U.S. Steel, Koreans Plan Joint Venture : Deal to Save Jobs at Pittsburg; May Bring Layoffs at Utah Mill
U.S. Steel said Monday that it will form a joint venture with a South Korean steel company to modernize its Pittsburg, Calif., steel plant, which will help save 1,100 jobs in California but jeopardize 2,400 others in Utah.
The nation’s largest steel producer and Pohang Iron & Steel of South Korea will jointly own and operate the finishing mill, located in the east San Francisco Bay area. The companies said they will invest more than $300 million over the next four years to modernize and expand the facility, which currently employs 1,100. The plant, which produces a variety of sheet steel products, will convert to processing semi-finished steel slabs imported from Korea.
Foreign Competition Cited
The Northern California plant thus would become the second in the state to convert to processing imported steel. California Steel, a private Long Beach-based company, currently operates the former Kaiser Steel plant in Fontana as a rolling mill, using steel slabs imported from Brazil.
Domestic steelmakers have long complained that full-scale steel production is no longer economical at West Coast plants because of cheaper foreign competition, particularly from Japan, Brazil and Korea.
U.S. Steel acknowledged that its new Korean partnership at the Pittsburg mill will result in “a significant reduction” by 1990 at the company’s Geneva, Utah, steelmaking operation, which currently ships two-thirds of its output of semi-finished steel slabs to the Pittsburg plant.
Rumors have circulated for months that U.S. Steel was negotiating with Pohang, considered one of the world’s lowest-cost steel producers.
“U.S. Steel’s new partnership with one of the world’s most modern steel producers upholds our long-term commitment to serve Western customers with products of the highest quality at a cost that is competitive with all other producers, foreign or domestic,” U.S. Steel Chairman David M. Roderick said in a statement.
Industry observers say the South Korean deal probably sounds the death knell for the Utah facility, which currently employs 2,400. “This program probably saves the Pittsburg mill, although it sacrifices Utah,” said Charles Bradford, an industry analyst at the Merrill Lynch investment firm in New York.
If the Reagan Administration’s current program of limits on imported steel expires as scheduled in October, 1989, Pohang will become the primary supplier of steel for finishing at the California plant. The Administration negotiated a series of restraints on imports last year that were designed to help the domestic steel industry recover from its worst slump in 50 years.
Utah Plant’s Future in Doubt
U.S. Steel said the Utah plant’s future beyond 1989 will be determined by “then-existing market conditions.”
Related operations include the Somerset Coal Mine near Delta, Colo., and the Keigley Quarry near Payson, Utah, according to the company.
Wayne Holland, a subdistrict director for the United Steelworkers in Utah, said he is not optimistic after meeting with U.S. Steel officials Monday in Provo. “I had a conversation with the company. . . . They haven’t told us for sure that they will close it, but in my opinion the conversation wasn’t of the type for optimism.” His union represents 2,000 Geneva plant workers.
U.S. Steel has long wanted to buy imported steel to process in the United States. Two and a half years ago, the company announced that it would import semi-finished steel from British Steel to be finished at its Fairless, Pa., mill near Philadelphia.
‘Caused Political Stink’
Analyst Bradford said: “That caused a huge political stink,” and the United Steelworkers waged a media campaign that caused U.S. Steel to eventually drop the British Steel proposal.
“Geneva has the same kind of old furnaces that Fairless has,” Bradford said. “These can’t be used indefinitely because the quality of steel will not be acceptable in a few years. In order to keep the plants, U.S. Steel would have to spend more than $1 billion on each (plant), which is not justified because there would be no return on that kind of investment.”
The two plants are among U.S. Steel’s lowest cost and most profitable operations but they are outmoded. The latest steelmaking technology involves continuous casting machines which eliminate a number of steps to steelmaking, saves energy, but most importantly improves quality. The South Koreans have such a new steel mill scheduled to begin production in 1989.
Separately, United Steelworkers President Lynn Williams, in Chicago for a union meeting, said he was “concerned” about the U.S. Steel-Pohang deal because “it represents another move . . . in the disintegration of industry in America and the establishment of American dependence on offshore facilities for the most basic product in an industrial economy.”
