US Steel To Lay Off 1,500: Why Is The Steelmaker Cutting Back Its Operations?

U.S. Steel (USSX34.SA) has said that it will idle down part of its operations and lay off more than 1,500 employees in the process. The reduction move is part of a new initiative to “competitively position the company for the future,” it said.

In the announcement, the steelmaker said it will “indefinitely” idle down a significant portion of its Great Lakes Works facility near Detroit. The facility, an iron and steelmaking plant, will close on April 1, 2020. U.S. Steel will also close its Hot Strip Mill rolling facility by the end of 2020.

US Steel said the decision to reduce its operation is a “best of both” strategy, meaning that it will combine its integrated and mini-mill steel technology to become nimbler and more reactive to market conditions. It is also looking to “deliver cost or capability differentiation.”

Through the plant closures, U.S. Steel issued a WARN notice for 1,545 employees at its Great Lakes Works plant. The company said it does expect the final number of workers impacted by the layoffs to be lower and has already notified workers about the job cuts. Employees are being offered benefits and employment support, the company said.

“We are conscious of the impact this decision will have on our employees, their families, and the local community, and we are announcing it now to provide them with as much time as possible to prepare for this transition,” David B. Burritt, U.S. Steel president and CEO said in a statement.

“These decisions are never easy, nor are they taken lightly. However, we must responsibly manage our resources while also strengthening our company’s long-term future – a future many stakeholders depend on.”

Earlier this year, U.S. Steel announced that it was investing more than $1 billion into endless casting and rolling and cogeneration projects at its Mon Valley Works facility in Pennsylvania. It also said it would invest $750 million into a hot strip mill and other projects at its Gary Works operations in Indiana and Big River Steel facility in Arkansas, which it is looking to fully acquire within the next four years.

“In order to further accelerate our strategy of creating a world-competitive ‘best of both’ U.S. Steel, we must make deliberate but difficult operational decisions,” Burritt said,

“In this case, current market conditions and the long-term outlook for Great Lakes Works made it imperative that we act now, allowing us to better align our resources to deliver cost or capability differentiation across our footprint.

“Transitioning production currently at Great Lakes Works to Gary Works will enable increased efficiency in the use of our assets, improve our ability to meet our customers’ needs for sustainable steel solutions and will help our company get to our future state faster,” he added.

Shares of U.S. Steel stock were down 10.58% as of market close on Friday.