U.S. Steel, the nation’s largest steel producer, is asking its suppliers to temporarily cut their prices by 8 percent to help improve the company’s efficiency and viability.
Company officials say if suppliers voluntarily reduce supply costs, it will help U.S. Steel through one of the domestic steel industry’s most difficult periods.
“Obviously, things are very, very difficult in the industry,” said Mike Dixon, a spokesman for USX Corp., parent company of U.S. Steel Group. “Natural gas prices, which are a big part of the business, are soaring.”
U.S. Steel operates several steel plants, including Gary Works in Indiana.
Skyrocketing energy prices are cutting into the profitability of domestic steelmakers, all highly dependent on fuels used for mining and steelmaking. But that’s not the only problem.
Final numbers on steel imports for 2000 are expected to be near 39 million tons, second only to a record 41.5 million tons imported in 1998. Steel prices have fallen dramatically. Domestic steelmakers are operating at about 68 percent capacity. And nine domestic steelmakers have filed for Chapter 11 bankruptcy, including LTV Corp.
“We are asking each of our current suppliers for an immediate, temporary 8 percent price adjustment off existing levels to help us weather this crisis period,” said Charles Hrach, U.S. Steel Group general manager of purchasing, in a letter sent last week to U.S. Steel vendors. “In return, we commit to reinstate normal pricing once the crisis has passed and extend our purchase agreement with you for the period of time equivalent to the duration of the adjustment.”
Though some steel industry analysts expect a rebound in the second half of 2001, it’s not clear how long the crisis might last, Dixon said.