In a regulatory filing, U.S. Steel announced layoffs. At a rally last week, President Trump claimed that the US steel industry is “thriving” due to his tariffs.
U.S. Steel announced layoffs
Reuters reported that U.S. Steel (X) said in a regulatory filing that it plans to layoff some employees at its Michigan facility. The company expects to layoff less than 200 employees. In June, U.S. Steel announced the temporary closure of three blast furnaces. The company announced the curtailment of two blast furnaces in the US and one in Europe. In the US, the company idled a blast furnace at the Great Lakes and Gary Works facility, respectively. U.S. Steel said, “As a result of these footprint actions, we expect to decrease monthly blast furnace production capacity by approximately 200,000 – 225,000 tons beginning in July.”
U.S. Steel’s layoff announcement shouldn’t really be a surprise. The company has been adjusting production levels amid the sharp decline in US steel prices. The prices peaked in the first half of 2018 after President Trump’s Section 232 tariffs. However, the prices have corrected sharply since then. US steel prices reached multi-quarter lows in June. US steel mills piggybacked on U.S. Steel’s closure announcement and announced price hikes due to expected supply discipline. We’ve seen some traction in US steel prices since U.S. Steel’s plant closures.
Trump visited U.S. Steel’s facility
Last year, President Trump visited U.S. Steel’s Granite City facility. The company idled the blast furnaces in 2015 as US steel prices fell. U.S. Steel announced the restart of two blast furnaces at Granite City last year in a bid to capitalize on higher US steel prices. Overall, life has come a full circle for U.S. Steel. After last year’s expansion, the company is considering production curtailments and layoffs.
Layoff announcement comes at a bad time
U.S. Steel’s layoff announcement comes at a bad time for President Trump. Last week, he claimed that the US steel industry is “thriving” under his presidency. He also said that “U.S. Steel and all of them, all of them — they’re expanding all over the place.” However, U.S. Steel’s layoff announcement punctures the claim. Previously, U.S. Steel announced the closure of two blast furnaces on the same day that President Trump launched his 2020 campaign.
Trump and steel
US steel stocks including U.S. Steel, AK Steel (AKS), and Nucor (NUE) fell sharply last year despite President Trump’s tariffs. Steel stocks have looked weak this year. However, on multiple occasions, President Trump said that his tariffs revived the US steel industry. Last year, President Trump tweeted, “Our Steel Industry is the talk of the World. It has been given new life, and is thriving. Billions of Dollars is being spent on new plants all around the country!”
Other side of the coin
US steel companies have obtained several new projects since the tariffs were announced. Even foreign steel companies are investing in new US plants. Recently, Australia’s BlueScope confirmed $1 billion in investments towards its US operations. However, some analysts see increasing US steel capacity as a long-term bearish driver for US steel prices.