Automotive, oil and gas industries reinvigorate steel production in Ohio

Steelmakers in the midwestern state are planning to invest up to 1.5 billion dollars to expand their production facilities up to 2 million square feet just to fill the orders, according to an article by Keith Schneider in the New York Times.

The steel industry’s collapse essentially foreshadowed the problems the US auto industry experienced, though to a much greater degree. Nevertheless, their difficulties came from similar business errors – failure to prepare or even recognize the need for change, keep abreast of trends and compete in a global marketplace.

The US steel industry, once the industrial base on which men like Andrew Carnegie and J.P. Morgan built their considerable empires, began to collapse to foreign competition in the 1960’s. By the 1980’s the industry was in ruins as steel mills closed throughout the country, leaving thousands of workers not only unemployed but suffering from clinical depression, alcoholism and suicidal tendencies.

Though small mills have remained and even thrived in the interim, cannibalizing used steel to use in their forges; this is the first significant move to expand new US steel production in over 30 years.

It was Canton’s Timken Company that was idle 27 days in 2009, due to the lack of orders either foreign or domestic. Now the demand for oil and gas drilling, obviously connected to the US auto industry, is driving their business to such a degree they are adding an 80,000 sq. ft. addition at a cost of $200 million.

“The need for specialty steel, much of it for oil and natural gas producers, is high in the United States and around the world,” Schneider quoted Salvatore J. Miraglia Jr., the president of Timken’s steel group as saying. “We see demand in that market continuing to be healthy for quite some time.”

The new Timken building will soar 26 stories high greatly increase the plant’s ability to cast steel billets to fabricate parts for drilling rigs, heavy equipment and other needs of the oil and gas industry. Two more buildings are under construction at the 27-year-old mill, to contain a forge press and mineral processing installation to add strengtheners to molten steel.

Timken isn’t the only such expansion however. United States Steel spent $100 million on a 325,000-square-foot mill that opened last October in Lorain OH. to make pipe for drilling. The French firm Vallourec & Mannesmann is working on a $650 million, 1.1 million sq. ft. steel pipe production facility in Youngstown, with a collateral 200,000-square-foot mill to thread the pipes.

Japan’s Kobe Steel is collaborating with United States Steel on a $400 million, 454,000 sq. ft. expansion of the Pro-Tec plant in Leipsic OH to cater to the booming market for high-strength lightweight steel used more and more by makers of high mileage vehicles.

“We haven’t had this kind of expansion in steel since the 1980s,” said Eric Burkland, the president of the Ohio Manufacturers’ Association. “It’s a tremendous turnaround.”

What all this means to Ohio residents is 630 new jobs in a stating already below the national unemployment rate. In the Midwestern state unemployment was down to 7.5 percent in March, compared to 8.2 percent nationwide, and way below the recession peak of 10.6 percent in July 2009.

Burkland thinks a lot of the rebound is a direct result of the auto industry’s resurgence.

“People feel more confident and they are buying cars again,” he said.

Automotive manufacturers are big customers for US produced steel. Sales are on track this year to top 14.5 million units sold, as we near a return to the peak of 17 million in 2005. The Ohio Department of Development estimates 72,000 people are currently employed by vehicle assembly plants and dozens of parts manufacturing firms within the state.

That not only good news for Ohio, it’s good new for us all.