PITTSBURGH The lockout of
unionized workers at U.S. Steel Corp.s Lake Erie Works
will put further pressure on the Ontario ferrous scrap market
and could have a trickle-down effect on other major scrap
regions, according to market participants.
The Pittsburgh-based steelmaker
initiated the lockout of union workers at 9 a.m. April 28 after
labor negotiations between the two sides failed. Although it is
still too early to estimate how long the lockout could last or
to what extent the steel mill will be able to continue to
operate, scrap market participants predicted the action could
leave some material usually sold into the mill looking for new
The company did not respond to
requests for comment about its planned scrap purchase program
during the lockout, and it has not announced any plans to stop
producing. In fact, the union claimed in early April that the
company was teaching nonunion workers how to operate the
Nanticoke, Ontario-based complexs hot-strip mill,
indicating that it planned to continue to produce metal to some
amm.com, April 8).
Nonetheless, scrap market
players are still expecting the raw materials market to feel
the lockouts impact in the form of a possible oversupply
situation for some grades and expected downward movement in
"I have already been talking to
a lot of people and you are going to see plate and structural
scrap (P&S) offered into Detroit or sent to Buffalo, where
it can be transloaded and resold into the Pittsburgh market,"
said one scrap supplier to mills in the Ontario region. "Plate
and structural is plentiful and this could create a glut in
A New York scrapyard owner
agreed that the lockout could result in an oversupply of some
scrap grades. "This definitely has an impact. U.S. Steel is the
leading buyer of P&S in the region," he said. "While it
will have a greater effect on the guys in Ontario, western New
York will be the second-largest area affected. Material from
Ontario wont move east. It will move to Detroit because
of the easy trucking route."
Mills in Cleveland and
Youngstown, Ohio, also could benefit from the expected influx
of P&S usually slated for Lake Erie Works, the scrapyard
U.S. Steels Lake Erie mill
purchased scrap in March but was out of the market in April for
a reline, sources familiar with the mill told AMM at
the time. Scrap sources suggested that the April reline was
strategically timed by the steelmaker, which was aware of the
pending contract vote.
As a result, the lockout
wont have much of an effect on the scrap market, at least
in the short term, one scrap broker said. "I cant see
their absence making a difference in May because they
didnt buy in April and it was expected this month would
be the same. But if this goes on for a prolonged period, it
will have a major impact."
A lockout during the last
contract negotiations at Lake Erie Works lasted eight months
before the two sides reached a three-year deal (
amm.com, April 16, 2010).
In addition to P&S, the
Canadian mill consumes shredded scrap, heavy melting scrap and
bundles. Shredded scrap and bundles could feel the sting of the
lockout, but to a lesser degree than P&S, sources said.
"On grades like shred and prime,
there will be an impact in Ontario with the other mills not
having to compete on price," the broker said.
Meanwhile, two other Ontario
mills are running well but a third mill has been leaner in its
scrap buys due to a soft order book, according to sources.