Thomas Steel recovering after ruling stamps out unfair competition
When Thomas Steel Strip began losing 10 to 15 percent of its sales volume to foreign competitors unfairly dumping products in the United States, plant management knew they had to act fast or the future of the nearly century-old Warren plant was looking grave.
“There’s not too much to say. Forty-five percent is what the Department of Commerce found, and that’s where you start to get upset,” Tata Steel Plating President and CEO William Boyd said last week as he walked through the Thomas Steel Strip plant, humming along again on three shifts.
Boyd was referring to the dumping margin, or percentage of the steel’s real value that Japanese producers were charging for their products.
Earlier this month, the International Trade Commission sided with the Warren steel producer in a complaint it filed more than a year ago alleging Japanese steel makers were dumping the highly specialized annealed nickel-plated steel products in the United States at prices far below the amount it costs to produce them. Producers in foreign countries often are subsidized by their governments allowing them to sell products to U.S. users at prices below actual production costs.
“We also had to reduce our prices. It pushed us from a profitable organization, and if we hadn’t filed it, our future would have been in doubt,” Boyd said. “We are not looking for a free lunch. We are pretty confident we can face up to low-cost competition, provided that it’s fair competition.”
Thomas Steel Strip has been operating on Warren’s west side since 1920. Today the company, owned by India-based Tata Steel, has evolved into America’s sole producer of a very specialized steel used for household alkaline batteries that power things like television remote controls, toys or flashlights. The steel is rolled to a thickness of about a hundredth of an inch, specially treated, cut and sold to companies like Energizer and Duracell. It’s safe to say, in fact, that any Energizer alkaline battery in your home today contains steel produced at the local plant.
About 65 percent of the plant’s products are used for batteries. Another 10 percent is used for automotive fluid lines, including brake lines for General Motors and Ford. The rest of the company’s steel is used to make shell casings on ammunition and a range of other products. The plant’s vast acreage holds about two dozen production lines, which manipulate steel brought in from Tata Steel sister company Apollo Metals in Bethlehem, Pa., or purchased from nearby domestic mills that previously included Warren’s RG Steel before its 2012 shutdown.
Thomas Steel’s 254 employees are back to work full time since the ITC ruling began to take effect, but things weren’t so cheery for a while.
The plant slowed production as customers began shifting supply purchases to the cheaper Japanese products as early as 2009. The plant shut down completely six or eight times in 2009, and after it restarted, shifts were idled on a rotating basis. Workers that retired or left were not being replaced.
Tom Jones, who represents Thomas Steel hourly workers as United Steel Workers Local 3523 president, recalled being laid off for 14 weeks in 2009, due in part to the faltering economy and the loss of customers purchasing products more cheaply from Japanese producers. He recalled a period when shifts were idled on a rotating basis.
“It’s very hard to run the mill efficiently and do that. They tried to juggle the production, but the customers want the steel when they want it,” Jones said.
Jones was among a contingent of plant leaders who traveled April 1 to Washington, D.C., to testify before the ITC.
“It was an honor and a privilege to speak for the hourly workers and all the workers at the plant,” Jones said. During his testimony he called the shrinking production volume “out of control” and said it was leading to a reduced workforce, triggered “not from a poor product but from unfair trade practices.”
Other support for Thomas’ case came from federal legislators, including U.S. Rep. Tim Ryan and U.S. Senators Sherrod Brown and Rob Portman.
Jones also had a brief opportunity to speak to three of the five commissioners when they spent three hours touring the Warren mill with Boyd and other management about a week before the hearing. They made the trip to Warren to see first-hand the plant’s unique annealing process, and to speak to management and employees.
Boyd and Mike Hartman, Tata Steel Plating’s director of Quality & Technical Services for Thomas Steel, said they had not expected a personal visit from the commission members but were thrilled when the opportunity arose.
“We are a good company, a company worth defending,” Boyd said. “Not only did you have the (management) talking, but also the steel workers talking about the job opportunities in Warren, the good-paying jobs, benefits, good working conditions. These jobs are definitely worth fighting for.”
Jones’ Washington, D.C., testimony echoed that sentiment.
“This is a job where you could have one person in the household working, have two or three kids and still have a comfortable life,” he testified.
Finally, on May 2 five members of the International Trade Commission voted unanimously that the U.S. industry is being materially injured or threatened by imports of diffusion-annealed, nickel-plated flat-rolled steel products from Japan being sold in the United States at less than fair value. The final report will not be made public until June 6, but a preliminary ruling had determined the dumping margins equaled about 48 to 78 percent of the value of the imported goods.
As a result of the ITC’s determination, antidumping duties are being added to imports of the product from Japan, allowing Thomas to remain competitive and profitable.
The ITC process is lengthy, but Hartman and Boyd believe it works.
“There’s a great deal of work involved. That’s as much as you can ask to see that process completed in a year,” Boyd said. “Would we like to see that done faster? Yes, I guess we would, but we want it done right.”
Boyd and Hartman said they worry little about loopholes that could lead Japanese or other foreign producers to maneuver around border police to get their products back into the country. Now the delicate task at hand involves reattracting business from companies that had been purchasing their supplies at reduced costs from Japanese producers.
“We have to have highly qualified, highly motivated, highly knowledgeable workers. That’s how we can be competitive,” Boyd said. To overcome the higher costs for good domestic labor, he said the company simply must operate “smarter” than foreign producers.
The company already is seeing the effects of the ruling after a favorable preliminary ruling led customers to begin returning business to Thomas.
As a result of the duties, members of the plant’s aging workforce who retire now will be replaced. Patty Mohney, director of Human Resources, noted the average age of the plant’s worker is 56, and the average years of service is about 18.
With the trade issue behind them, Jones said he will turn his focus on a fight for new capital investments at the plant, which has seen no major investment for more than 10 years, before Tata Steel’s 2007 acquisition of Thomas through its purchase of then-owner Corus.
Boyd said major investments have slowed largely because the existing machinery remains up-to-date, other than ongoing maintenance or IT upgrades.
“There have been no major technological break-throughs that would make the equipment obsolete,” Boyd said.
“Most of our equipment is over 15 years old. You can’t compete in the modern global economy using old equipment,” Jones said. “If Tata Steel Europe doesn’t start to invest in capital improvements, it doesn’t matter how many trade cases you win.”
But until the company regains much of the business it lost in the Great Recession coupled with trade battles, large investments are not expected to be on the table.
“They lost about 20 percent of their sales volume and that has never recovered since the recession of ’08, so we have to have a very sound, well-reasoned idea to plan for a capital investment,” Boyd said.
In the meantime, Jones said dedication of the steel workers will continue.
“Everybody there wants to go to work, do the job and do it right and do it safely and know they have a job to go to the next day. In the end, we all want the same thing,” Jones said. “When I walked in on my first day, I didn’t even know what they did there, but I knew I had walked into a little piece of heaven.”