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Auto manufacturing shutdown to take toll on Region's steel industry
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Auto manufacturing shutdown to take toll on Region's steel industry

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Auto manufacturing shutdown to take toll on Region's steel industry

A view from the control room at ArcelorMittal Indiana Harbor shows a bar of steel making its way through the 80-inch hot strip mill on its way to becoming a coil of steel. 

Automakers across the country are temporarily shutting down auto plants to clean and sanitize them in a bid to stop the spread of coronavirus, which potentially could have a major impact on the Region's steel mills.

The Big 3 Detroit automakers are closing through at least next Sunday for deep cleans, and other automakers such as Honda and Subaru also announced they are pausing their American manufacturing operations.

Nationally, the automotive industry accounts for a full 25% of U.S. steel demand. Integrated steel mills such as those that line the Lake Michigan lakeshore in Northwest Indiana account for more than half of automotive sheet production in the United States and "will be the hardest hit by plant shutdowns," KeyBanc analyst Phil Gibbs said.

Gibbs said in a note that the shutdowns likely would result in "heavy shipment ramifications as well as pricing degradation."

U.S. Steel warned investors it expected to lose 80 cents a share in first quarter. U.S. Steel said there was significant uncertainty about demand, given that it was unknown how long the "unprecedented and rapidly evolving situation" would last and what impact it would ultimately have on steel consumption this year.

"We continue to monitor the impacts of the coronavirus and are following policies and procedures recommended by health and government officials to ensure our employees are working in a safe and healthy environment," U.S. Steel CEO David Burritt said. "We understand the situation remains fluid and we are preparing our operations to be flexible as circumstances may warrant. Our regional supply chain minimizes the risk of significant supply-chain-related production disruptions and we continue to work with our customers to provide value-added steel solutions as we execute our world-competitive, ‘best of both’ strategy.”

ArcelorMittal spokesperson William Steers said it was not yet known how the company would handle a potentially steep drop-off in demand.

"The impact of COVID-19 crisis across all sectors of the economy and industries is evolving rapidly and the steel industry is no different," he said.

"We are only beginning to understand the full impact of COVID-19 on the end markets that our products and customers serve due to the rapidly evolving market implications and unknown duration of this crisis. As we continue to engage in conversations with our customers and market dynamics become clearer, we will be better positioned to address the actions that may be required to align our production with customer demand."

Steelmakers also are lobbying for the steel manufacturing sector and its workers to be categorized as “essential” when shelter-in-place orders are imposed in response to the COVID-19 pandemic to ensure steel mills can keep running if most people are told to stay at home for the public's safety.

“As the secretary of commerce determined in 2018, steel is important to national security well beyond obvious defense applications to encompass critical infrastructure and transportation, electric power and energy generation systems, as well as water systems. Without access to a reliable source of steel production during this crisis, our national and economic security will be severely impacted," American Iron and Steel Institute President Thomas Gibson wrote in a letter to the administration.

"As businesses across the nation have been ordered by many state and local governments to limit or cease operations in recent days, several states have specifically exempted industrial manufacturing as 'essential,'" he wrote in his letter. "We urge the Trump administration to provide consistent nationwide guidance by formally recognizing critical manufacturing sectors that are essential to our country’s critical infrastructure and the response to COVID-19. I urge the administration to identify the steel manufacturing sector and its workers as essential when drafting and enforcing shelter-in-place orders and other directives."

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Business Reporter

Joseph S. Pete is a Lisagor Award-winning business reporter who covers steel, industry, unions, the ports, retail, banking and more. The Indiana University grad has been with The Times since 2013 and blogs about craft beer, culture and the military.

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