High Imports and Low Prices Prompt Allegheny Technologies to Idle Two Mills
12/11/2015 - Citing the abundance of low-cost imports and depressed steel prices, stainless and specialty steel producer Allegheny Technologies Inc. is indefinitely idling two of its western Pennsylvania plants.
In a statement, the company said it will shut down the standard stainless meltshop and sheet finishing operations at its Midland, Pa., USA, facility and grain-oriented electrical steel (GOES) operations at its Bagdad, Pa., USA, facility.
Midland will come off-line by the end of January 2016; the GOES operation will be mothballed by April 2016.
“The actions announced today are the result of an extensive strategic review and analysis of the current and expected medium-term market conditions affecting our U.S. flat rolled products operations,” said ATI chairman and CEO Rich Harshman in a statement.
“These actions are designed to return the (flat rolled) segment to profitability as quickly as possible and execute our strategy for sustainable long-term profitable growth.”
The company said there is no particular timeframe under which it plans to restart the mills.
“The future restart of the Midland and GOES operations, respectively, will depend on future business conditions and ATI’s ability to earn an acceptable return on invested capital on products produced at these operations,” the company said in a statement.
ATI also announced that it was reducing its quarterly dividend from 18 cents per share to 8 cents per share to conserve cash and is undertaking impairment review of its flat rolled assets.
Harshman said market conditions for ATI’s commodity stainless products have been challenging and have continued to deteriorate throughout 2015, even into the fourth quarter.
“These conditions are the result of global excess capacity, which has led to unfairly traded imports in the U.S. market, including the first half 2015 record surge of low-priced imports, primarily from China. Base selling prices have fallen throughout 2015 and are now at historic lows. In addition, falling raw material prices, primarily for nickel, has resulted in aggressive inventory reduction actions by customers,” he said.
As a result, selling prices for standard stainless sheet products have declined to 2003 levels.
“And demand for our standard sheet products is showing no signs of sustainable improvement as we head into 2016,” Harshman said.
He also said that even though the GOES business has shown some signs of improvement, it is expected to face increasingly challenging market conditions due to global excess capacity and aggressive pricing.
“An additional challenge is the move by most of our customers to high-permeability GOES products, which would require a significant capital investment by ATI. Market conditions for high-permeability GOES products do not currently support the business case for such an investment.”
The company didn’t say how many jobs are affected by the shutdowns. According to the Pittsburgh Tribune-Review newspaper, the mills employ approximately 600 union workers.
Members of the United Steelworkers union have been locked out since August after leadership let lapse a company-imposed deadline to accept what ATI called its last, best and final offer.
John Tumazos, an analyst and owner of Tumazos Very Independent Research in Holmdel, N.J., USA, said ATI's decision isn’t likely an attempt to pressure the union into concessions, adding that ATI is still projecting a loss for the first half of next year.
“In view of the deterioration of ATI's flat rolled business this year, some may question if that ‘last, best' offer was too generous,” he said. “You can't get blood from a stone.”
Midland will come off-line by the end of January 2016; the GOES operation will be mothballed by April 2016.
“The actions announced today are the result of an extensive strategic review and analysis of the current and expected medium-term market conditions affecting our U.S. flat rolled products operations,” said ATI chairman and CEO Rich Harshman in a statement.
“These actions are designed to return the (flat rolled) segment to profitability as quickly as possible and execute our strategy for sustainable long-term profitable growth.”
The company said there is no particular timeframe under which it plans to restart the mills.
“The future restart of the Midland and GOES operations, respectively, will depend on future business conditions and ATI’s ability to earn an acceptable return on invested capital on products produced at these operations,” the company said in a statement.
ATI also announced that it was reducing its quarterly dividend from 18 cents per share to 8 cents per share to conserve cash and is undertaking impairment review of its flat rolled assets.
Harshman said market conditions for ATI’s commodity stainless products have been challenging and have continued to deteriorate throughout 2015, even into the fourth quarter.
“These conditions are the result of global excess capacity, which has led to unfairly traded imports in the U.S. market, including the first half 2015 record surge of low-priced imports, primarily from China. Base selling prices have fallen throughout 2015 and are now at historic lows. In addition, falling raw material prices, primarily for nickel, has resulted in aggressive inventory reduction actions by customers,” he said.
As a result, selling prices for standard stainless sheet products have declined to 2003 levels.
“And demand for our standard sheet products is showing no signs of sustainable improvement as we head into 2016,” Harshman said.
He also said that even though the GOES business has shown some signs of improvement, it is expected to face increasingly challenging market conditions due to global excess capacity and aggressive pricing.
“An additional challenge is the move by most of our customers to high-permeability GOES products, which would require a significant capital investment by ATI. Market conditions for high-permeability GOES products do not currently support the business case for such an investment.”
The company didn’t say how many jobs are affected by the shutdowns. According to the Pittsburgh Tribune-Review newspaper, the mills employ approximately 600 union workers.
Members of the United Steelworkers union have been locked out since August after leadership let lapse a company-imposed deadline to accept what ATI called its last, best and final offer.
John Tumazos, an analyst and owner of Tumazos Very Independent Research in Holmdel, N.J., USA, said ATI's decision isn’t likely an attempt to pressure the union into concessions, adding that ATI is still projecting a loss for the first half of next year.
“In view of the deterioration of ATI's flat rolled business this year, some may question if that ‘last, best' offer was too generous,” he said. “You can't get blood from a stone.”
