Final Thoughts
Final Thoughts
Written by Michael Cowden
April 24, 2022
We’ve all grown used to worrying about global supply chains and their shortcomings – as underscored by the pandemic, the chip shortage and the war in Ukraine.
But it’s important not to forget that foreign supply chains aren’t the only ones that can get tangled up. And exotic problems don’t mean that long-standing issues – like tensions between unions and management teams – haven’t magically disappeared.
I note that because the United Steelworkers (USW) union held its Basic Steel Industry Conference in Pittsburgh last week. There is nothing extraordinary about that in and of itself.
USW International president Tom Conway, International Vice President David McCall and others spoke about steel, iron ore, trade, and health and safety.
“We also discussed our upcoming bargaining and how our Union’s full resources will support our negotiations,” the USW said in texts to members.
Recall that The United Steelworkers (USW) union is preparing for contract talks this summer with US Steel and with Cleveland-Cliffs Inc. Contracts with both Pittsburgh-based US Steel and Cleveland-based Cliffs were negotiated in 2018 and expire on Sept. 1, 2022.
The negotiations in 2018 then were fractious and extended well past a Sept. 1 deadline. Cliffs agreed to a new contract with the USW in October. Talks with US Steel and ArcelorMittal USA (since acquired by Cliffs) dragged into November.
Will see similar difficulties this time around? I don’t know. But what I do know is that there are uncanny similarities between the steel market in 2018 and in 2022.
Remember that in March 2018, former President Donald Trump took the market by surprise with Section 232 tariffs and quotas. Steel prices – and steel mill profits – shot sharply higher.
The shock was different this time. Russian forces invaded Ukraine in late February. But the result was similar: steel prices skyrocketed. And it looks like profits might too. (Nucor, a non-union shop, expects to see its most profitable quarter ever in Q2’22.)
You could make a case that talks should be smooth in 2022. Everyone is making money, so why not come to an agreement quickly and continue to make money – not just for companies and shareholders but for workers and communities too.
You could also make a case that labor has an even stronger hand than it did in 2018. No one wants to turn off the spigot on profits. Which means turning off the spigot on steel production is a greater threat than it might be in a down market.
That said, workers are facing real struggles when it comes to inflation. Will standard mechanisms to adjust for higher consumer prices be enough to offset the highest inflation we’ve seen in decades?
Then there is the worker shortage. It’s very, very real as everyone reading this already knows. There is a good chance it’s your No. 1 problem. And it gives workers more clout. (Do you have any family who might be interested in working in the steel industry? I’m asking for a friend.)
Cleveland-Cliffs seems keen to avoid trouble. Company chairman, president and CEO Lourenco Goncalves was clear that he wants the support of the USW during a press conference and mill tour earlier this month at the company’s steel mill in East Chicago, Ind. (Union members vastly outnumbered journalists at the event.)
“I do not work for the shareholders. I work for my people. I work for my company. The shareholders want to take a ride? Be my guest. Jump in the bandwagon,” Goncalves said.
“And we work well with the unions. We work well with the USW. We don’t have any light in between ourselves. Ultimately we want the same things,” he added.
But words are one thing. What about actions? US Steel decided to move a $1 billion investment at its Mon Valley Works – an integrated, union-represented mill in western Pennsylvania – to Big River Steel, a non-union electric-arc furnace mill in Osceola, Ark. It is also nearly doubling capacity at Big River.
I am not privy to any discussions between USW International president Tom Conway and US Steel CEO David Burritt about Mon Valley and Big River. But I don’t think it’s a stretch to say that they might not see eye to eye on how capital has been allocated of late. Afterall, the USW, like US Steel, is based in Pittsburgh. And Mon Valley Works goes a long way toward keeping the “steel” in “Steel City.”
Let’s also remember that contract talks were difficult last year between NLMK USA and the USW as well as between Allegheny Technologies Inc. (ATI) and the USW. Were those negotiations a precursor of what’s to come?
Maybe. Maybe not. What I do know is this: Labor talks this summer are one more variable – in a market brimming with them now – that you’ll want to keep an eye on.
By Michael Cowden, Michael@SteelMarketUpdate.com
Michael Cowden
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