By Bob Tita 

Workers at two of the biggest U.S. steelmakers are demanding higher compensation as tariffs on foreign metal push prices and profits to their highest point in years.

Leaders for some 30,000 members of the United Steelworkers union say United States Steel Corp. and ArcelorMittal SA aren't passing those benefits to workers yet. The union is in a contract standoff with both companies. Workers have authorized union leaders to call a strike against U.S. Steel, and say they could do the same at ArcelorMittal if an agreement isn't reached soon.

Contracts for both companies expired Sept. 1.

U.S. Steel and ArcelorMittal account for 40% of the U.S. production capacity for flat-rolled steel, the price of which is up by more than 30% this year. The 25% tariff the Trump administration enacted on steel imports earlier this year gave domestic steel companies leverage to raise prices at a time when demand for steel from manufacturers in a strong economy is up, too.

Steelworkers say they have yet to see the benefit from those gains flow through to their paychecks.

"We feel we need some recognition and to share in the profits of the company," said Michael Young, president of the union local for U.S. Steel's Midwest Plant in Portage, Ind.

U.S. Steel has forecast a more-than-60% increase in adjusted pretax income this year from 2017. ArcelorMittal, which has mills throughout the world, doesn't issue a profit forecast for its U.S. operations.

U.S. Steel said it doesn't anticipate a strike. "Talks are ongoing, and we continue to work diligently to reach a mutually agreeable conclusion, " the company said. ArcelorMittal declined to comment on the strike threat.

Higher costs for wages and benefits could erode profit margins at steelmakers that are only beginning to see stronger business after many years struggling against cheap imports. Industry analysts say U.S. Steel already has higher labor expenses and older, more complicated production processes than competitors such as Nucor Corp., where the workforce isn't unionized.

"U.S. Steel wants and needs more labor flexibility to deal with the volatility in the industry," said Philip Gibbs, an analyst at KeyBanc Capital Markets.

U.S. Steel workers agreed to forego raises for three years when the recently expired contract was negotiated in 2015. The Pittsburgh-based company had been losing money amid a slump in the steel industry.

This year U.S. Steel has proposed a six-year contract with annual raises of 4% in the first year and 3% in each of the next two. Raises would drop to 1% annually in the last three years, with the addition of new bonuses pegged to pretax profit. The lowest annual base wage, excluding profit-sharing and other variable pay, would rise to $71,726 in 2024 from $63,516 this year.

Union negotiators want U.S. Steel to provide bigger pay increases or drop a demand that workers pay part of their health-insurance premiums and higher copayments.

"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," the union wrote last week to its 16,000 members at U.S. Steel.

The union said ArcelorMittal's wage offer is also too low. The Luxembourg-based company offered a three-year contract with pay increases of 2% and 1.5% in the final two years. The union, which represents 15,000 ArcelorMittal employees, said the company also is seeking concessions on health insurance and other benefits that would cost workers more than their pay raises would provide.

"ArcelorMittal clearly intends to test our solidarity," the union said Friday in an online update on the negotiations.

Write to Bob Tita at robert.tita@wsj.com

 

(END) Dow Jones Newswires

September 11, 2018 08:41 ET (12:41 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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