[ZTWsquared]

2001 ZTS,Mar 7 2009, 08:54 AM Wrote:US Steel has also idled there Lorain Ohio plant (~600 people). ArcellorMiltal is laying off its Cleveland plant (~1000 people). ArcellorMittal is also the parent of Dofasco in Hamilton the past few years and that location remains open so it goes both ways across the border.
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If the plants closed were the least efficient, then IMO it doesn't matter what side of the border they're on ... it's a valid business decision.

OTOH - US steel closed down its most efficient operation (ie: lowest cost of production) which happens to be in Canada, in favour of less efficient operations in the US. How, other than politics, can you explain this kind of decision?

[Canadian ST]

When you also consider the exchange rate as well...thanks Obama.

[2001 ZTS]

ZTWsquared,Mar 7 2009, 10:50 AM Wrote:

2001 ZTS,Mar 7 2009, 08:54 AM Wrote:US Steel has also idled there Lorain Ohio plant (~600 people). ArcellorMiltal is laying off its Cleveland plant (~1000 people). ArcellorMittal is also the parent of Dofasco in Hamilton the past few years and that location remains open so it goes both ways across the border.
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If the plants closed were the least efficient, then IMO it doesn't matter what side of the border they're on ... it's a valid business decision.

OTOH - US steel closed down its most efficient operation (ie: lowest cost of production) which happens to be in Canada, in favour of less efficient operations in the US. How, other than politics, can you explain this kind of decision?
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Market drivers. There is production cost and then there is the cost to the end user to deliver to where the finished product is needed. Right now there isn't a lot needed in Canada or the US. Finished steel is very expensive to transport or even to just store in inventory.

[ZTWsquared]

2001 ZTS,Mar 7 2009, 05:54 PM Wrote:

ZTWsquared,Mar 7 2009, 10:50 AM Wrote:

2001 ZTS,Mar 7 2009, 08:54 AM Wrote:US Steel has also idled there Lorain Ohio plant (~600 people). ArcellorMiltal is laying off its Cleveland plant (~1000 people). ArcellorMittal is also the parent of Dofasco in Hamilton the past few years and that location remains open so it goes both ways across the border.
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If the plants closed were the least efficient, then IMO it doesn't matter what side of the border they're on ... it's a valid business decision.

OTOH - US steel closed down its most efficient operation (ie: lowest cost of production) which happens to be in Canada, in favour of less efficient operations in the US. How, other than politics, can you explain this kind of decision?
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Market drivers. There is production cost and then there is the cost to the end user to deliver to where the finished product is needed. Right now there isn't a lot needed in Canada or the US. Finished steel is very expensive to transport or even to just store in inventory.
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I'm more than familiar with the concept, but I don't see how it applies in this case - - not trying to be argumentative but I continue to believe there is a significant political component to this decision that defies the production and market forces that would normally apply.

[2001 ZTS]

There was 1300 MILLION tonnes of steel made around the world in 2008, 15 million of that total was in Canada. We are such small players and the plant owners carve off pieces here and there willy nilly and could care less about local politics. I wouldn't be surprised at all if it just wasn't a case of conservation of effort. Its just easier to make money in other countries. Stelco (USS) Hamilton/Nanticoke also specialized in automotive steel and steel for construction and infrastructure where plants elsewhere may not have been so specialized and affected by downturns?

[ZTWsquared]

2001 ZTS,Mar 8 2009, 09:13 AM Wrote:There was 1300 MILLION tonnes of steel made around the world in 2008, 15 million of that total was in Canada. We are such small players and the plant owners carve off pieces here and there willy nilly and could care less about local politics. I wouldn't be surprised at all if it just wasn't a case of conservation of effort. Its just easier to make money in other countries. Stelco (USS)  Hamilton/Nanticoke also specialized in automotive steel and steel for construction and infrastructure where  plants elsewhere may not have been so specialized and affected by downturns?
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I wasn't thinking in terms of local politics but in fact US national politics in the era of the stimulus / bailout and more specifically the "buy american" portions of the aforementioned.

In anticipation of receiving steel orders related to stimulus-based infrastructure projects, and in anticipation of the possibility of even asking for a bailout, I have no doubt that any US based steel company would close down a Canadian plant before they would an American one, regardless of the quality of its product, the efficiency of its production, or the market factors that might otherwise influence such a decision.

