By CLARE ANSBERRY
AUGUST 2, 2011
- “The steel and shale-gas industries are symbiotic to some degree“
YOUNGSTOWN, Ohio—On the edge of the Mahoning River, where once stood dozens of blast furnaces, more than 400 workers are constructing what long has been considered unthinkable: a new $650 million steel plant.
When complete, it will stand 10 stories tall, occupy one million square feet and make a half million tons of seamless steel tubes used in “fracking” or drilling for natural gas in shale basins.
France’s Vallourec & Mannesmann Holdings Inc., one of the world’s largest makers of steel tubes for the energy market, has decided to build the plant here next to an existing facility for two main reasons. Youngstown has an experienced steelmaking work force and the city is at the door of the Marcellus Shale, a natural-gas basin beneath New York, Pennsylvania, West Virginia and Ohio.
“We’re confident we can get this built and running quickly and when we do, there will be a growing marketplace,” says Joel Mastervich, who runs the company’s existing Youngstown plant, the V&M Star. The company, a unit of Vallourec SA, also has operations in Houston and other North American cities.
The shale market is partly responsible for expansion at other steelmakers, as well. U.S. Steel Corp. is investing $95 million to expand and upgrade its plant in Lorain, Ohio, which makes tubular steel. Timken Co. is spending about $50 million to upgrade its plants in Canton, Ohio.
The steel and shale-gas industries are symbiotic to some degree. Shale drilling, with its network of horizontal pipes, consumes huge amounts of steel tubes and pipe. Steel also is needed to build rigs and excavators for extracting gas.
Meanwhile, increased natural-gas production helps push gas prices lower. That makes steelmakers, which use natural gas for heating, more competitive in global markets as energy costs decline. Forging companies, which make components for drilling equipment and other machines and tools, rely almost entirely on natural gas to heat ovens to 2,300 degrees.
“They need natural gas to make products, which are needed to get the gas that services them,” says Roy Hardy of the Forging Industry Association trade group.
Vallourec’s V&M Star, built in the 1920s and purchased from Cargill International in 2002, has been through a series of owners, shutdowns and updates but always has made tubular products—early on for sewers and water lines, and later for drilling.
Most of its current output, 500,000 tons of large seamless tubes, is sent to Houston for conventional, oil and natural-gas drilling.
With the new plant, V&M will be able to make the smaller-diameter seamless tubes that are used in shale drilling.
The first pipes will roll out around the end of the year. Drilling through shale is done horizontally, with batches of smaller pipe extending from a single point into the basins.
The new V&M plant will add about 350 jobs and provide additional tax revenue for Youngstown, both needed in a region where the unemployment rate stands at 9% and has consistently surpassed the national average.
“Any improvement is welcome in the area,” says John Russo, with the Center for Working Class Studies at Youngstown State University. “But in the larger scheme, there is still rampant loss of employment over the last five years.”
The Youngstown area has lost about 20,000 jobs in the last five years, he says, although it gained jobs last year.
Local leaders say the project also lends a psychological boost to a long depressed region. “That V&M is putting $650 million in the area—in a bad economy, in what people call an old Rust Belt town—says something,” says Thomas Humphries, president of the Youngstown/Warren Regional Chamber.
Paul Uhrain, a 47-year-old V&M Star steelworker, worked at the plant when it was owned by Cargill. “They wanted to get out of steel and concentrate on agriculture,” says Mr. Uhrain. Work has been steady and the pay at the nonunion plant, about $16 to $25 an hour, is considered among the area’s best, he says.
Jay Williams, whose grandfather migrated from South Carolina to work in the steel plants, is from the first generation whose fathers weren’t steelworkers. “When I grew up, there was no steel to speak of,” says Mr. Williams, who was Youngstown’s mayor until Monday, when he stepped down to join the U.S. Labor Department’s director of recovery for auto communities and workers.
He was 6 on Sept. 19, 1977, known locally as “Black Monday,” when Youngstown Sheet & Tube Co., the city’s largest steelmaker, said it would close its biggest operation.
When industrial parks were created on former steel-plant properties, they were filled by light industry and small, high-technology firms.
The outgoing mayor admits, “I never envisioned a new steel mill in Youngstown.”
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