Steel Workers Demand Higher Pay After Companies Reap Profits From Steel Tariff

Steel coil

American steelworkers are demanding higher pay now that tariffs on foreign metal have raised profits. According to the Wall Street Journal, workers at two of the nation’s largest steelmakers are demanding higher compensation after tariffs on steel imports have pushed steel profits to their highest point in years.

The 25% tariff President Donald Trump enacted earlier this year gave U.S. steel companies leverage against foreign manufacturers. The tariffs have thus far worked in the favor of domestic companies United States Steel Corp. and ArcelorMittal SA.

US Steel and ArcelorMittal account for 40% of the American steel production of flat-rolled steel. The demand for steel from manufacturers has gone up in recent years, resulting in a 30% price hike just this year.

Approximately 50% of the world’s steel is used for infrastructure and buildings and 13% is used in the automotive industry for vehicles like trucks and reefer trailers, 500,000 of which are currently on operation in the United States.

The remaining 37% of steel is often used by manufacturing companies for products like home appliances, snowmobiles, and 95% recyclable LED lights. It’s for this reason that other American companies have been nervous about the 25% tariff because of the possibility it could raise the price of steel and thus the price of manufacturing their products.

Although the price of steel has increased and American steel companies have seen profits, leaders of the United Steelworkers union say US Steel and ArcelorMittal have yet to pass on any of their profits to their workers.

The union, made up of 300,000 steelworkers, is currently in a contract standoff with both companies. The contract expired on September 1, 2018.

Steelworkers have authorized union leaders to call a strike against US Steel and say they may do the same against ArcelorMittal if an agreement isn’t reached.

“We feel we need some recognition and to share in the profits of the company,” said Michael Young, the local union president for the Portage, Indiana US Steel plant.

An increase of more than 60% in adjusted pre-tax income is expected for US Steel this year. ArcelorMittal doesn’t issue a profit forecast for its domestic operations.

Despite this significant rise in revenue since last year, industry analysts say US Steel already has higher labor expenses compared to its competitors. Higher costs for benefits and increased wages for workers could reduce profit margins for the steelmaker, analysts say.

However, US Steel workers haven’t seen a raise in the last three years after they agreed to forego wage increases as a part of the recently expired contract, which was negotiated back in 2015.

For 2018, US Steel has proposed a six-year contract promising 4% annual raises in the first year with a 3% increase in the following two years. The last three years of the contract, workers would see only a 1% annual raise increase.

Workers would also receive bonuses related to the company’s pretax profit. Over the next six years, the contract would increase the lowest annual base wage from $63,516 to $71,726.

Union negotiators say they want US Steel to provide bigger pay increases to workers or that the company stops demanding workers pay part of their health insurance premiums and higher co-payments.

“They can use the windfalls of the tariffs and current industry climate we helped to create to pay themselves even more and then turn to us with dramatic cost shifting and wage packages that are far below what we’ve earned and deserve,” said United Steelworkers union leaders.

The union said ArcelorMittal’s wage offer was also too low. The company offered a three-year contract with a 2% pay increase over the next year and a 1.5% increase over the final two years. The union also plans to seek demands for health insurance and other benefits.

“ArcelorMittal clearly intends to test our solidarity,” union leaders said. ArcelorMittal has made no comment over the union’s threat to strike. US Steel says the company isn’t worried.

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