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Blame China?

Originally Posted by Katie Memmel via Steel Orbis

Although US Steel’s year of seemingly never-ending layoff notices isn’t news within the US steel industry, the trend has apparently caught the notice of mainstream news. In an editorial earlier this month, the Washington Post argued that US Steel’s downsizing is a direct result of the Chinese steel industry.

Again, blaming China for all the US industry’s woes isn’t news, but reporters with little experience in the industry who rely on corporate press releases and corporation-friendly news sources (such as the Wall Street Journal, which was referenced in the Post’s article) to make sweeping generalizations should be.

The most obvious argument against the assumption that Chinese imports are the primary reason for US Steel’s “pink slip spree” is to look around at other major US steel producers. Nucor, AK Steel and Steel Dynamics Inc. have not dominated the headlines with layoffs this year. Then again, with a few exceptions, Nucor, AK Steel and Steel Dynamics Inc. have reported generally positive quarterly results in the last few years, while US Steel has reported net losses nearly every time.

Miserable quarterly and yearly results were the impetus for the company’s Carnegie Way strategy announced two years ago, which seeks to streamline operations to become the most efficient US steelmaker, if not the largest. And part of this streamlining, naturally, takes the form of mass layoffs—the most recent, this week, includes over 2,000 employees at its Granite City facility.

That’s not to say that the global market has not been a factor—US Steel has idled several pipe and tubular plants this quarter  after plunging oil prices decimated pipe demand in the US, along with competitive imports of OCTG and line pipe from Korea and other sources other than China. As such, blaming China exclusively is almost as short-sighted as the Post’s proposed resolution to the problem: petition the US government for a dumping investigation, which US steel producers have already been doing for years.

US Steel’s layoff notices might sound lamentable, but the reality is that the company is doing exactly what it meant to do when it announced its Carnegie Way initiative in 2013. It’s unfortunate for the workers of course, but they might be able to do more than the Post’s directive to “figure out something else.” Namely, applying at one of the many US steel producers who aren’t purposely downsizing.

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