Bethlham Steel reminds me of the Ghost of Christmas past.
Big American steel layoffs sour Thanksgiving
By Jean Scheidnes
NEW YORK, Nov 19 (Reuters) - Holiday plans have abruptly changed in Weirton, W.V., population 22,124, where 3,200 people were temporarily laid off from Weirton Steel Corp. (NYSE: WS) over Thanksgiving week.
The eighth largest U.S. steel maker said on Thursday it will shut down its only operating blast furnace for 10 days to reduce an inventory buildup caused by increased steel imports at a time of rising costs and flat domestic demand.
"These layoffs are probably the first time Weirton Steel has done something to this degree over the holidays," said Brian Linkesh, president of the Weirton Area Chamber of Commerce in the West Virginia town. "We're looking at this as more of a short term situation, but undoubtedly our community is going to be faced with tough times ahead."
During the past week, Bethlehem Steel Corp. (NYSE: BS) said it was closing a mill, and Wheeling-Pittsburgh, a subsidiary of steel maker WHX Corp. (NYSE: WHX), filed for bankruptcy. In the past month, steel makers USX-U.S. Steel Group (NYSE: X) and LTV Corp. (NYSE: LTV) also announced curtailments of operations.
"We would expect more layoffs to be announced before this is over," said analyst Mark Parr of McDonald Investments.
"You just can't operate an industry at full capacity when existing supply exceeds demand," he said.
On top of mounting inventories that depress prices, energy costs have risen and the strength of the dollar has encouraged imports as domestic demand has slowed modestly, analysts say.
SLOWING ECONOMY HURTS DEMAND
The steel industry also is being hurt as the economic backdrop has darkened for its single largest end-user, the auto industry. Rising interest rates have curbed consumer spending, analysts say, leaving automakers with their own excess inventory, and causing them to downsize operations.
"The domestic automakers have been over producing in anticipation of growth that hasn't materialized," said Prudential Securities analyst Michael Bruynesteyn. "They're having a good year, but the pace of sales was higher last year than this year. Automakers got a little excited because last year they were struggling to keep up."
DaimlerChrysler AG (NYSE: DCX) , General Motors Corp. (NYSE: GM), and Ford Motor Co. (NYSE: F) all plan to idle vehicle assembly plans over Thanksgiving week due to growing inventories of unsold cars and trucks.
"You either have to raise incentives, which are already at a very high level, or cut production, which they started to do this month," Bruynesteyn said.
The auto industry led U.S. corporations in October job cuts, according to a monthly report by outplacement firm Challenger, Gray & Christmas. Over 10,000 people were expected to have lost auto industry jobs in October, bringing the year-to-date industry total to more than 51,000, more than double the 20,000-plus job losses of the same period last year.
BIGGER SLOWDOWN EXPECTED NEXT YEAR
While interest rates and energy costs have risen, the stock market has simmered down. As a result, "some people don't feel as wealthy, particularly in technology industries, that's probably dampening car sales," and sales of other big-ticket items, said Gary Thayer, chief economist at A.G. Edwards & Sons.
"This year as consumer spending has cooled, the manufacturing side of the economy is following suit," Thayer said.
But next year the slowdown will begin in earnest, when the knock-on effect from the Federal Reserve's recent string of interest rate hikes, already pinching corporate earnings, will be felt more widely, analysts said.
America's economy has steadily lost steam as gross domestic product, the broadest gauge of the nation's economic output, in the last quarter slowed dramatically to an annualized growth rate of 2.7 percent from 5.6 percent.
Looking ahead to 2001, 20 economists polled by Reuters during the week ended Oct. 17 said the economy would expand at an annual rate of 3.4 percent after growing at an expected 4.6 percent rate this year.
"We think the economy will stay soft into early next year, when the Fed will probably start cutting interest rates. We'll see better markets for durables in the second half; but the dollar could continue to strengthen, so it could be a tough environment for autos for the next year or so," Thayer said. |
