You are here

NEWS ANALYSIS

US steelworkers wonder where the windfall will land

BT_20181005_PQWINDFALL5_3581610.jpg
Richard Lattanzi, mayor of Clairton, Pennsylvania, and a US Steel safety inspector, says workers fear they will not share in the steel tariffs' bounty.

Clairton, Pennsylvania

WHEN President Donald Trump imposed tariffs on steel imports in June, Richard Lattanzi thought of dozens of his fellow steelworkers who have for years put off badly needed repairs for their cars and homes.

"There was a lot of excitement here; there were a lot of us saying, 'It's about time someone is looking out for us'," said Mr Lattanzi, the mayor of this town of 7,000 and a safety inspector at the US Steel plant in nearby West Mifflin. "A lot of people around here were saying, 'We're going to be OK'."

Four months later, Mr Lattanzi is less optimistic. Production at US Steel's facilities has ramped up, and the company announced this summer that, thanks in part to the tariffs, it will see profit surge. But, in interviews in recent weeks, Mr Lattanzi and other steelworkers said they're no longer confident they'll take part in the tariff bounty.

sentifi.com

Market voices on:

"It's been a little like watching the air going out of a balloon," Mr Lattanzi said.

As he has pressed his steel tariffs, Mr Trump has declared that the industry is "being rebuilt overnight". But the question facing the rank-and-file is whether the controversial policy - which has raised the price of inputs for many American companies and alienated allies - will translate into higher wages and better benefits.

While the impact of recent pacts - such as that struck with Canada and Mexico last week to modernise the North American Free Trade Agreement - may take years to be fully understood, the steel industry provides a more immediate testing ground.

The initial anticipation of the tariffs, followed by their actual imposition, led the price of the metal to soar. Now, facing less foreign competition, domestic steel companies are seeing their profits balloon. And, crediting Mr Trump, they are making plans to open up new steel plants and hire more workers.

"The commitment that he has to steel is unprecedented," US Steel chief executive David Burritt said in August, after Mr Trump visited a US Steel plant reopening in Granite City, Illinois. "He's with us and we're going to do everything we can to support him because this is not just good for US Steel. This is great for the United States of America."

Yet the trickle-down effects are far harder to predict. Steel companies, while supportive of the tariffs, have seen wild gyrations in their business in recent years and can't be certain the lucrative new protections will stick around. So even in this time of sudden prosperity, some analysts say, they must be disciplined with worker pay and benefits.

Here in southwest Pennsylvania, 15 miles from Pittsburgh, the question is coming to a head because labour contracts governing 31,000 steelworkers at US Steel and ArcelorMittal, the largest steel company in the world, expired last month. Workers say the new contracts represent the perfect opportunity for the companies to be more generous with their workers - who had given up raises just a few years ago when times were tough.

Frustrated by the lack of progress in negotiations, about 31,000 steelworkers at the companies voted last month to authorise a strike. Though there were signs on Wednesday that they could reach an agreement, if the negotiations break down, it could bring about the industry's first major work stoppage in four decades.

The steel industry was already in a period of renewal when Mr Trump slapped 25 per cent tariffs on steel imports. Mr Trump acted in the name of national security, though he later justified the move as a way to help the steel industry rebuild. The industry was enjoying gains driven by a strong economy, high demand to fix bridges and infrastructure after several major natural disasters, and an effort by President Barack Obama to limit steel imports from China.

The tariffs sent the price of steel surging more than 33 per cent.

This will not last forever

"We have a strong US exposure; clearly we are a net beneficiary of the trade actions," Aditya Mittal, chief financial officer of ArcelorMittal, said in August, according to Bloomberg News. But while the tariff boon might provide new opportunities for jobs and boost corporate bottom lines, whether it can overcome longer-term factors affecting the livelihoods of steelworkers remains to be seen.

"Any reasonable observer who just goes on the economic facts will say: 'This will not last forever,' " said Steven Kyle, an economics professor at Cornell University. "The tariff will temporarily make them more profitable. But we all know it could end at any time." Those longer-term trends help explain why, even during one of the best periods for the steel industry in recent memory, the negotiations between organised labour and steel companies here grew tense.

In its latest offer, US Steel said it would give workers an immediate raise of 4 per cent, followed by 3 per cent annual raises later on. By usual standards, that would be a good deal.

But, at the same time, the company said it is wrestling with soaring health-care costs in the long run. The company said its health-care costs are projected to rise to US $20,000 per employee by 2019 and that it needs to start asking workers to absorb some of those - namely by paying US$145 per month for health care. Workers haven't paid premiums in the past.

The proposal represents "an incredible value under the Company's current proposal," said Meghan Cox, a company spokeswoman.

But to the union, it was an upsetting plan. It would reduce the overall wage increase to just about 1.7 per cent over nine years.

"We have done so much for this company, and now they have the audacity to bring before us all these concessions when they are projected to profit US$2 billion this year alone," said Michael Young, a maintenance technician at a US Steel plant in Portage, Indiana, and a survivor of colon cancer. "I want the company to leave my health care alone." Young and others were particularly furious because the work they do can be perilous to their health. Mr Young ticked through the toxic substances he is exposed to while manning the production line, such as hydrochloric, sulfuric and chromic acids, as well as tin, zinc and kinds of chromium used to plate metal objects.

"The bargain has always been that we work in very dirty, very dangerous, very unhealthy places, and in exchange we get good, quality health insurance at affordable prices," said Cliff Tobey, who helps mine for iron ore at US Steel's facility in Hibbing, Minnesota.

It's not clear how much leverage the workers will have. While at least temporarily protected from foreign competition, US Steel is facing increased domestic competition from steel shops without unions.

"We're still negotiating for a fair contract," said Mr Lattanzi, the Clairton mayor and steelworker. WP