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The U.S. Steel mill in Nanticoke, Ont.

Fred Lum/The Globe and Mail

United States Steel Corp. plans to lock out unionized workers at its mill in Nanticoke, Ont., marking the third time the steel giant has locked out workers since it took over the former Stelco Inc. in 2007.

The lockout comes after members of United Steelworkers local 8782 at the company's Lake Erie Works rejected what the company called its final offer, which the union said included a three-year wage freeze, elimination of cost of living adjustments unless inflation is higher than 3 per cent annually, co-payments on prescription drugs and reductions in holidays.

A bulletin the company handed out to workers at the plant said U.S. Steel was offering a $2,500 signing bonus if the agreement was ratified. The average wage is about $28 an hour.

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The company said in an earlier bulletin that the cost of living adjustment provision in the previous contract will lead to a $1.01 an hour wage increase, but that it's based on a 1971 formula and must be changed.

About 70 per cent of the 900 workers at the mill rejected the final offer in a vote held earlier this week. The union offered to continue negotiations after the rejection, but the company issued a 72-hour notification to local 8782 Thursday that workers will be locked out as of 9 a.m. Sunday.

Employees at the Lake Erie Works were locked out for nine months during a previous round of contract negotiations in 2009-2010 and workers at the company's Hamilton plant were locked out for about 11 months in 2010-2011.A spokesman for U.S. Steel Canada did not reply to e-mail messages seeking comment.

Lake Erie has capacity to produce about 2.5 million tons of steel annually, some of which is shipped to Hamilton for further processing into galvanized steel for automotive customers and other users.

The lockout comes amid a steel market that is slumping because of the tepid pace of the U.S. and Canadian recoveries from the recession. Prices for steel on the spot market have been falling and mills are running on average at considerably less than full capacity, analysts said.

"There has been strengthening in the automotive arena, but there's also been weakening in some of the industrial markets and weakening in the energy markets," said Mark Parr, who follows U.S. Steel for KeyBanc Capital Markets Inc. in Cleveland.

Capacity utilization among U.S. steel makers has been running at about a 75 per cent level for the past six months, Mr. Parr said.

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Production at U.S. Steel's North American mills is down about 7 per cent so far this year from year-earlier levels, he noted.

"Lake Erie Works continues to lose large sums of money when other plants are making money," Jodi Koch, director of human resources for U.S. Steel Canada, said in a memo to employees on April 19.

U.S. Steel has other steel making facilities in Pennsylvania, Alabama, Indiana and Illinois that could supply steel to the Hamilton finishing mill.

The steel maker lost $124-million (U.S.) in 2012 on revenue of $19.3-billion, compared with a loss of $53-million and revenue of $19.9-billion in 2011.

Results for the first quarter of 2013 are scheduled to be released next week.

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About the Author
Auto and Steel Industry Reporter

Greg Keenan has covered the automotive and steel industries for The Globe and Mail since 1995. He also writes about broader manufacturing trends. He is a graduate of the University of Toronto and of the University of Western Ontario School of Journalism. More

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