Exclusive: US steel workers are about to get the biggest pay rise for years – sources

CHICAGO (Reuters) – United States Steel Corp (X.N) workers are on the verge of achieving the largest wage increase for at least six years under a new deal negotiated with the company, thus providing early signs that gains from repression of imports foreigners by US President Donald Trump are finally felt.

The deal, concluded Monday, proposes a cumulative wage increase of 14% over a four-year period, Reuters told Reuters on Tuesday three sources informed of the details of the negotiations.

Wages were frozen in the latest contract, which ended Sept. 1, as the Pittsburgh-based company suffered losses due to falling prices for steel in the domestic market. The 2012-2015 agreement increased wages by an average of 1.5% per year over three years, according to the workers' union.

Trump's restrictive trade policy, coupled with a strong economy, pushed domestic steel prices up, helping US steel to record nearly 60% increase in pre-tax profits in June .

The agreement, which is to be ratified by 16,000 workers across the country, comes just days after US Secretary of Commerce Wilbur Ross called on steelmakers to share the benefits of high prices. steel with their workers.

It comes at a time when US wages are rising as fast as they can for more than nine years.

The new deal also offers a flat-rate bonus and a share of the company's profits, the sources said anonymously to discuss the confidential transaction. Workers will retain health care benefits from the last contract, which did not require them to pay premiums.

A spokeswoman for the company did not respond to the invitation to comment on the agreement, details of which were not made public.

United Steelworkers (USW), which represents US steel workers, began negotiating a new contract in July. However, the company's efforts to bear some of the health costs have led to a stalemate.

Scott Cranor, a union official in Gary, Indiana, said Monday that an increase in health care costs would have effectively eliminated any salary increases proposed by the company. He added that affordable health care and the lack of bonuses were one of the reasons why workers preferred to work at US Steel despite lower wages.

"We have an excellent set of benefits," said Cranor during an interview in his office a few hours before the two parties reached a tentative agreement. "That's why we opted for a lower salary.

"UNDERLYING PROBLEMS

While import restrictions have helped to reverse the fate of the American steel company, they have not solved the company's competitive problems. The company's operating profit margin is below the industry average. And its turnover per employee is well below that of rival steelmaker Nucor Corp. (NUE.N).

Financial markets are concerned that the US $ 2 billion plan by 2020 to increase production capacity to meet increased demand could further delay any potential dividends or share buybacks.

The dividend yield is the weakest among the major rivals. Investors remain concerned that because US Steel is focusing on capital investments, shareholder returns remain on the sidelines, "said Seth Rosenfeld, a metals and mining analyst at Jefferies.

The new agreement could inflate its cost structure, exerting pressure on the company's stock, which has lost nearly 40% since March 1, when Trump decided to impose tariffs on metals. US stocks fell 1.2% on Tuesday to $ 27.63.

Domestic steel prices have fallen about 10% since early June, raising concerns that prices have peaked. Demand from the auto industry, the company's biggest customer, is also expected to slow. "The auto industry is facing a lot of cost pressures due to trade wars, rising raw material costs and declining sales volumes," said Rosenfeld.

"So we have a somewhat conservative outlook for contract increases in 2019."