It is, by any accounting, a positive development. But with a few caveats, that is:
U.S. Steel owner Nippon Steel says it is more than doubling its “no less than $1 billion investment” in the former’s Hot Strip Mill at the Mon Valley Works announced in August 2024.
That’s great.
Parker Strategy Group, commissioned by U.S. Steel to measure the upgrades’ economic impact, notes that “updated projections now indicate that the total capital commitment to the Mon Valley Works may range from approximately $2 billion to $2.5 billion — reflecting the expanded scope of improvements planned for the … Edgar Thomson Works in Braddock and related infrastructure throughout the Mon Valley Works.”
Parker’s 2024 analysis of the initial project’s total economic impact for Pennsylvania was between $476 million and $953 million that would support between approximately 2,432 and 4,864 jobs over a two-year construction period.
Keep in mind, however, that such impact studies — commissioned by their directly interested (conflicted?) parties — should be taken with a grain of steel-making coke.
But now, for the U.S. Steel/Nippon doubled-plus investment, Parker gauges that over a three-year period, the expanded project will generate between about $1.4 billion under the $2 billion investment scenario and approximately $1.7 billion under the $2.5 billion outlay in total economic impact.
The Parker study says about 5,105 jobs will be supported under the $2 billion scenario and around 6,381 jobs under the $2.5 billion scenario. And Parker says it will generate between an estimated $46.4 million under the $2 billion scenario and approximately $58 million under the $2.5 billion scenario in state and local taxes.
More grains of coke, please. Yes, there will be an economic impact. But, these estimates likely are inflated.
Now, to the few caveats mentioned at the outset:
First, Parker says its investment scenarios exclude equipment purchases because they are not expected to be procured within Pennsylvania. “Economic impact calculations are based solely on construction and labor expenditures projected to occur within the commonwealth.”
That said, and second, the economic impact numbers for those two metrics are skewed because “prevailing wages,” based on “union wages,” will inflate the cost of these mill upgrades.
While that might be a “good” thing for jurisdictions benefiting from taxes paid by laborers during the construction period – again, estimated to be $58 million to local and state coffers over three years – that’s at a higher cost to U.S. Steel and Nippon Steel.
And, lest we forget, third: The U.S. Steel/Nippon marriage came with a federal government “golden share” clause. That is, the feds – more specifically, the Trump administration – holds veto power over the joined companies’ operations.
Last summer, the administration pulled the veto trigger, forcing U.S. Steel to keep open a Granite City, Ill., plant whose operations were to be folded into the rejuvenated Mon Valley Works.
And that was even with U.S. Steel retaining 800 Illinois plant employees to keep the facility on “idle-ready” status, apparently an attempt to honor the “golden share” agreement.
The government forced an operation deemed inefficient by the marketplace and U.S. Steel/Nippon to remain open.
So, will the administration force U.S. Steel to keep open other plants that might not be up to market and efficiency snuff when the fully updated Mon Valley operations come online?
That’s hardly a sound business practice. But it sure does sound like a government operation, doesn’t it?
Clearly, U.S. Steel and Nippon have upped their game in the Mon Valley. Congrats! But Big Government and it’s “golden share” run the risk of neutering the effort.
So do keep those grains of coke on standby.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
