By Robert Schoenberger
LORAIN, Ohio — Republic Steel plans to invest $85.2 million and create 450 jobs here, three years after shutting its blast furnace and cutting 700 jobs.
An expected boom in the oil and gas industry, coupled with a rebound in the auto industry, is feeding a mini-resurgence in Northeast Ohio’s steel industry with Republic, U.S. Steel, Timken Co. and V&M Star all making major investments
With Gov. John Kasich standing at his side, Republic President and Chief Executive Jaime Vigil, said, “It was easy to chose Lorain, Ohio, over other locations in the United States and other parts of the world.”
“Can you repeat that?” Kasich asked.
The investment will go toward building an electric arc furnace at the plant that will melt scrap metal, effectively recycling it into fresh steel.
The Lorain plant has been processing steel that Republic made in an electric furnace in Canton. About 200 of the people who lost jobs in Lorain in 2008 took positions in Canton.
Vigil (pronounced vi-Heel) said several of Republic’s existing customers – automakers, machinery companies and construction companies – have been steadily increasing their orders, but expected growth in the oil and gas industry was a major driver for the decision to expand in Lorain.
“We’re really hoping to get that market into our sales mix,” Vigil said.
It’s not the only steel company hoping to benefit from gas exploration. Its immediate neighbor, U.S. Steel is spending $100 million to expand its Lorain plant to make pipes for oil and gas production.
Oil and gas companies are rushing to Ohio, West Virginia and Pennsylvania to try to tap shale gas – natural gas trapped in shale. Energy companies pump high-pressure fluid into wells to break up the shale, releasing the gas – a process called hydraulic fracturing or fracking.
At an oil and gas conference in Pittsburgh Wednesday, U.S. Steel Chairman and Chief Executive John Surma said, “Increased development of North American shale resources and our customers’ growing need for heat-treated [oil and gas tubing] contributed heavily to our decision last year to construct a new” portion to its plant in Lorain.
Larry Wickstrom, chief geologist at the Ohio Department of Natural Resources, said last month that very conservative estimates show Ohio’s shale gas could produce the equivalent of 2 billion barrels of oil.
In addition to Republic and U.S. Steel, other companies hope to benefit.
Timken Co. in Canton gets about 20 percent of its steel sales from oil and gas companies. Spokeswoman Lorrie Paul Crum said order growth from energy companies is playing a role in the company’s deliberations over a $225 million expansion at one of its Canton area plants.
“Oil and gas is definitely one of our top markets,” Crum said. “It’s been our fastest-growing segment this year.”
In Youngtown, V&M Star is building a second steel mill, specifically to make pipes for gas produces.
ArcelorMittal’s Cleveland operations aren’t taking part in that boom, the company said. The 1,700-job plant did restart a blast furnace there in October, but spokeswoman Katie Patterson said increased orders from automakers were responsible for that bump in production.
Arcelor is in the process of upgrading an Indiana steel plant to make more pipes for the oil and gas industry, she added.
Kasich, who hosted an energy summit in September to encourage the growth of Ohio’s natural gas industry, said shale exploration is creating opportunities for lots of different industries.
With the development of shale natural gas, Kasich told Vigil that Republic’s role in the steel industry is going to change.
Vigil, who has run Republic since 2005 when Mexican steel giant ICH bought it out of bankruptcy, said the new furnace will be able to make about 1 million tons of steel a year, about the same capacity as the blast furnace. Blast furnaces burn coke, a refined form of coal, to melt iron ore for steel creation.
It can take weeks to get the furnaces up to the proper temperature, and the furnace must run continuously. That’s why blast-furnace plants tend to operate 24 hours per day.
Electric furnaces, on the other hand, heat up almost instantly and can be run for part of the day, which keeps costs down.
Republic hopes to begin construction of the furnace next year and start melting scrap iron by mid-2013.
The governor and several other lawmakers praised Republic for investing in the state and creating new jobs.
Pat Gallagher, sub-district director for the United Steelworkers union, said of the 700 jobs cut in 2008, there are still about 125 people on layoff. Those workers will have first crack at the new jobs.
“There will be a substantial number of new jobs created here,” Gallagher said. He added that the union hopes many workers will be able to transfer back from Canton to Lorain.
New hires will make a lower training rate for their first two years, he added, but after that they will be earning about $50,000 per year – more if they work overtime or night shifts.
Vigil said Republic’s expansion plans are conditional and assume job-creation tax breaks and other incentives from state and local government and a new contract with the union. Gallagher said Republic and the Steelworkers enter contract talks next year. He added that the union will do what it can to support the expansion.
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