From the President's Desk

July 24, 2006

MITTAL USA/USW PARTNERSHIP QUARTERLY MEETING

Pittsburgh, PA – William Penn Hotel

July 20-21, 2006

 

On Thursday, July 20, 2006, 42 Union officials representing all the Local Unions (Mittal Steel USA Divisions) were preparing for the following day’s agenda with the Management counterparts of Mittal Steel. We reflected back to the days of a very fragmented industry that struggled for market share at the expense of all our members as 34 steel companies drowning in a lake of debt. Three years and three employers later, we see a better tomorrow.

 The climate of the William Penn conference room was actually pleasant for a change. We have met as a Union in this historical hotel for more than twenty five years. Again, we would recall the good and bad times for steel and our Union.

 Today, both unions and steel corporations must identify those objectives that we must share to build a secure future for all involved. The questions asked at these meetings are very important. The information shared has tremendous value. A partnership of Union and Company must not be perceived as “need to know” or “they say, we say.” Facts are facts, and mistakes are generally made when facts are left out of the equation. “Run by the seat of your pants” takes over, and that spells disaster for everyone.

 An effective partnership can never survive in a “kissy face, huggy bear” atmosphere.

 The value of any good organization or business is always reflected in the attitude of its most valuable asset, the employees. To promote good industrial relations, everyone involved must have a clear understanding of their job, their union, and the company that they work for.

 Steel is a very valuable commodity that is used in every corner of the world. One billion tons of steel are produced each year to be consumed in many different fashions. It is extremely important to know who are the producers of this steel, who sets the standards, and how market share is established.

 

Who Are We?

To understand who we are is to know what and how much we are.

If I ask the average steelworker, “How valuable are you to your family, your union, or the company you work for,” the quickest and most accurate answer would be to your family. You may not be prepared to answer the latter, simply because the facts that you need have changed.

 If we choose to remain old-fashioned and simplify our day-to-day life, we are allowing our employer to make all the decisions that effect our future. However, if the employee, employer, and union are all on the same page and deal with the facts as they unfold, we can be a player and set the standard for our industry. This is a very simple definition of any partnership. The partnership we must have is very complex and necessary. If we are to achieve our objectives for the future, we must put old-fashioned unionism and corporate greed behind us.,

 

Arcelor/Mittal/USW

 Today we work for an employer who has a ten-year plan. The recent merger of the two largest steel companies, Arcelor/Mittal, will produce 120 million tons in a global billion ton market. It is Lakshmi Mittal’s plan over the next ten years to acquire 250 million tons of capacity. Keep in mind that Burns Harbor hopes to ship 5.4 million tons annually.

 

Lakshmi Mittal/Lou Schorsch

 The Mittal USA leader or CEO, Lou Schorsch, is optimistic with today’s projections of a very strong market environment. However, he says Mittal facilities here in the US are not performing as they should. The profit share pool for the second quarter indicates we did not do as well as we should have. However, with the increase of steel prices our profit share should be 50% greater than the last quarter. You do the math!

 We had a $70/ton increase during the second quarter. Hot bands are selling at $620/metric ton, while service centers are holding a three month supply of steel.

 

Operating Profit Per Net Ton

 

Mittal USA has a $40 operating profit per net ton.

US Steel has a $35 operating profit per net ton.

Nucor has a $105 operating profit per net ton.

Steel Dynamics has a $120 operating profit per net ton.

 

The steel losses of Mittal for the second quarter are the result of:

            Indiana Harbor:            190,000 tons lost

            Sparrows Point:              85,000 tons lost

            Burns Harbor:               270,000 tons lost

 

All of the above losses are spills, breakouts, equipment failures, etc. You do the math- about $180,000,000, the equivalent of an additional $2.00 per hour in profit sharing per USW member. This would have increased the profit share pool to an additional $45 million. Burns Harbor has the lowest cost per ton of steel produced.

 

Capital Spending

 $355 million equals about $17 per ton of improvements to the operations this year. $100 million is applied to the Mack projects this year. This must be done and be in compliance by May, 2007. We expect to have both C and D furnaces relined over the next three years.

 Arcelor/Mittal has 51 blast furnaces. We have 12 blast furnaces in Mittal USA. We are operating ten of the twelve. Two are shut down at Weirton.

 

China

China has 1.3 billion people with a 350 million ton steel capacity. China’s weakest equation of producing steel is a big one, natural resources. China’s iron ore is low-grade compared to developed markets and is still considered an emerging market. However, China could have a plan to increase exports by 50%. China’s ten-year plan is to produce 500 million tons of steel. That means 50 million tons of export to somewhere.

Mittal’s plan is based on economies of scale. Scale equals value. Control the price, and you control the industry. We must keep a close watch on developed markets versus emerging markets. Do not overlook India, who has sufficient natural resources. India plans to increase capacity by 180 million tons.

 

Ron Bloom

Ron Bloom is the economic advisor and assistant to our International Union President, Leo Gerard. Ron has the insight and knowledge of our industry. His professional background is second to none and brings a tremendous value to our Union and our industry. His untiring work and dedication have been included in many industrial studies and he plays a major role in developing the economics of consolidating our industry in relationship to working people.

 Ron has said on numerous occasions that the steel industry is served well when it chooses to get along with our Union. Our Union has a clear proven track record, and the best example would be Alleghany Telidine.

 Companies should support the single payer health care plan. Involve a joint effort to protect our US manufacturing base.

 We must have a National Energy Policy.

We must have a Fair Trade Policy.

This was a very good conference. Things are looking much better. Let’s make steel!

 On behalf of all of us here at Burns Harbor USW Local Union 6787, I would like to extend my personal appreciation to all the input and help from a very good friend and Union brother, Joe Roselle. Joe has been involved with our Union for many years and does an excellent job of providing valuable facts to our Union. Joe is an employee and Union member from the Sparrows Point division.