Labor talks are under way between the United Steelworkers and the nation’s largest steelmakers ArcelorMittal and U.S. Steel to replace the current three-year contract that expires Sept. 1. The outcome of the negotiations has implications for the entire steel supply chain, reports Sandy Williams of Steel Market Update. (For Williams’ complete take on the current contract talks, see the Business Topics column in MCN’s August print edition.)
During the last negotiation period in 2012, ArcelorMittal asked the union to cut wages by 36 percent and eliminate retiree benefits for new hires. The company also asked for the right to cut wages and hours worked in times of reduced production. U.S. Steel focused on capping rising health care and pension costs for current and retired employees.
U.S. Steel settled first, offering union members annual wage hikes of 2.0 and 2.5 percent, plus protection of health care benefits. ArcelorMittal took a harder line and began preparations for a work stoppage in anticipation of union resistance. Eventually, about six weeks later, ArcelorMittal employees received a package similar to U.S. Steel’s in exchange for cuts to retiree pension and health care benefits, according to Williams.
After the contract ratification three years ago, USW Local 6787 President Paul Gipson commented on the difficulties of the ArcelorMittal negotiations: “Management did accomplish one objective in this round of talks. The long-term relationship between our union and this multinational giant has been severely damaged,” he said. “Save your money, three years is not that far away.”
Today, three years later, the contract talks may be equally contentious, Williams says. They come at a time when imports have put a major dent in production and domestic demand. Both ArcelorMittal and U.S. Steel have been working for the past year to trim costs, which has led to closures and temporary layoffs.
The USW is well aware of the challenges the steel industry faces and has been supportive of trade legislation to deal with the onslaught of unfairly priced imports, but its support is likely to stop short of cuts in pay or health care and retirement benefits for its members. As USW Bargaining Committee Chairman Tom Conway was quoted as saying, “Our goal this summer is to get a labor agreement, but not at any cost.”
Steel strikes are a rarity today, but how might a job action affect the industry if the current negotiations fail? There is some evidence the supply chain is padding its inventory, just in case a labor situation develops, says Williams. She points to a recent Platts blog, which suggests that a supply disruption would not necessarily be all negative: “The market has been mostly down or flat this year. With demand being so lackluster, market players are looking for any help they can get, including a work stoppage that could tighten supply and raise prices.”
On the other hand, a strike or a lockout and the resulting reduction in domestic production could open the door to more foreign steel imports, renewing pressure on prices and casting doubt on the outcome of various antidumping trade cases. Labor negotiations are also ongoing in the automotive industry, which could affect production and demand in one of steel’s biggest markets. The combination of these various factors could have a negative ripple effect across the supply chain, Williams says.
As Steel Market Update states, labor unrest and lack of trust between union and management produces no winners. Let’s hope the current negotiations prove less acrimonious than the last contract talks.
The labor situation will be a timely topic of discussion at SMU’s Steel Summit 2015 conference Sept. 1-2 in Atlanta. For more information and registration, visit www.steelmarketupdate.com