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Year in Review: Mixed picture for heavy industry in 2019 despite more than $2 billion in investment

Year in Review: Mixed picture for heavy industry in 2019 despite more than $2 billion in investment


The year 2019 was a mixed one for heavy industry in the Calumet Region, despite a serious influx of cash.

Ford's Chicago Assembly Plant in Hegewisch, the BP Whiting Refinery and the Gary Works steel mill made major investments that collectively totaled more than $2 billion. But Northwest Indiana's steel mills have struggled amid tough market conditions and depressed prices, leading to the idling of the No. 8 blast furnace at Gary Works and East Chicago Tin.

"2019 has been mostly negative for heavy industry, with the most substantial changes in Northwest Indiana occurring in the steel industry," Indiana University Northwest Assistant Professor of Economics Micah Pollak said. "When the first tariffs were imposed at the start of 2018, they provided a clear benefit for the steel industry. For the next six to eight months, steel futures, inventories, orders, shipments, production and the stock of the major steel producers all rose."

Steel prices peaked last summer and have been declining ever since, cutting into the profitability of steelmakers. U.S. Steel lost $84 million in the third quarter amid the tough environment of weakened prices.

"As the trade war dragged on and these tariffs and their extensions shifted from a temporary negotiating tool to a semi-permanent fixture, the longer-term effects of increased barriers to trade came into play, wiping out earlier gains," Pollak said. "In the last 12 months steel futures have fallen 38%, steel inventories, orders and shipments have all dropped between 6% to 8%, the shares of the two major steel producers in Indiana have fallen 51% for U.S. Steel and 37% for ArcelorMittal. Steel production in Indiana has fallen by 5.4%."

While unemployment may be low and the stock market may be bullish, the entire manufacturing industry faces headwinds, Pollak said.

"This decline has not only been limited to the steel industry, but broader manufacturing as well," Pollak said. "The Manufacturing Purchasing Managers Index, which is published by the Institute for Supply Management and is an important gauge of manufacturing health, has fallen by 12.2 points, or -20%, in the last year, and September marked its lowest level since June 2009. This suggests a dismal outlook for manufacturing in the next year. In addition, other leading economic indicators suggest the U.S. economy may enter a recession in the next 6 to 12 months without a clear end to the ongoing trade war and substantial change in our economic fundamentals."

Despite the slowdown, industrial employers in the Region have pressed forward with major investments they planned earlier. Ford pumped $1 billion in the Chicago Stamping Plant in Chicago Heights and the Chicago Assembly Plant in Hegewisch to prep them to make the new 2020 model of the Ford Explorer, a new hybrid Police Interceptor Utility and the Lincoln Aviator. 

The massive retooling of the 95-year-old automotive factory on the banks of the Calumet River at 12600 S. Torrence Ave. in Hegewisch installed 600 more robots, 3D printing machines, 160 giant ceiling fans to make it more comfortable for workers, and multiple amenities for workers, including more break rooms. Last year, the 2.8 million-square-foot plant made more than 380,000 vehicles, with a new one coming off the assembly line every 52 seconds or so.

The investment resulted in the hiring of hundreds of more workers at both plants, which together now employ more than 7,000 workers just across the state line in neighboring Illinois.

Along the lakeshore, BP invested $300 million in a massive project at the BP Whiting Refinery that resulted in as many as 500 construction jobs at the time and will bring 12 more permanent jobs to the sprawling refinery that takes up more than 2,400 acres across the Lake Michigan shoreline in Whiting, Hammond and East Chicago. The former Standard Oil Refinery is installing a naphtha hydrotreater to meet a new U.S. Environmental Protection Agency mandate to ensure that gasoline has less than 10 parts per million of sulfur, instead of the existing standard of 30 parts per million.

U.S. Steel is pumping $750 million into the Gary Works mill to revitalize its blast furnaces, steel shop, hot strip mill and casters over the next few years. U.S. Steel aims to maximize productivity at the 113-year-old mill that stretches across seven miles of shoreline, pumping out 7.5 million tons a year, making it U.S. Steel's largest steel mill in the world.

The Pittsburgh-based steelmaker, one of Northwest Indiana's employers, has, however, been going through a rough patch. U.S. Steel idled Blast Furnace #8, which can make 3,300 tons of pig iron to be turned into steel, as well as a blast furnace near Detroit. U.S. Steel also idled East Chicago Tin, displacing more than 300 steelworkers as it consolidates its tin business at Gary Works and East Chicago Tin. It planned to transfer more than half the affected workers, keeping the total number of layoffs to around 150.

Shares of U.S. Steel fell more than 40% during 2019 as the company — once the largest steelmaker in the world — continued to shed market capitalization. The steelmaker looked to diversify by buying out the Big River Steel mini-mill in Arkansas and said it would cut more than $200 million in annual operating costs.

But U.S. Steel CEO David Burritt warned during a conference call with investors that "market headwinds persist."


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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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