Dura-Bond Layoff of 180 in Steelton, PA: Broader Impact of Troubled U.S. Steel Industry

Dura-Bond layoff
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Dura-Bond Industries disclosed in a notice filed with the state Department of Labor and Industry that it is laying off 180 employees at a plant located in Steelton, Pennsylvania. The Dura-Bond layoffs are expected to begin on November 15.

Most of those being terminated are recent hires; the layoffs are expected to be permanent.

Dura-Bond Layoffs

Dura-Bond bought the Steelton pipe factory back in 2003 from the Capital Region Economic Development Corp. Prior to that, it was owned by Bethlehem Steel Corp., but had been empty since 1998.

The Steelton plant currently employs around 400 workers. After the layoffs are complete, Dura-Bond Pipe Steelton will have about 220 workers represented by the United Steelworkers.

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Dura-Bond is a privately held company that manufactures and coats large steel pipes in the heart of Pennsylvania’s Marcellus Shale region. It supplies steel pipes, protective pipe coatings, and pipeline products to gas transmission, mid-stream, and gas distribution pipeline companies.

U.S. Steel Industry’s Global Standings Falling

By the 1900s, the U.S. had become the global leader in steel production. The strength of the U.S. steel industry was buoyed by the rapid expansion of the country’s urban infrastructure, office buildings, railroads, factories, and other sectors. Demand for U.S. steel increased even further with the rising demand for appliances and automobiles.

The steel industries in places like Pennsylvania and Ohio thrived thanks to the abundance of iron ore and coal; two of the biggest commodities needed to manufacture steel.

Over the ensuing years though, the U.S. steel industry has lagged behind other nations. Of the top 10 steel-producing countries in the world, the U.S. is now ranked fourth, trailing China, Japan, and India.

Over the last number of years, China has dominated the global steel industry. In 2016, China shipped 808 million metric tons of steel, accounting for nearly half of global steel production. Japan was a distant second in 2016, producing about 13% of what China did.

The U.S. was also once home to the largest steel plants in the world. Not anymore. When you look at the top 10 largest steel producers in the world, the U.S. is nowhere to be seen. Luxembourg-based ArcelorMittal SA (ADR) (NYSE:MT) is the world’s largest steel producer, followed by China Baowu Group, HBIS Group, NSSMC Group, and POSCO.

Out of the top 10 biggest steel producers, six are based in China. POSCO, which came in fifth, is based in South Korea.

Nucor Corporation (NYSE:NUE) is the largest steel producer in the U.S. The Charlotte, North Carolina-based company is ranked 12th in the world. Meanwhile, Pittsburgh-based United States Steel Corporation (NYSE:X), which at one time was the world’s largest steel maker, is ranked 24th.

Despite falling in the global ranking and not having a single steel producer in the top 10, the U.S. is the second-largest consumer of steel.

Trump’s Plan to Strengthen U.S. Steel Industry Could Backfire

On the campaign trail, Donald Trump promised to “Make America Great Again;” this included putting American companies first. But there are concerns that Trump’s desire to help out American companies, which many see as being too protectionist, could actually hurt the U.S. steel industry.

To kick-start the ailing U.S. steel industry, President Trump wants to mandate that all oil and natural gas pipelines being built only use American-made steel. According to some though, his plan could destroy more jobs than it creates. That’s because it’s not going to be simple for American steel plants to manufacture all the necessary parts needed to construct an oil and gas pipeline.

For starters, U.S. steel companies do not make the right-sized parts for most pipelines and U.S. steel costs more than steel from overseas. Should U.S. steelmakers be responsible for 100% of pipeline production, domestic prices would rise and projects would get delayed—which could lead to massive layoffs.

Right now, U.S. oil and natural gas companies import more than 75% of the steel used in pipeline production. Why? It’s the most cost-effective way to source steel.

No matter how well-intentioned Trump’s plans are, those numbers are not going to change anytime soon. Today, just 25 U.S. steel producers make parts for domestic oil and gas pipelines.

On top of that, there are some products that U.S. steel manufacturers can’t even make. Mandating U.S. steel for oil and gas pipelines would mean steel manufacturers will need to retool their factories; no small feat. This would mean renovating and refitting plants, which could lead to a doubling of prices and production slowdown.

This would be bad news for the U.S. The oil and gas industry, and pipeline production, is responsible for tens of thousands of U.S. jobs. The Keystone XL pipeline is expected to create 40,000 jobs, generating more than $2.0 billion in income.

Again, no matter how well-meant Trump’s protectionist steel policies are, he is on the wrong side of history. Back in 2002, then-President George W. Bush imposed tariffs on imported steel. This resulted in higher steel prices and an economic slowdown that led to the loss of 200,000 jobs. That’s more than the number of jobs the entire U.S. steel industry supports.

Should Trump insist on only using U.S. steel in oil and gas pipelines, it could also backfire on Republicans. That is, if you think the 2016 Pennsylvania election results mean anything. Pennsylvania was one of the states that helped usher Trump into the White House; but his victory there was razor thin.

Out of the six million votes cast in Pennsylvania, Trump won by just 44,292 votes, a difference of 0.72%. This was the first time a Republican had carried Pennsylvania since George H.W. Bush did in 1988.

Trump’s slim victory is attributed in large part to the rural vote. That could vanish if steel jobs in rural areas of Pennsylvania disappear, like with the Dura-Bond layoffs.


Sources

WARN Notices,” Pennsylvania Department of Labor and Industry, last accessed October 13, 2017.

Steelton plant to lay off more than 100 workers,” Penn Live, October 12, 2017.

Size Matters: Which Are the Top 10 Steel-Producing Companies?” Market Realist, September 18, 2017.

Trump plan to use only U.S. steel in pipelines will raise prices and cause layoffs,” The Philadelphia Inquirer, September 11, 2017.

Pennsylvania Results,” The New York Times, November 9, 2016.

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