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Final Thoughts – Steel Market Update

by Clarence Jones

U.S. Steel Sale and UAW Union Strike: Possible Developments

In recent weeks, two major events have taken center stage in the news – the potential sale of U.S. Steel and the United Auto Workers (UAW) union strike. Let’s take a closer look at some possible developments in each of these situations.

Starting with the U.S. Steel sale, it was revealed that Stelco, a Canadian steelmaker, has expressed interest in acquiring U.S. Steel. This came as a surprise to many, considering Stelco’s smaller size compared to the Pittsburgh-based U.S. Steel. However, history has shown us that smaller players can sometimes make significant acquisitions in the steel industry. For example, in 2007, SSAB acquired Ipsco for $7.7 billion, and subsequently sold off its tubular operations to Russian steelmakers.

While there have been reports of potential suitors buying “all” of U.S. Steel, it is unlikely that a single buyer would acquire the entirety of the company. U.S. Steel has various assets and operations, including integrated mills, energy tubular facilities, mining operations, and international steel mills. It is more plausible to envision a scenario where U.S. Steel is divided among several companies involved in the sales process, or even new players entering the picture.

One potential constellation of companies could include Big River Steel, AM/NS Calvert, and ArcelorMittal’s DRI/HBI plant. Additionally, Nippon Steel, with whom ArcelorMittal has a partnership abroad, might also be a contender. These types of collaborations among steelmakers could result in a more strategic and efficient use of resources.

While the U.S. Steel sales process has been relatively quiet in recent weeks, this could indicate that serious negotiations are taking place behind the scenes. The recent surge in news about the talks suggests that we may be closer to seeing some official announcements regarding the sale.

Turning to the UAW union strike, the UAW has expanded its strike to include parts distribution plants at Stellantis and General Motors. This strike has already had an impact on parts makers, with layoffs and disruptions to the supply chain. For example, LM Manufacturing, a joint venture with Magna International, had to lay off approximately 650 workers due to the strike. Magna is a major supplier to the automotive industry, so any disruptions there are worth monitoring.

The expanding web of UAW strikes could potentially affect not only the “Big Three” automakers with operations in the Midwest but also non-union shops in the South. An example of this is the strike at ZF Group in Tuscaloosa, Alabama, which has not impacted production at a nearby Mercedes-Benz plant. However, if the strike continues and spreads to more suppliers, it could indirectly impact non-union automakers and their profitability.

Given the recent events surrounding the automotive market, it is important to stay informed. On October 4 at 11 a.m. ET, there will be a Community Chat with Ken Simonson, the chief economist of the Associated General Contractors of America (AGC). This chat will delve into the outlook for the construction industry and the challenges of finding and retaining skilled workers. It is a valuable opportunity to gain insights into the construction sector, so mark your calendars and register for the event.

In conclusion, the potential sale of U.S. Steel and the UAW union strike have been significant events in the industry. There are various possibilities for the future of U.S. Steel, including different companies collaborating or dividing up the assets. The UAW strike has already had repercussions on parts makers and could potentially impact non-union automakers as well. Staying informed and participating in industry discussions, such as the upcoming chat on construction, can provide valuable insights into these developments.

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