Steelmaker in Košice cuts jobs

Rumours that the US Steel will change hands resurface.

(Source: Courtesy of USSK)

Amid rumours about a possible sale of the U.S. Steel Košice (USSK), the steel maker is reducing its labour force, launching a voluntary programme for early retirement to be followed by closing of work places. The moves come in response to a declining market hit by imports of cheap steel especially from China.

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“Adjustments of the structure of the company are linked with the persisting complicated situation on the market,” spokesman Ján Bača told The Slovak Spectator.

In efforts to reduce costs the steelmaker launched this January a voluntary programme for early retirement as of the beginning of March, offering a severance pay of a 10-fold of a monthly wage, estimated at €19,000. While a total of 200 showed interest, only 85 people were selected for the programme.

As of April 1 USSK is scrapping additional 29 work positions in management and administration. Among those affected is Anton Jura, a senior consultant and the former head of Canadian U.S. Steel, or vice-president of USSK Vladimír Jacko.

Rumours about the sale

Earlier in March rumours about he sale of USSK re-appeared while the Czech company Moravia Steel, led by Tomáš Chrenek Sr, was mentioned as a potential buyer before July 1, the Hospodárske Noviny economic daily reported in mid March. Moravia Steel denied this information and USSK refused to comment.

“I do not comment on speculation,” Bača told The Slovak Spectator.

For Ľuboš Vančo, chairman of the Partner Board of KPMG in Slovakia the sale of USSK makes sense.

“U.S. Steel had 15 years ago a strategy to expand not only in North America but also in other parts of the world,” Vančo told The Slovak Spectator. “This has not happened. USSK is its only plant outside North America.” 

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Vančo added that the year 2015 was bad for the group when it lost approximately 33 percent of sales and its loss was USD1.6 billion. Prices of its shares decreased by about 60 percent over the last one and half year.

“From my point of view it does not make sense for U.S. Steel to have a steel mill in Europe when they do not have ambitions to be a global player,” said Vančo. “The Slovak plant of U.S. Steel reaches significantly better results than the group, even though they are not any special. Thus I personally think that the sale makes sense.”

In terms who might be interested in USSK, Vančo recalled the bad situation in the steel sector.

“In North America steel makers suffer from low prices, import of cheap Chinese steel and the fall in oil prices what has impacted the oil industry that is a large client of steel products,” said Vančo, adding that especially groups or companies producing a different assortment of steel than in Košice may be interested as they might achieve synergy this way.

Rumours about a potential sale of USSK occurred also in 2013 when the allegedly required sum ranked between USD1 billion USD1.5 billion, according to Hospodárske Noviny. But later the USSK signed a memorandum with the Slovak government, in which it promised to remain in Košice and maintain its employment levels until 2018, while the government promised to help cut the firm’s energy and environmental bills.

Problems in the steel industry

USSK and other steel plants suffer from the import of cheap steel especially from China and call for a halt of the flood of products from China and other countries unfairly sold in Europe at dumping prices. Thousands of steel workers from across the European Union marched in Brussels on February 15 to protest dumping of cheap steel imports on the EU market, and to call on the European Commission to take action. The march was attended by about 100 workers from  USSK and took place the same day as a conference on energy-intensive industries hosted by the European Commission.

On March 16 the European Commission (EC) suggested policy measures to support the European steel sector to overcome its serious challenges, largely due to global overcapacity. It presented a communication setting out how the European steel sector can overcome its short-term and long-term challenges with the support of member states and EU institutions. According to the EC, a joint effort is needed to overcome these serious challenges fuelled by global overcapacity, a dramatic increase of exports and an unprecedented wave of unfair trading practices. High energy costs and changing market conditions require energy-intensive industries to adapt and innovate to ensure their long-term competitiveness and sustainability.

“We must do more to help the steel sector and other energy-intensive industries adapt, innovate and compete on the basis of quality, cutting-edge technology, efficient production and a highly skilled workforce,” said EC Vice-President Jyrki Katainen, as cited in a press release. “We now have a record level of anti-dumping measures on steel products in place and the Commission is determined to restore a global level playing field. We will take steps to further streamline our procedures but member states must also act together and urgently adopt our legislative proposal to modernise EU trade defence instruments and make fairer trade a reality.”

USSK welcomes that the EC is dealing with problems of the steel industry.

“We do not require advantages; we only want equal conditions for doing business on the global market,” said Bača.

From the viewpoint of USSK, it is necessary to improve usage of instruments for defence against unfair trading practices and steel makers must not be burdened by additional direct or indirect costs stemming from the EU emissions trading system.

In terms of efforts to act against dumping, USSK sees the United States as a model. 

“They imposed a 265 percent anti-dumping duty for Chinese cold-rolled steel,” said Bača. “The duty imposed in the EU on comparable material was 13 percent.”

The American owners entered the then ill-fated Východoslovenské Železiarne (VSŽ) back in 2002. Since this time it heavily invested in increasing effectiveness and ecology of the plant. USSK employer more than 12,000 people and is the biggest private employer in eastern Slovakia.

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