump, but it’s not good for everybody,” said Paul Chester of Granite City as he left the plant where he’s worked for 28 years.
The price of Brent crude, the international benchmark, has dropped 50 percent in the past nine months.
The steelworkers union directed its ire at “a surge of unfairly traded, record-level imports.”
“These imports are landing at a time when the energy pipe and tubular business in oil and gas exploration has been cut in half and crude oil prices remain depressed,” Steelworker Vice President Conway complained in an email.
The steelmaker had announced in early January that it would idle two pipe plants and lay off more than 750 employees because of reduced investments by energy companies.
U.S. Steel will continue to make steel in mills in Alabama, Indiana, Michigan and Pennsylvania.