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Aug 06, 2023

Uncertainty surrounds steel industry’s future in northwest Indiana

The CEO of the Northwest Indiana Forum said the announcement by Pittsburgh-based U.S. Steel Corp. that it is exploring a potential sale was not a complete surprise. The steelmaker, which founded the

The CEO of the Northwest Indiana Forum said the announcement by Pittsburgh-based U.S. Steel Corp. that it is exploring a potential sale was not a complete surprise.

The steelmaker, which founded the city of Gary with its Gary Works operation that at one time employed 30,000 people, said last week that it rejected $7.3 billion buyout offer from rival Cleveland-Cliffs Inc.

“We’ve seen some indications from the activity that’s happening around U.S. Steel to continue to tighten up their portfolio,” Heather Ennis said. “So, there’s been speculation that a sale might come about at some point.”

Ennis discussed what a potential sale could mean for the region in an interview with Around INdiana Reporter Mary-Rachel Redman.

“It’s a private conversation between two private entities and business,” she said. “So, there’s always speculation and always imagining what’s going to come next from this, but with the opportunity of fully integrated steel that we have here in northwest Indiana, those assets are still going to be critical to the economy.”

U.S. Steel has operated in northwest Indiana for 122 years. And the company continues to see success, according to Joseph S. Pete, who covers the steel industry for our partners at The Times of Northwest Indiana.

“U.S. Steel just had two of its most profitable quarters in its entire 122-year history,” Pete said. “Last year, the company has been doing relatively well; it had a $500 million profit roughly in the second quarter. The steel market’s been pretty strong and robust. The stock isn’t depressed. The company isn’t struggling.”

Pete reported last week that the news came as a shock to steelworkers throughout the region. But he says the move could’ve been anticipated in retrospect with Cleveland-Cliffs’ recent acquisitions of ArcelorMittal USA for $1.4 billion, as well as AK Steel, in 2020.

“Cleveland-Cliffs has been trying to really consolidate the vertically integrated steel industry,” Pete said. “They weren’t even making steel three years ago, they were an iron ore producer. And they’re looking to kind of further consolidate the industry and have more leverage, especially over automakers and the prices that automakers will pay for hot rolled steel.”

Since the initial announcement, other players have come on the scene to potentially acquire U.S. Steel. Pittsburgh-based Esmark, which is run by a former U.S. Steel executive, made an all-cash offer to buy the company for $7.8 billion.

Additionally, The Times reported that ArcelorMittal is purportedly considering a bid.

Currently, over 20% of the nation’s steel is made in northwest Indiana. Despite all the rumors and speculation, Ennis said there are high expectations that the region will continue to be a major steel producer.

“The steel that is produced here is different than steel that’s produced through arc furnaces or other other types of furnaces,” said Ennis. “This is really critical in order to be able to build ships and submarines and things that are critical to the defense of our nation. So really, it plays a high role in the national economy. So we feel confident that we will still be able to see activity and great product out of these assets.”

However, Ennis noted that while the steel industry will continue to be a critically important market, it is important for northwest Indiana to continue to evolve and diversify its economy.

“That’s why we’re making investments in things like the quantum corridor and why we’re looking at opportunities to continue to better connect ourselves with the city of Chicago through the investments that have been made in the commuter rail line,” she said. “So really, I think that industry is going to continue to evolve and players may come and go from it.”

Pete said it will be difficult to predict what will happen next, but noted that a potential sale to Cleveland-Cliffs could create antitrust issues.

“[Cleveland-Cliffs] would end up as the only integrated vertically integrated steel maker left standing, supplying automakers, appliance makers, other manufacturers. They would also control about 100% of the iron ore. It remains to be seen whether the feds will go for that.”