TPT September 2015

Global Marketplace

For US Steel, with over $2 billion in pension liabilities and tens of thousands of blue-collar workers making between $50,000 and $150,000 a year, the stakes were high in the first contract bargained during a down market since the early 2000s. In this context, union leaders sensed that Nucor’s non-union shop was as much an attraction for Mr Longhi as its steelmaking methods. › Taking a closer look at Nucor, which assumed its current form in 1972, Mr Miller noted that its Alabama plant produces roughly the same amount of steel as US Steel, 2.4 million tons per year, but employs about one-third as many workers. “Managers and workers emphasise their unique brand of steelmaking,” he wrote. “Employees call one another teammates and talk up their competitiveness.” Expressing a company preference for “can-do, innovative guys”, plant manager Mike Lee told Mr Miller that “athletes or military” account for a high percentage of hires. With each batch of steel they make, workers get a scorecard assessing their performance. An incentive-based pay structure means that salaries range from over $100,000 to less than half that. The Nucor culture would seem to promote morale, with workers coming to the mill to clean or do research during downtime. Techniques developed during a shutdown in 2009 helped the company become more productive when the mill started pumping out steel again, said Mr Lee. In contrast, wrote Mr Miller, “There aren’t many mills more old- school than US Steel’s Alabama plant.” › Meanwhile, as construction of the new $230 million electric arc furnace goes forward at Birmingham, US Steel workers at mid-year were not yet fully trained in its operation. “We’re trying to find a facility with an EAF, but most of the EAF facilities are non-union so they’ll let company officials visit but not us,” union local president David Clark told the WSJ . “We do know our scrapyard is going to be 20 times the size it is now.” In the end “I think [Mr Longhi] is going to succeed,” said union trading coordinator Fred Gipson. “But a lot of us are going to suffer.” An unintended consequence of sanctions: cheap Russian exports of finished steel and scrap ‘wreak havoc’ in the American market “Over the past six months Russian scrap and finished steel products have flooded the US market thanks to the attraction of earning high-value dollars for a product with a rouble cost base.” On 2 June, Forbes contributor Tim Treadgold was pointing out an irony in the American and European economic measures taken against Russia after the Ukraine incursion: together with lower oil prices, due in part to higher US oil production, the sanctions that have shrunk the value of the Russian currency

Steel With its embrace of a scrap-based process, US Steel takes example of Nucor – but the minimill’s culture is something else altogether “If you can’t beat ’em, join ’em. The granddaddy of old- fashioned steel companies is now saying it needs more variable production.” The “granddaddy” invoked by Deutsche Bank analyst Jorge Beristain is US Steel; and the company it failed to beat and is now imitating, under the impetus of a global steel glut, is Nucor. Other steel industry observers consulted by the Wall Street Journal expressed similar views of the two companies – the only US-based steelmakers still among the top 50 steel producers worldwide. That list is now dominated by Chinese companies. (“Steel Firms in US Strive to Cope with Imports,” 17 June) In the opinion of the WSJ ’s Pittsburgh-based reporter John W Miller, the construction by US Steel of its first electric arc furnace in decades signals a major shift in American steelmaking. The company has begun dismantling the stable of iron-ore-reliant blast furnaces at its World War I-era mill in Fairfield, Alabama, near Birmingham, and will install a scrap- based process that allows for stopping and starting production when there is not enough demand to keep churning out steel. “Just over an hour’s drive away [from Fairfield], in Decatur,” Mr Miller wrote, “Nucor Corp has been turning old cars and refrigerators into fresh batches of steel for more than a decade, with two electric arc furnaces and a flexible, non- union workforce.” Those methods helped Nucor (Charlotte, North Carolina) overtake US Steel last year to become America’s biggest steelmaker by production capacity. Mario Longhi, the US Steel CEO, who took the job almost two years ago, admires the Nucor approach but thinks it can be improved upon. In building the new Birmingham furnace, he told the WSJ , “We want to be more flexible than Nucor.” But if it is to adapt any part of the Nucor model to its own purposes, the 114-year-old Pittsburgh company must first meet and overcome a major challenge. US Steel’s workers are unionised. Nucor’s are not. T he appeal of a non - union shop Writing in mid-June, when US Steel’s 2,100-strong work force was anxiously monitoring contract talks between the company and the United Steelworkers, Mr Miller pointed out why the union labour issue is central to any makeover. Some 2,500 US Steel workers were currently laid off. Nucor has an unofficial no-layoff policy. US Steel has lost money in five of the last six years. Nucor has been consistently profitable. The name Nucor, of course, instantly suggests scrap.

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S eptember 2015