TMK Ipsco's Layoffs rising at NKY steel mill

23 June 2015

A Wilder steel mill that serves the energy industry is set to lay off nearly 150 workers next month, as crude oil exploration wanes and foreign imports of steel increase.

TMK Ipsco's workforce of 320 workers will be reduced to 54 people by early July, according to Worker Adjustment and Retraining Notification notices filed with the Kentucky Career Center April and May. The July layoffs, along with 115 jobs cut in June, equate to a 83 percent reduction of employees, mostly in production roles.

The company, with annual revenues of $1.7 billion in 2014, produces high-frequency electric resistant welding (ERW) process steel pipes used in oil and gas extraction and transmission at the sprawling Wilder mill alongside the Licking River.

Company and union officials blame the layoffs on the recently drop-off in profits of the oil and gas industry, as well as trade agreements that allow the import of cheaper ERW steel from China and South Korea.

"The problem is definitely two-fold," said Roger Bentley, communications director for TMK Ipsco, from the company's Houston headquarters. Bentley noted the layoffs are temporary, although there is no set time for the workers to return.

Ray Rogg, who has worked at the company for 25 years through its various owners and name changes, said the Wilder plant is rife with fear and confusion.

"When oil prices started going down, we were put in survival mode," said Rogg, who is president of United Steelworkers Local 1870.

"We've got guys here who've worked here 30 and 40 years getting laid off – things are so bad," he added.

"Oil and fracking industries affect more people than we think, and these pipe manufacturers are directly related to it, so they're seeing the brunt," said Bill Froehle, president of the Cincinnati AFL-CIO Labor Council.

"It's costing a lot of working families their income and putting them in precarious situations," he said, underscoring the paradox of how low energy prices can hurt some people and firms even as they have benefited many other families and companies.

Mill is a remnant of NKY's steelmaking past

The Wilder mill is one of the last survivors from the steel and iron works that once lined the Licking River in Newport and Covington. Another is Stewart Iron Works, a historic gate and fence maker in Erlanger.

TMK Ipsco is the American division of Russia's TMK. It was formed June 2008 when TMK purchased 10 pipe-manufacturing facilities from SSAB, a Swedish steel company that had acquired Chicago-based IPSCO in 2007.

Much of TMK Ipsco's current production capacity comes from the company's 2006 acquisition of Newport-based NS Group Inc., a producer of seamless and welded pipe. The acquisition brought together welded pipe manufacturing and finishing operations in Wilder, as the Newport plant was closed.

Roughly a year ago, the company announced plans to expand the Wilder facility with a $19.8 million development designed to be the company's first steel coating facility. The state of Kentucky Economic Development Finance Authority agreed to give company $650,000 in tax credits over 10 years. Yet the project, which would have added 40 jobs, was put on hold later last year, when crude oil prices wobbled downward.

In fact, shortly after the expansion was announced, TMK was cutting hours at Wilder and two U.S. other mills by 30 percent.

A drop in oil prices before a flood of imports

Here's the two-fold problem facing TMK Ipsco.

First "the current amount of oil drilling is substantially lowered" that what it was in the start of the decade, when fracking was booming in places such as North Dakota, Pennsylvania and eastern Ohio, Bentley said. A rapid increase in U.S. oil and gas production as the world economy was recovering from the Great Recession eventually combined to drive prices sharply in late 2014.

"Last year the price of crude oil was barely hanging on $60 per barrel," said Corey Walker, markets editor for the Midwest at the Oil Price Information Service in Houston. As a result, companies are reducing capital expenditures on additional oil production. Fewer new wells means less demand for the pipes made at Wilder.

Walker said many large banks and financial institutions have made it clear they believe that oil prices could continue to struggle into 2016, because global demand is not seen as sufficient to offset growing supply.

The second problem is increasing steel imports from foreign companies. The company, with support of the union, is part of a movement to stem the tide of what both groups believe are unfairly cheap imports.

Douglas A. Polk, chairman of the Committee on Pipe and Tube Imports, an industry trade group, testified to a U.S. House committee on March 15, warning that increased imports of steel could cause the American steel industry to collapse.

"In 2014, pipe and tube imports took over half of the U.S. market," he testified. Many "of these imports arrived from China and Korea, with India and Turkey following."

"Cheap imports are taking business away from us – we can't compete when labor overseas is not held to the same OSHA, EPA and pay standards," local union president Rogg said. "We may not survive."

What will happen, now the layoffs are here

As for what becomes of the TMK Ipsco workers, the president and CEO of the Northern Kentucky Chamber of Commerce said his group works with other organizations, such as Kentucky Career Center, to identify companies that are hiring and matching them with workers.

"That is something that isn't often done in many areas, but it's something we do" because of the particular problems that manufacturers are currently are having finding qualified workers, chamber president Trey Grayson said.

James Brock, an economics professor at Miami University, said the economic effect of the layoffs will be cushioned by a recovering local and national economy.

"Thankfully, there are jobs and manufacturing positions opening up that these workers could fill. If this happened at the height of the economic crisis, it would be a very different story."

Speaking about the state of the energy industry, Brock said. "It looks like things will eventually pick up, and by the time things do, companies will be scrambling for workers and the cycle will begin again."