The former Stelco mill in Hamilton, Ont., now is part of U.S. SteelMIKE CASSESE
One of the world's major steel makers is seeing early signs of a pickup in demand in key areas, a glimmer of hope for a battered sector whose fortunes rise and fall with products ranging from autos to appliances.
United States Steel Corp. said Tuesday it is recalling 800 workers to a mill in Illinois to boost production.
U.S. Steel's chairman and chief executive officer John Surma cited the signs of increased demand for its flat rolled steel products, which are used by the automotive and appliance industries.
Customer orders likely bottomed out in April and May and have improved in June and July as customers replace depleted stockpiles.
Despite the indications of a turnaround, U.S. Steel has kept its Canadian operations idle amid an increasingly bitter dispute with Ottawa about production and job commitments made two years ago.
Steel is the key input material for the manufacturing industry and rising demand bodes well for the greater economy. After months of production shutdowns, North American auto makers including General Motors Co. and Chrysler Group LLC are priming assembly lines to begin building cars again.
Meanwhile, bargain prices prompted U.S. house sales to surge 11 per cent last month, suggesting demand for appliances such as dishwashers and refrigerators will likely increase.
In response, Pittsburgh-based U.S. Steel is restarting production at its Granite City, Illinois, operations and putting laid-off employees back to work.
The company warned, however, that after posting a $392-million (U.S.) loss in the second quarter, it expects to suffer a third-quarter loss.
It is considering permanently closing some plants in reaction to the severe downturn in manufacturing, construction and industrial production.
"Things are just so opaque in the market that it's really hard for us to reach a conclusion on that right now. We're looking at it, studying it, considering what the effects are one way or the other," Mr. Surma said on a conference call.
U.S. Steel has stopped production at facilities in Hamilton and Nanticoke, Ont., in response to the global recession, which has pushed demand for steel in the U.S. to its lowest level in decades. About 2,400 Canadian workers either retired or were laid off ahead of the production shutdowns which began last year.
Canada's federal government recently took the unprecedented step of going to court to demand U.S. Steel live up to job and production commitments made when it purchased the mills' former owner, Stelco Inc., in 2007.
Industry Minister Tony Clement has filed an application asking the Federal Court for fines of $10,000 a day against U.S. Steel going back to last November when the company began shutting its Canadian facilities. Mr. Surma fired back at Ottawa Tuesday, suggesting the government has failed to comprehend the severity of the drop in steel demand.
"We have an unprecedented and severe economic downturn and the most severely affected sector in the global economy has been steel, even though auto gets most of the news about it. I can only guess that the news of that economic downturn hasn't reached Ottawa," Mr. Surma said.
The dispute with Ottawa comes as the United States has imposed strict Buy America rules in a bid to boost its fledgling economy. Experts have said the economic stimulus measure gives U.S. Steel an incentive to keep production higher at its U.S. mills.
Rolf Gerstenberger, president of local 1005 of the United Steelworkers, which represents workers at the company's Hamilton operations, said that while 600 workers are back on the job they aren't producing steel.
"We have 600 guys or so doing nothing … there's no steel being made and no sign yet of steel being made," he said.
In addition to the idle Canadian operations, U.S. Steel's Great Lakes Works in Michigan also remains closed.