Consistent, moderate growth forecast for Valley economy

By KALEA HALL

khall@vindy.com

YOUNGSTOWN

Butch Taylor has seen the good times and the bad times.

As the business manager for the Plumbers and Pipefitters Local 396, he has watched the economic conditions both cost and add jobs.

“It’s always like this,” Taylor said. “You have peaks and valleys. You want the peaks to last long and valleys you want to be short.”

Right now the Mahoning Valley is “in a little bit of a valley, but we see a light at the end of the tunnel,” Taylor said.

Taylor, other union leaders and an economist remain optimistic because of some bright spots.

THE COMEBACK

May 7, 2013.

The Valley was in a boom phase.

Oil and gas exploration drove international companies to consider the Valley as a place to grow business.

On that day, that business was Exterran, which built a 65,000-square-foot facility on Salt Springs Road. The Houston-based company built the $13 million plant to make production equipment used to treat and process oil and gas.

It was considered another piece of the Valley’s rebound story. Even the governor recognized it in that light.

“We’ve seen lots of activity, and it goes along with what’s an incredibly indomitable spirit. There’s something about Youngstown — I don’t know if it’s in the water, I don’t know what it is,” said Gov. John Kasich at the event.

“It seems like no matter how many times people get knocked down here, we just get back on our feet. It just makes such a difference, and now you’re seeing this whole Valley beginning to regenerate itself.”

A month later, on June 12, Vallourec Star opened its Martin Luther King Jr. Boulevard plant for a dedication ceremony of its seamless pipe mill. The pipe mill initially was announced in February 2010. The $1 billion mill was constructed to handle growing demand for small-diameter pipe used in hydraulic fracturing.

Those announcements are a stark contrast from the ones that come today.

THE TURNDOWN

The price of oil started to dip in the summer of 2014 after OPEC decided not to give in to cartel members that wanted more profits and market share.

Typically, Saudi Arabia would have cut production to avoid the collapse. It didn’t.

That has repeatedly driven the price of oil down. The once $100-a-barrel days are seemingly over as the price has hit $30 and below.

The drop hit U.S. producers the hardest, causing them to take cost-saving measures. In turn, suppliers to producers also had to make cuts.

It started with Vallourec.

On Feb. 4, 2015, Vallourec’s leaders announced the plant would shut down for three weeks. The company also offered a six-month voluntary layoff period for interested employees.

In July 2015, the company announced it would cut 60 to 80 jobs in August.

Then in October, the company announced another workforce reduction, but did not specify how many jobs would be lost.

Parker Hannifin announced in October that it would close its Youngstown operation with 137 employees where hydraulic gear pumps for industries including oil and gas are manufactured.

On Dec. 18 the Valley saw the impact of low energy prices hit home again. Exterran announced it laid off 11 employees and would let go of its remaining 57 employees in March.

The latest plant to take a hit is TMK IPSCO in Brookfield. It sent a notice to its employees to warn them of a mass layoff. A Worker Adjustment and Retraining Notification filed with the Ohio Department of Job and Family Services shows 106 employees affected by a layoff expected April 4-17.

TMK IPSCO, one of the largest North American producers of welded and seamless pipe and premium connections, laid off 20 at the plant last year.

DEALING WITH THE IMPACT

Taylor has watched many projects put on hold because of the downturn in the oil and gas industry.

Plumbers and Pipefitters Local 396 has 500 active members. About half of the membership works on piping projects for the oil and gas industry.

“They have moved on,” Taylor said. “They are able to travel to other things.”

Taylor remains positive about the future because the union has work coming for members.

“We are very optimistic because the natural-gas power plant project is coming,” he said.

Clean Energy Future is planning to construct an $850 million power plant in Lordstown that will support an estimated 1,026 related jobs in Trumbull and Mahoning counties. Commercial operation is expected to begin by May 2018.

For now, Jose Arroyo, business representative for the United Steel Workers in the Youngstown-Warren area, has noticed hiring is down for steel workers and so are wages.

“We lost RG Steel, Warren Steel and General Electric, and we never replaced those jobs,” Arroyo said. “Those were major employers in the Valley.”

Last year, Arroyo worked with Parker Hannifin on a shutdown agreement. The shutdown has an 18-month time line.

A weakness in a variety of markets the plant serves from construction to oil and gas and an increase in global competition led the company to consider the close.

“People are celebrating at the pump,” Arroyo said. “They aren’t celebrating at my plants.”

The steel industry has taken a hit from the effects of a strong dollar, weak global demand and a buildup of inventory.

Earlier this year, Warren Steel Holdings announced it would permanently close because of “unforeseen business conditions.”

Warren Steel Holdings, affiliated with Optima Speciality Steel based in Miami, engineers products used in a variety of industries, including aerospace, mining, construction, automotive and agriculture.

But it’s not all bad.

BRIGHT SPOTS

Arroyo also represents about 450 workers at Comprehensive Logistics in Austintown. The plant does sequencing for the Lordstown General Motors Assembly Plant where the Chevrolet Cruze is built.

“The auto industry is doing very well,” Arroyo said.

Business at the local steel company Hynes Industries, where custom-roll formed steel and standard roll formed steel shapes, slit coil and strip steel products are made, is a positive story for the Valley, Arroyo noted.

Hynes moved into its new Henricks Road facility in Austintown last year with a new roll-forming line to increase product capabilities.

Now, the company is installing two new production lines and continues to add to its workforce of 300.

“We continue to grow our business,” said Mike Giambattista, senior vice president of sales and marketing for Hynes. “We continue to expand into new markets and new industries.”

The 90-year-old company does business in a variety of industries from the truck-trailer industry to parts for garage door openers and racking for solar panels.

Last August, Hynes acquired American Roll Form Products of Painesville. American Roll Form, a full-service, custom-metal fabricator, also has operations in Las Vegas, which expanded Hynes’ footprint to the west.

“With them we will have additional customers and diversification,” Giambattista said.

Matalco, based in Brampton, Ontario, soon will open a 200,000-square-foot facility in Lordstown to manufacture aluminum billets for the aluminum-extrusion industry. The plant is expected to employ 60 to 80.

Construction at the plant in the Ohio Commerce Centre, 5120 Tod Ave. SW, is expected to be complete by mid-March. The company has hired for more than 30 full-time positions.

THE STATE OF THE ECONOMY

Tod Porter, chairman of Youngstown State University’s economics department, gathered data from the U.S. Bureau of Labor Statistics showing little growth in the Youngstown area.

In December 1990, the civilian labor force was 284,600 and the number of employed was 264,200. In December 2015, the civilian labor force was 256,600 and the number of employed was 238,900.

“I think it is just remarkable how little things have changed over how long,” Porter said.

The December unemployment rate in the Mahoning Valley jumped to 7.3 percent from 5.6 percent reported in December 2014.

But economists said at the time the increase was because of a statistical reason, not for an economic reason, because the civilian labor force increased from 249,000 up to 253,000.

PNC Bank’s Northeast Ohio Market Outlook for the third quarter of 2015 shows “improved consumer finances and pent-up demand are boosting vehicle purchases nationwide.”

Mekael Teshome, PNC economist, sees the region’s economy as soft, but resilient because it has both hot and cold parts.

The cold parts are steel and energy; hot parts are auto and health care.

“I think we will see consistent moderate growth in 2016,” Teshome said.