US Steel Lays Off 614 Workers, Blames Collapse In Oil Prices

According to a company spokesman, United States Steel Corporation will leave its Lorain, Ohio, plant idle, with the loss of 614 jobs.

In an announcement on Tuesday the company claimed that the collapse in global oil prices is behind its decision. Prices of Brent crude recently dipped below $50 for the first time since 2009, meaning that energy companies are less inclined to drill new oil wells, which in turn reduces demand for the tubes and pipes produced by the plant.

United States Steel

Rapid deteroriation

“The company has suddenly lost a great deal of business because of the recent downturn in the oil industry,” wrote Tom McDermott, president of United Steelworkers local 1104. “What appeared just a few short weeks ago as being a productive year, [with new hires in December and extra turns going on], has most abruptly turned sour.”

The layoffs will start on 8 March, and more are forecast “through May 2015,” according to a letter written by a United States Steel official..

Workers at the plant in Lorain will find out if they are losing their jobs at a meeting set to take place on Wednesday evening.

United States Steel: Oil country tubular goods industry

The past few years have seen huge development in an industry known as oil country tubular goods (OCTG), due to unprecedented levels of drilling for shale gas and new oil wells in the Gulf of Mexico.

United States Steel has invested heavily in OCTG as part of its efforts to prevent the company recording 6 straight years of losses. The tubular division recorded an operating profit of $23 million over the first 9 months of 2010, a figure that increased to $140 million for 2014.

Back in October CEO Mario Longhi claimed that fourth quarter results would be unaffected by a global collapse in oil prices, but he sagely predicted that “the recent turmoil in the crude oil markets could have an impact on the level of drilling activity as we move into the new year.”

He went on to claim that the industry is “at a transitional moment that is going to take a little bit of time for people to sort out exactly where this is going to go.”

Susan Murphy, publisher of the OCTG Situation Report, expects spending on exploration and production to fall approximately 20% year on year. The effects of the oil price collapse continue to be felt.