3-7-18 4:34 PM EST | Email Article
By Bob Tita and Andrew Tangel 

Some U.S. steel and aluminum makers are restarting idle mills and ramping up capacity to make up for imports that face being priced out of the market if President Donald Trump's proposed import tariffs take hold.

United States Steel Corp. on Wednesday said it would fire up a blast furnace in Granite City, Ill., and call back 500 workers. Century Aluminum Co. said last week it will restart lines at a smelter in Kentucky that have been curtailed since 2015, doubling its workforce there to 600.

"Our Granite City Works facility and employees...have suffered too long from the unending waves of unfairly traded steel products that have flooded U.S. markets," U.S. Steel Chief Executive David Burritt said. The company had idled the furnaces and laid off hundreds of workers in 2015 as a flood of cheap imports pushed down domestic prices.

U.S. Steel shares rose 3.8% Wednesday to $46.25, making for a 28% increase in the past 12 months.

American steel and aluminum makers could still lose out to foreign competitors if they can't make enough metal to meet demand, even at higher prices. Producers have struggled for years to compete with foreign mills, particularly in China, that have ramped up production at lower prices.

New tariffs on foreign steel and aluminum of 25% and 10%, respectively, proposed by Mr. Trump last Thursday would give U.S. producers the price advantage they have lobbied for in recent years.

Critics say the tariffs will damage relationships with Canadian and European allies, slow economic growth and harm American metal-consuming industries. The president and his aides have said the tariffs, including those already imposed on solar panels and washing machines, are designed to give plants in the U.S. more opportunities to expand production and employment. The White House said Wednesday Mr. Trump would sign a proclamation by the "end of the week."

Producers have "been given the keys to the city, and now they've got to do something with it," said Curt Woodworth, a metals analyst for Credit Suisse.

Annual U.S. raw steel production has hovered around 80 million tons since the financial crisis, roughly half of the industry's peak output in the 1970s. Aluminum production last year fell to 741,000 tons, less than a third of what was smelted here a decade earlier. Aluminum imports in that time surged 60%.

Steel and aluminum prices have risen recently on higher domestic demand and piecemeal tariffs against producers in other countries including China, as well as Mr. Trump's support for broader tariffs. Spot-market sheet-steel prices have risen more about 37% since October to about $810 a ton, according to industry surveys. The premium customers pay for aluminum deliveries has also increased.

As a result, some companies were planning to expand U.S. production even before Mr. Trump's new tariff plans. Alcoa Corp. plans to reopen part of an idle smelter in southern Indiana this spring. Luxembourg-based Tenaris SA opened a mill near Houston late last year to make pipe for natural-gas and oil fracking wells. Startup Big River Steel LLC, in Osceola, Ark., accelerated production in 2017 at one of the largest sheet mills to be built in the U.S. in years.

Steelmakers Nucor Corp. and Commercial Metals Co. are planning to build small mills in Missouri and Oklahoma to supply the steel reinforcing bar used in concrete for construction. Rebar and well pipe are among the steel products that have faced some of the heaviest competition recently against cheap imports from countries including South Korea and Turkey.

Not all metalmakers are happy with the proposed tariffs. California Steel Industries Inc. said the tariffs would hurt its business importing steel slabs that it makes into pipes and sheets used in construction.

Manufacturers that use steel and aluminum in their products, including Caterpillar Inc. and Harley-Davidson Inc., have said the tariffs could significantly increase their raw-material costs. Construction-equipment maker Terex Corp. said this week it would pass on higher steel costs to customers.

"We can't be the shock absorber for that significant increase," Chief Executive John Garrison said Tuesday.

Pittsburgh-based U.S. Steel said it would take about four months to restart its Granite City furnace. It needs to replenish stocks of coking coal and other ingredients used to melt ore into iron inside the furnace and do other work to get it running again. The furnace will add about 1.4 million tons of steel to the U.S. market annually, analysts said, and generate up to $85 million in pretax income this year for U.S. Steel. The plant has another idle furnace that could make an additional 1.4 million tons of steel annually.

A spokeswoman said the company hasn't reached a decision on whether to restart the second furnace, as it monitors demand trends in the market.

In Granite City, a town of some 30,000 just across the state line from St. Louis, the local United Steelworkers office was flooded with calls on Wednesday from former U.S. Steel workers asking how they could get their jobs back. Many who didn't retire when the plant was idled found jobs at nearby manufacturers or a retail distribution center. Union officials said those jobs often paid only half of what workers made at the steel mill.

"They're all ready to come back," said Dan Simmons, president of United Steelworkers local 1899.

Granite City Mayor Ed Hagnauer said renewed hiring at what was the town's biggest employer before the layoffs would benefit other local businesses that have suffered since the plant scaled back.

"We're an industrial town," he said. "This is a big bonus for us. It really puts us on the right course."

--Allison Prang contributed to this article.

Write to Bob Tita at robert.tita@wsj.com and Andrew Tangel at Andrew.Tangel@wsj.com


(END) Dow Jones Newswires

March 07, 2018 16:34 ET (21:34 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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