United States Steel Corp. said it plans to make its Texas and Ohio plants temporarily idle and lay off 756 workers amid the collapse in oil prices, which has weakened the demand from oil industry, media reports said. The plants make steel pipe and tube for oil and gas exploration and drilling. On Wednesday, Brent crude oil prices fell below $50 a barrel for the first time since May 2009.
The company plans to lay off 614 workers at its Lorain, Ohio plant, which produces 700,777 tons of pipes annually, while about 142 people will exit the Houston plant, the Wall Street Journal reported. The company had sent layoff notices to its workers on Monday citing weak market conditions for its move, Reuters reported. The layoffs will reportedly begin on March 8. The workers will find out who is being laid off at a meeting on Wednesday, the Journal reported, citing U.S. Steel workers in Lorain.
“The company has suddenly lost a great deal of business because of the recent downturn in the oil industry,” Tom McDermott, president of United Steelworkers local 1104, which represents workers at the Lorain plant, wrote to workers in a letter, reviewed by the Journal, adding: “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.”
At the end of 2013, U.S. Steel had about 26,000 employees in North America and nearly 12,500 in Europe, Fortune reported.
Steel pipes and tubes have been “the company’s most reliable profit driver,” Sam Dubinsky, an analyst at Wells Fargo, said, according to the Journal. The company, which has been struggling with losses for the past five years, reportedly had a $1.7 billion deficit loss in 2013. However, its tubular division posted an operating profit of $140 million in the first nine months of 2014.
U.S. Steel shares have fallen more than 8 percent from the beginning of the year to Jan. 6.