Cleveland-Cliffs Inc.’s decision to shut down permanently three operations at AK Steel Dearborn Works will put more than 200 people out of work less than two months after the Cleveland-based iron ore producer acquired the mill.
The news comes as the nearby Great Lakes Steel Works on Zug Island is set to idle and steel companies across the U.S. face pressures created by COVID-19, forcing them to shut down blast furnaces and lay off thousands.
The company is stopping hot strip mill, annealing and tempering operations at the former Rouge Steel site, citing “rapidly deteriorating business conditions,” James Dyckman, AK Steel Corp.’s general manager of labor relations, wrote Friday in a layoff letter to the state of Michigan made public this week. The shutdown will take effect July 5 and will affect 343 workers, according to the letter.
The jobs of about 211 United Auto Workers Local 600 workers will be eliminated. Others might have their current jobs eliminated, but will be moved to other positions within AK’s operations, the union said.
“The UAW Local 600 is working very hard to try and place everybody,” UAW spokesman Brian Rothenberg said.
Cleveland-Cliffs did not respond to requests for comment on Tuesday. The company could move Dearborn’s slab-rolling to its mill in Middletown, Ohio, sources told S&P Global.
The entire mill where between 1,200 to 1,300 work is not closing, the UAW said. The union has been informed that the closure of some of the plant’s operations is an under-capacity issue and not related to the downturn created by COVID-19.
Steve Neumann just returned Monday to his job hauling hot steel in the plant’s slab yard after a weeks-long layoff due to COVID-19. He since has learned that come summer, he will be out of work.
“During this crisis, to do this on top of it? You are either laughing or you’re crying,” said Neumann, 29, of Detroit. “A lot of young guys got hired here with the hopes of this as a long career opportunity and to make a decent living and provide for your family. All of that’s gone now.”
Neumann said just before the pandemic he’d bought a house in Detroit. Prior to Monday last worked part of the week of April 17, earning just $500 in his last paycheck. He and others learned of the impending job losses from a news report before it was officially announced by the company or union, he said.
Right now, the site is working with a skeleton crew, Neumann said, shipping out inventory to Middletown. Neumann does not work in any of the areas being shut down, but since he was hired in January 2017, he doesn’t have enough seniority to keep his job. The union, he said, is negotiating and trying to keep people working as much as possible but he’s not hopeful.
“I’m pissed off,” said Neumann, who earned around $65,000 last year without overtime. “I made an investment down here and had what I thought would be a good job in the union.”
The closures at Dearborn Works are only the latest in a series of bad news for steel plants. Despite the Trump administration’s 25% tariffs on steel from China, layoff notices last month went out to 1,000 steelworkers at U.S. Steel’s aging Great Lakes Steel Works.
The mill produces flat-rolled products for the U.S. automotive industry. Automakers temporarily suspended production starting in late March. Dearborn Works followed, idling its blast furnace the week of March 30.
U.S. Steel has idled blast furnaces in Indiana and Pennsylvania because of decreased demand as a result of the pandemic. ArcelorMittal S.A. also turned off blast furnaces at some of its plants including ArcelorMittal Indiana Harbor steel mill, which produces steel for the auto industry.
“This is what economists call multiplier effects,” said Charles Ballard, Michigan State University economics professor. “A shock hits the economy in one place and then it ripples through the economy because of the various interconnections in the supply chain. Because of the downturn in the auto industry it’s not surprising that firms that are supplying materials for the auto industry are in a pinch.”
The Center for Automotive Research estimates that 3,000 vehicles were built in April when typically 900,000 are built a month in the U.S.
“This year for production it looks like it’s going to be about 80% of the amount of vehicles that were produced last year, so everyone in the supply chain no matter what tier will be impacted by losing 20% of their business,” said Kristen Dziczek, vice president of industry, labor and economics for CAR.
AK Steel acquired Dearborn Works in 2014 for $707 million from Russian steel manufacturer Severstal. Severstal had invested $1.2 billion into the plant during major modernization efforts in 2007 and 2011, including rebuilding its blast furnace. The steelmaking plant originally was part of Ford Motor Co.’s Rouge manufacturing complex. Ford divested the mill’s assets in 1989.
Cleveland-Cliffs, which claims to be North America’s largest producer of iron ore pellets, in March closed its $1.1 billion acquisition of AK Steel to integrate vertically iron ore and steel products.
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