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U.S. Steel plant in Ontario (Fred Lum)
U.S. Steel plant in Ontario (Fred Lum)

U.S. Steel shutting Hamilton mill Add to ...

United States Steel Corp., locked in a legal battle with the federal government, facing potential labour strife, and battered by a continuing industry-wide slump, is temporarily ceasing operations at its Hamilton facility.

Trevor Harris, a U.S. Steel Canada spokesman, said the shutdown of the blast furnace - a Hamilton landmark for generations - will not result in layoffs; workers will be assigned to other tasks. There are about 900 workers left at the mill, compared with about 1,700 when the Pittsburgh-based giant took over Stelco Inc. in 2007. The company plans to cease operations indefinitely as of Monday.

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The latest move comes as North American steel makers struggle to get their mills running at full capacity. While the industry has rebounded from the worst of the recession, capacity levels are still too low to generate profits.

"We review and analyze market conditions on an ongoing basis and the impact they have on customer orders and we're idling the blast furnace and steel-making operations at Hamilton Works to stay in line with customer demand," Mr. Harris said. "There's no timeline to restart the facility."

Another U.S. Steel mill in Nanticoke, Ont., is not affected by the shutdown.

The move is likely to spark fresh debate over the Investment Canada Act. Liberal industry critic Marc Garneau said the U.S. Steel case illustrates the need for the government to provide the public details about promises made by foreign companies acquiring Canadian firms.

"It speaks to the need for complete transparency and enforceability," Mr. Garneau said in an interview.

He noted there have been a number of cases in which Ottawa approved takeovers based on promises made by the companies, only to see them later slash employment and close operations. Under the Investment Canada Act, the government cannot reveal undertakings given by the acquiring company.

U.S. Steel is already embroiled in a legal battle with the federal government over the shutdown of all its Canadian operations last year, which were restarted earlier this year.

The latest move also comes amid a labour dispute with the United Steelworkers union in Hamilton, whose members have been working without a contract since July 31 and are resisting the company's demands that they agree to the elimination of pension indexing, give up two weeks of vacation and provide other concessions.

There have been no negotiations since May 20, Rolf Gerstenberger, president of local 1005 of the union, said Friday.

Mr. Gerstenberger said he believes the shutdown is related to negotiations on a new contract. The union will be in a strike position and the company will be able to lock workers out 17 days after a government-appointed conciliator issues a report. A conciliator has not been appointed yet.

"I think it's pretty obvious that we're just part of their empire," he said. "We're the afterthought. We're one of the colonies."

Mr. Harris would not comment on the labour negotiations or the court battle with Ottawa.

A spokesman for Industry Minister Tony Clement said the minister has instructed his staff to look into the matter and determine what, if any, impact the action will have on employment at the plant.

"We are disappointed to learn that U.S. Steel will idle their blast furnace in Hamilton, but we are encouraged by the company's statement that it will not lay off staff as a result," said Erik Waddell, Mr. Clement's director of communications.

He said the government could not comment on the status of the lawsuit that Ottawa brought against U.S. Steel under the Investment Canada Act, claiming the steel maker broke undertakings on employment and production that were agreed to when it acquired Stelco. The case has been proceeding through the Federal Court of Canada.

The steel maker has said in its own court filings that events beyond its control - namely the 2008 financial crisis and global recession - forced it to shut its Canadian operations and prevented it from keeping the commitments it made when it took over Stelco.

In the first nine months of 2010, capacity utilization at U.S. mills was 71 per cent. That's more than double the rate during the trough of the recession, but not the 85-per-cent needed to generate profits, said Mike Willemse, a steel industry analyst at CIBC World Markets Inc.

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