U.S. Steel puts hold on $1B Clairton project

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U.S. Steel is suspending indefinitely the $1 billion modernization of its Clairton coke plant, a massive, multi-year project that was expected to create more than 600 construction jobs.

The Pittsburgh steel producer said it was forced to make the "difficult but necessary decision" because of the economic slowdown that has prompted it to lay off about 7,000 union workers in recent months.

"We cannot speculate as to when conditions will improve enough to allow work to resume," the company said in a prepared statement.

When announced in November 2007, the project was hailed as the region's largest construction project since Pittsburgh International Airport was completed in 1992. U.S. Steel said it would build two new coke batteries, a plant that would generate electricity from gas produced by the coke-making process, and add state-of-the-art environmental controls to existing operations.

U.S. Steel broke ground on the project Oct. 22, with Gov. Ed Rendell remarking: "This is real good news for the American economy and we haven't had a lot of good news recently."

The decision to embark on the largest capital project in U.S. Steel's 108-year industry came at a time when steelmakers were jockeying for supremacy in the revitalized industry, using acquisitions, expansion and modernization.

The optimism vanished 10 months later when the sudden onset of the global recession sent demand and prices lower. U.S. mills are now operating at 42 percent of capacity and many analysts believe the only good news for the industry is that conditions are as bad as they are going to get.

Yesterday, one of the industry's largest customers reported disappointing results as automakers posted March sales declines ranging from 36 percent for Honda to 45 percent for General Motors.

U.S. Steel began laying off workers in November. About 3,500 workers lost their jobs as the result of the idling of plants in Michigan, Illinois and Minnesota in December, when the steel producer said it would concentrate production at its mills in the Mon Valley; Gary, Ind.; and Huntsville, Ala. Further cuts followed at mills in Texas and Canada. Another 500 nonunion workers accepted early retirement offers.

At Clairton, the company has idled seven of the 12 batteries that produce coke, a baked coal used to fuel blast furnaces. Union officials estimate those cost-cutting initiatives have cost about 200 Clairton workers their jobs.

Analysts expect U.S. Steel to post a first quarter loss of $1.49 per share later this month vs. net income of $235 million, or $1.98 per share in the year-ago quarter. Its shares closed yesterday at $22.62, up $1.49.

Allegheny Technologies, another area metals producer, is proceeding with plans to spend $1.2 billion over the next three years at its Brackenridge plant.

The project, approved by the company's board in September, will result in a new rolling and processing facility. Spokesman Dan Greenfield said yesterday engineering permitting and site preparation for the project are proceeding.

Len Boselovic can be reached at lboselovic@post-gazette.com or 412-263-1941.


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