[Canadian ST]

2001 ZTS,Mar 8 2009, 10:13 AM Wrote:There was 1300 MILLION tonnes of steel made around the world in 2008, 15 million of that total was in Canada. We are such small players and the plant owners carve off pieces here and there willy nilly and could care less about local politics. I wouldn't be surprised at all if it just wasn't a case of conservation of effort. Its just easier to make money in other countries. Stelco (USS)  Hamilton/Nanticoke also specialized in automotive steel and steel for construction and infrastructure where  plants elsewhere may not have been so specialized and affected by downturns?
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Well I can a agree with you on some points, but in 2008 US steel Nanticoke had the highest profit margin in all of North America. So Nanticoke may not produce as much steel but we do it at a fraction of the cost, plus we can finish our steel on site
Vs shipping it to another facility to get finished.

[2001 ZTS]

That Nanticoke plant isn't one of my customers so I don't know as much about what is going on there as say Dofasco which is one of ours. What I do know that whatever may have been the case in 2008 is ancient history, that is how much and how quick things have changed.

In the news today:

U.S. Steel consolidations continue

3/8 - U.S. Steel is consolidating all of its steelmaking at plants in Pittsburgh, Pennsylvania; Fairfield, Alabama; and Gary, Indiana.

U.S. Steel will continue to concentrate production at its Mon Valley Works outside of Pittsburgh; Gary Works in Gary, Ind.; and Fairfield Works near Birmingham, Ala., the company said.

Its recent decision to shut down Lake Erie Works, in Nanticoke, Ont., a plant widely viewed as one of the most efficient in North America, surprised many in the industry.

"It's not just about the efficiency of the plant, it's about the efficiency of the overall system in terms of the transporting steel in different forms during the process," said U.S. Steel spokesperson Chuck Rice. "In terms of the travel logistics of rail and so on, well these three plants are the most efficient in that way.

Meanwhile, U.S. Steel moved forward last week with plans to shut down Lake Erie Works and also Hamilton Steel, in Hamilton, Ont.

In a memo to employees, the company outlined steps to shutter the Lake Erie blast furnace in Nanticoke by next week. Once the final batches of steel are processed in Nanticoke and Hamilton, those facilities will go down as well, the memo states.

Only the coke ovens in Lake Erie will continue to function.

During the fourth quarter, U.S. Steel cut its work force by 4,200 in North America, where it employs some 27,000 people.

[ZTWsquared]

2001 ZTS,Mar 8 2009, 12:12 PM Wrote:That Nanticoke plant isn't one of my customers so I don't know as much about what is going on there as say Dofasco which is one of ours. What I do know that whatever may have been the case in 2008 is ancient history, that is how much and how quick things have changed.

In the news today:

U.S. Steel consolidations continue

3/8 - U.S. Steel is consolidating all of its steelmaking at plants in Pittsburgh, Pennsylvania; Fairfield, Alabama; and Gary, Indiana.

U.S. Steel will continue to concentrate production at its Mon Valley Works outside of Pittsburgh; Gary Works in Gary, Ind.; and Fairfield Works near Birmingham, Ala., the company said.

Its recent decision to shut down Lake Erie Works, in Nanticoke, Ont., a plant widely viewed as one of the most efficient in North America, surprised many in the industry.

"It's not just about the efficiency of the plant, it's about the efficiency of the overall system in terms of the transporting steel in different forms during the process," said U.S. Steel spokesperson Chuck Rice. "In terms of the travel logistics of rail and so on, well these three plants are the most efficient in that way.

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Sounds exactly like something that I would have written if US Steel was my client ... I've readjusted the italics, bold and underline to highlight a different perspective ... first: that the decision took even industry insiders by surprise, and second ... that by adding the modifying statement "... in that way" they are in fact admitting that the overall efficiency is in fact higher in the closed plants (emphasis on overall) and that a much narrower definition of "more efficient" is being used to justify the closings. I stand by my opinion that the decision was, at least in part, mandated by US political considerations.

[2001 ZTS]

I'll agree with you that by appearance it was politically driven but remain of the opinion that in the end it was ultimately the all mighty dollar. Now possibly, it is political in the "where that dollar may come from down the road sense". No business decision is ever made for anything other than money and in fact nothing is ever done unless a 10% return on investment is pretty much a sure thing.

The steel business has just been so up-ended the last two years and the last quarter of 2008 especially. China changed everything.

Logistically Nanticoke is a sucky location to run a business. It was someones pipe dream back in the 50's creating that industrial park and it never did take off other than OPG and Stelco. There was actually a plan back in the day to set off a nuclear bomb and create a harbour there! Hard to believe but peaceful use of atomic energy was the mantra then. I will try and find a link!

