GARY | U.S. Steel is shutting down half of the coke batteries at Gary Works as part of an overall cost-cutting strategy the company is pursuing after failing to turn an annual profit in five years.
The Pittsburgh-based steelmaker said earlier this week it would shutter two of its oldest and most outdated coke batteries, which were nearing the end of their useful lives. The main reason is because they would have soon needed major maintenance work and would have cost too much to fix up, said CEO Mario Longhi during a conference call with investors.
About 120 workers are employed at the coke batteries, but no layoffs are expected, U.S. Steel spokeswoman Sarah Cassella said. All of the affected workers will be transferred to other positions within the massive steel mill, which employs 5,000 people and sprawls across seven miles of lakeshore.
Coke batteries, which play a key role in steelmaking, are sets of ovens that process coal into purified coke so it can be fed into the blast furnaces that forge the metal. The two in Gary that will be closed date back to the 1950s and were the two highest-cost batteries in the U.S. Steel portfolio, Longhi said.
Attrition, especially from the retirement of aging steelworkers, will let U.S. Steel restructure the mill's operations without any layoffs. Longhi also said it was a lean operation, making it easier to transfer the affected employees.
Despite the closure of the coke batteries, U.S. Steel is investing in Gary Works, its largest manufacturing plant. The company expects to increase its repair and maintenance spending by $60 million in the fourth quarter, and most of that capital will go toward a reline of a blast furnace at the mill.
The mill will continue to be serviced by the remaining two coke batteries. Some of the displaced workers might be transferred to those batteries, or to other parts of the mill, depending on their individual skills and experience.
U.S. Steel closed the smaller No. 5 coke battery - which employed 25 workers - on Oct. 4, Cassella said. The larger No. 7 battery - which employs 95 - will be taken offline by the end of the year. Both were built in 1954.
The steelmaker expects to save $75 million by closing the coke batteries, shutting down the Hamilton Works mill in Canada, ending the Double Eagle joint venture in Detroit and canceling an iron ore contract.
U.S. Steel is reviewing all its expenses and looking for places to cut, with the aim of becoming profitable during good times and bad, Longhi said. The steel industry is traditionally a cyclical business that prospers during boom times and slumps during downturns.
"Our aim is to be profitable regardless of market conditions," Longhi said. "The key is sustainability."
Executive vice president and chief financial officer David Burritt said changes needed to be made since the steelmaker last turned an annual profit in 2008.
"You're not happy," he told shareholders. "We're not happy. We need to fix the business."