The Sparrows Point steel plant owned by Netherlands-based Mittal Steel Co. NV will implement voluntary layoffs beginning Oct. 15 through the end of the year as worldwide demand for steel falls and inventories rise.
The two consecutive five-week layoffs will be offered to all employees except those in maintenance, according to a memo sent to plant managers and obtained by The Sun.
It is not known how many of the plant's nearly 2,500 employees will be granted layoffs. Requests will be accepted through noon Wednesday for the first five-week period, the memo said.
United Steelworkers Local 9477 President John Cirri said yesterday that he negotiated with management for the voluntary layoffs to head off any mandatory layoffs as demand softens.
The plant has offered voluntary layoffs in the past, most recently this summer when the plant's main "L" blast furnace broke down, costing the company about 250,000 tons of steel, about a month's production. About 150 workers took voluntary layoffs of up to four weeks.
The memo also encourages managers to avoid overtime and "reduce spending to the bone."
The union and management at Sparrows Point have a history of working together to meet goals. Owner Mittal pits plants against each other to reduce costs and improve efficiency. Mittal purchased Sparrows Point in 2005 from International Steel Group Inc.
Sparrows Point is one of three plants Mittal is considering selling to satisfy the Justice Department, which is concerned that its merger with Luxembourg-based Arcelor SA will create a monopoly on tin production in North America. Mittal's first choice is to sell Canadian steelmaker Dofasco to German-owned ThyssenKrupp AG, but Arcelor refuses to let it go. During Mittal's nearly six-month hostile takeover bid, Arcelor transferred Dofasco to a Dutch foundation, which makes a sale impossible without Arcelor's consent.
Last week, Mittal Chief Financial Officer Aditya Mittal said the company preferred to sell its plant in Weirton, W.Va., rather than Sparrows Point if it cannot sell Dofasco. However, the Justice Department has the final say on which plant is sold and to whom.
The layoffs come as steel prices show signs of slipping as demand softens and inventory in the United States grows "dangerously high," wrote London-based steel analyst Michael Shillaker in a research note for Credit Suisse Group, according to the Associated Press.
The furloughs at Sparrows Point could be a sign that Mittal is cutting production in response to the changing market climate. Mittal spokesman David Allen did not respond to a request for comment.