State of steel causes Warren Steel to shutdown temporarily

20 November 2015

An industry downturn has led a local producer and supplier of carbon and alloy steel products to shut down temporarily.

Warren Steel Holdings, 4000 Mahoning Ave. NW, will close on or before Nov. 30, according to a letter sent to employees this week.

“Given the current challenging market conditions, we have made the difficult decision to temporarily shut down steelmaking operations at Warren Steel Holdings,” said a company statement. “Our current expectation is to restart production sometime in the first quarter of 2016, contingent on market and business conditions at that time.”

Jose Arroyo, business representative in the Youngstown/Warren area for the United Steelworkers, said about 150 employees will be affected. USW organized the plant this year.

The company did not respond Wednesday to a request for how many employees will be affected by the shutdown.

The union will have a workshop for employees starting at 6 a.m. Monday at the USW Local 1375 hall, 684 N. Park Ave., for unemployment, health care and other information. The workshop will continue throughout the day.

“It’s trade,” Arroyo said as a reason for the shutdown. “This is directly tied to steel dumping and how we have been hit hard with pressure from foreign steel. The union and the company have been working together through this.”

Warren Steel Holdings, affiliated with Optima Speciality Steel based in Miami, engineers products used in a variety of industries, including aerospace, mining, construction, automotive and agriculture.

The steel industry has taken a hit from the effects of a strong dollar, weak global demand and a buildup of inventory.

“There’s a lot of pressure on the industry,” said Mekael Teshome, PNC economist. “I think the industry will be under pressure for some time.”

As the U.S. dollar appreciates in value, as it has over the past year, it makes it more expensive to sell product overseas, but it makes it cheaper for foreign producers to sell here, he said.

“The companies servicing autos are doing better, but companies perhaps serving energy producers are worse off,” Teshome said.

Companies in energy, such as Vallourec Star in Youngstown, have had to cut costs because of a continued decline in the price of oil. The drop in the price for a barrel of oil this year has gone above 50 percent in year-over-year declines. The cost for a barrel of oil Tuesday was $40.67, down $34.97 from a year earlier, according to the U.S. Energy Information Administration.

“I cannot say enough about the cost of oil killing us with the energy markets,” Arroyo said. “As the price of the barrel [of oil] continues to drop, it makes it tougher on the steel industry.”

The drop in the price of oil strengthens the dollar, Teshome said, which further impacts the steel industry.

John Augustine, chief investment officer for Huntington Bank, also said the strong dollar is a factor in the downturn in the steel industry. China’s increase in steel exports is another factor. Both Augustine and Teshome say it may be some time before steel makes a comeback.

“In general, we are in an economy that is searching for capital-spending projects,” Augustine said. “They are difficult to find.”