Oil dropped below $50 a barrel on Tuesday — a five year low. A growing surplus has lead producers to rein in output, leading to the dismissals of many workers.
Charles Bradford, an industry Analyst and President of Brad Research Inc., posited that part of the problem is due to the vast influx of new tubular mills, which make pipes and tubes for oil extraction and production. Large profit margins in the energy sector over the last few years led to a boom of new infrastructure.
Bradford estimates 4 million tons of steel for these projects in the U.S. has been announced in recent years. But as oil prices continue to fall, the demand for steel is also expected to fall.
The energy sector accounts for about 10% of steel consumption in the U.S.
Most of the layoffs will take place at Pittsburgh’s steel producer’s Lorain Tubular Operations, west of Cleveland, where a total of 614 layoffs will take place, along with 142 layoffs in Houston, starting on March 8.
A letter posted on the website of United Steelworkers 1104, the union that represents Lorain, first announced the layoffs and dates. USW President Leo Gerard explained in the letter, “This action is a result of a decline in tubular market conditions, which is impacting demand for the plant’s products.”
“What appeared just a few short weeks ago as being a productive year … has most abruptly turned sour,” Local 1104 president Tom McDermott said.
According to the American Iron and Steel Institute, there were around 150,000 Americans employed in the steel industry in 2014.
