MCDONALD STEEL Mill section to close if orders stay down

Officials hope to reverse the closing plans if orders pick up by September.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
McDONALD -- McDonald Steel, a producer of hot-rolled steel bars and shapes, may be forced to close a section of its mill Sept. 1 unless business picks up.
Bill Farragher, a company spokesman, said officials notified employees and local government officials this week that it is making plans to close its 8-inch mill. The 60-day notification is required under federal law, he said.
The company's main operating unit, its 14-inch mill, would continue operating. In all, Farragher said, the business employs about 160.
Officials estimate the closing would result in elimination of about 27 jobs, he said. The number working at the 8-inch mill is larger, but some workers are eligible for retirement, some may decide to leave and some would likely move to other jobs in the plant.
McDonald Steel opened in 1981 in the former U.S. Steel McDonald Works, and much of its equipment is 75 to 80 years old. Farragher said some parts of the 8-inch mill are hand-operated.
If sales improve
He emphasized that the company may reverse its decision to close if sales improve.
No workers are laid off now, and there are no plans to furlough the 8-inch mill workers before the Sept. 1 date. Farragher said the company plans to continue operating the 8-inch mill until then, although it may not run every day. Workers have been cross-trained, he said, so they can be assigned to other duties if the mill is not running.
Business is slow in general due to the sluggish economy, Farragher said, but orders have been extremely slow for the 8-inch mill for some time.
He said the company surveyed its customers last week, but the news wasn't good.
"They're not getting orders from their customers, so they're not ordering from us, and they're not expecting many orders in the next few months," he said. "The manufacturing sector is just flat."
Loss expected
McDonald Steel finished its fiscal year June 30 and its board of directors voted not to pay a dividend for the second year in a row, he said, another reflection of the depressed business climate. Final figures aren't in yet, he said, but it looks like the company will report a year-end loss for the third straight year.
He said rising health-care costs and increasing utility costs have been "staggering." The tight financial picture made officials decide to postpone plans for a $6 million furnace replacement last year.
While competition from steel imports has been a consistent issue for McDonald Steel, it has not been a major factor in its recent order decline. Most of the company's product categories are not protected by the federal steel tariffs, he said, so it must compete with the foreign makers' price and quality.
"The only advantage we have is being able to deliver on time," he said. "When you order steel, you don't ship it by air. Being a domestic producer, we can deliver overnight."
McDonald Steel maintains an inventory of tooling for nearly 500 hot-rolled shapes. It buys steel in billets and slabs, then produces the shapes and bars in a steel chemistry custom-tailored for each customer.
vinarsky@vindy.com