FARRELL – A top NLMK official promised no immediate changes at its Farrell facility Monday after an announcement that the U.S. Department of Commerce rejected almost all of the company's requests for exemptions from the federal government's steel tariffs.
But Bob Miller, president of NLMK Pennsylvania, said the ruling will require careful consideration of the Farrell plant's future.
"In the long term, this is something that adds a lot of risk to the business model,'' Miller said.
Miller oversees the company’s Farrell facility, which employs 600. Another 150 work at NLMK's Sharon Coatings operation.
"In the short term, there's nothing to worry about now,'' Miller said. "But we have to figure out what our next steps are going to be. And those discussions are happening right now.''
He had biting comments about the Commerce Department's long-awaited decision.
"It's an illogical decision that blatantly ignores the facts,'' Miller said. "It seems like an arbitrary decision that clearly favors one company over another. It's unfair.''
On March 8, 2018, President Donald Trump put a 25 percent tariff on steel imports from a number of countries, including Russia. NLMK Pennsylvania is owned by Novolipetsk Steel – abbreviated as NLMK – one of Russia’s leading steelmakers.
The Farrell plant has relied on its Russian parent company for most of its material. The steel arrives in America as slabs that the Farrell steel plant heats and rolls into coils that are sold for use in a variety of products, including pipes, cars and appliances.
To date, NLMK has paid $160 million in tariffs.
The local steelmaker filed for a tariff exemption with the Department of Commerce just days after Trump’s decision. Miller said an exemption is appropriate because it is difficult, and sometimes impossible, to buy American-made slabs because there is no product available.
"In past markets and in today's market, there's not enough domestically produced supplies of slabs at a reasonable quantity, or even the right sizes that fit our equipment efficiently,'' he said. "We can't survive just buying domestically produced slabs – there just isn't enough of them.''
But the company has already made adjustments, he added.
"We have developed some supplies from other countries, and that's what we're using predominantly right now.''
He didn't name the new suppliers but said they were in countries that weren't hit with steel tariffs.
"Right now we have plenty of slabs in our inventory and on (the) way that will supply us close to the fourth quarter of this year,'' Miller said.
NLMK officials are still considering the status of a planned $600 million upgrade, the bulk of which was earmarked for the Farrell steel plant. One of the key pieces of that project is a $100 million re-heat furnace that heats up slabs to be rolled into steel coils.
The furnace can reheat slabs much faster and more economically than the mill’s current technology, Miller said. So far the company has done only preliminary engineering work on the project.
But it's not a decision that can be delayed indefinitely.
"There's a certain part of our operations that's no longer competitive,'' Miller said. "I would say by the summer, or the end of summer, we will have to see what the market looks like at that point and time and make the right decision on the longevity of the plant that could have an impact on our workforce. It's a shame that it could possibly come to that.''
State Rep. Mark Longietti, D-7, Hermitage, said he was "disappointed" but not surprised by the ruling. The representative, whose district includes NLMK's plant, said he was optimistic that the company would make the improvements to its Farrell facility.
"I'm hopeful that they'll continue with that project that will make it competitive," he said.
While an appeal of the Commerce Department's ruling might legally be possible, Miller didn't show much enthusiasm when asked if the company would go that route.
"It's the folks within the Commerce Department that are responsible for their investigation and ultimately their decision,'' he said. "I would like to see that data that they used to arrive at their decision.''
Still, Miller said the company will look for ways to make NLMK competitive.
"We will never throw in the towel,'' he said. "We're going to fight for our people.''