Road access is terrible and it is "above" the Welland Canal and "below" the Soo for raw materials. Rival company Canada Steamship Lines has the contract and provides the raw materials there but in better days my company explored a business model because the finished product headed south to Ohio and we were contemplating doing to do a "drop trailer" barge run across the lake.

What drove that was the fact that New York State highway weight limits meant only two steel coils can be trucked at once where in Ontario and Ohio 3 would be allowed. That extra coil drops delivery cost by a third obviously. Border wait times where a huge factor too.

Great conversation by the way! This place has always been pretty cool and more than just something to do with a car.

What a diverse bunch we are and what a pethora of knowledge we collectively possess.

[2001 ZTS]

OPG Nanticoke may turn from burning coal to wood chips/wood waste btw.

Shhhhhh, that is a secret.

Not sure how that effects CO2 emmisions but McGinty promised to close the place 2 years ago because it is the largest point source of CO2 in North America and one of the ten biggest plants in world. The place is huge and the amount of coal we deliver there is astounding. I was once told running that place was the equivalent as running 6.2 MILLION cars.

That brings up another possibility and something to discuss, there is a huge environmental cost to making steel. The amount of ore, coal, water and electricity is increadible.

[ZTWsquared]

2001 ZTS,Mar 8 2009, 03:57 PM Wrote:I'll agree with you that by appearance it was politically driven but remain of the opinion that in the end it was ultimately the all mighty dollar. Now possibly, it is political in the "where that dollar may come from down the road sense". No business decision is ever made for anything other than money and in fact nothing is ever done unless a 10% return on investment is pretty much a sure thing.

The steel business has just been so up-ended the last two years and the last quarter of 2008 especially. China changed everything.

****

Great conversation by the way! This place has always been pretty cool and more than just something to do with a car.

What a diverse bunch we are and what a pethora of knowledge we collectively possess.
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Agreed 100% on the last two points ... and actually I think our arguments are converging in terms of your first point.

I didn't mean for a moment to suggest that money wasn't the final arbiter ... my argument is more about the source of the revenue and the nature of the business decisions made to ensure access to it.

In an era where "normal" revenue streams are shrinking, a company like US Steel is undoubtedly looking to get as big a piece of the US stimulus pie as possible ... and so, in an environment infused with protectionist attitudes, the executives are forced to make decisions about closings with an eye on the demeanor of the US Congress and Senate and include such factors as the political consequences of laying off American workers at the same time as lobbying for big stimulus funded projects.

Think about it ... from an American perspective it makes far more sense to close a Canadian plant because it would have zero impact on any political considerations of gaining access to stimulus revenue ... and, again if I was on their PR team, one could argue that it would be the more humane decision because the Canadian worker is supported by a far more robust social safety net.

It could also be argued that, despite the greater efficiency and profitability of the Canadian operation, the overall health of the company short-term is heavily reliant on US stimulus-based revenue and therefore it is also in the long-term interest of the Canadian operations to in fact have them closed down instead of the American operations.

One could argue that this is in fact a business decision regardless of the intrusion of US politics in the marketplace - and it is an argument no one could win because to some degree it is a matter of semantics.

The sad truth is that in a time of reduced business some elements of the US Steel operation in NA had to close. In the absence of the protectionism in the US, the American political sensitivity to any job loss, and the availability of hundreds of billions of $ in stimulus money, I maintain US Steel would have made a different decision as to which plant to close.

I'm standing by to be corrected, but nothing I've seen so far changes my opinion. Of course if US Steel calls tomorrow and asks me to join their communications strategy team I'll be singing a different tune on Tuesday.

[Canadian ST]

2001 ZTS,Mar 8 2009, 05:20 PM Wrote:OPG Nanticoke may turn from burning coal to wood chips/wood waste btw.

Shhhhhh, that is a secret.

Not sure how that effects CO2 emmisions but McGinty promised to close the place 2 years ago because it is the largest point source of CO2 in North America and one of the ten biggest plants in world. The place is huge and the amount of coal we deliver there is astounding. I was once told running that place was the equivalent as running 6.2 MILLION cars.

That brings up another possibility and something to discuss, there is a huge environmental cost to making steel. The amount of ore, coal, water and electricity is increadible.
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The weird thing about OPG plant is they have the multi-million dollar scrubbers on site and the have never been installed? They could greatly reduce the pollution just by installling them, but they are not???