U.S. Steel to partially shut Ontario mill

United States Steel Corp said on Tuesday it will permanently shut down iron and steelmaking operations at its Hamilton, Ontario, mill at the end of this year.

The integrated mill was idled in 2010, but the steelmaker had not ruled out restarting production if the market improved. Coke-making and steel finishing operations in Hamilton are not affected, said U.S. Steel spokeswoman Courtney Boone.

The decision is a blow to Hamilton, long the center of Canada's steel industry, which has been hit hard by plant closures over the last decade.

"It is disappointing, very disappointing for both our workers and the community in Hamilton that has a long history of making good steel," said United Steelworkers spokesman Tony DePaulo.

U.S. Steel's mills in Hamilton and Nanticoke, Ontario, were the subject of a legal dispute with the Canadian government over job-protection promises made when the company bought Canadian steelmaker Stelco in 2007.

When the conflict was settled in 2011, a Canadian minister said U.S. Steel had agreed to operate both plants until 2015.

"We are in compliance with our agreement with the Government of Canada," said Boone, who declined to comment further.

A spokeswoman for Minister of Industry James Moore said the shutdown is a business decision.

"The government does not get involved in the day-to-day decisions of companies," said spokeswoman Jessica Fletcher, in an emailed statement. "The government's settlement with U.S. Steel contains commitments which provide economic benefit for Canada."

A slowdown in China, the world's biggest consumer and producer of steel, combined with massive excess capacity, has weighed on steelmakers' profits around the world.

At the same time, a fairly strong Canadian dollar has raised costs for U.S.-based manufacturers operating in Canada.

When it was operating, the Hamilton works had an annual raw steelmaking capacity of 2.3 million short tons.

COST CUTTING

Chief Executive Mario Longhi said the Hamilton closure, part of an initiative dubbed "Project Carnegie" after steel magnate Andrew Carnegie, would reduce costs by about $50 million a year.

The change will also allow it to shut down two aging coke batteries at Gary Works in Indiana. The company will let some iron ore supply contracts expire in 2013 and 2014.

In Hamilton, 47 nonunionized employees will be affected, Boone said, but the move does not affect any unionized workers. At Gary Works, 120 employees will be reassigned.

U.S. Steel will take a noncash charge of about $225 million in the fourth quarter because of the closure, Longhi said.

The company reported its third quarter results on Monday, taking a $1.8 billion impairment charge linked to the weak market.

Shares jumped on the news, closing up 8.8 percent at $25.47 on the New York Stock Exchange.

(Corrects headline to clarify that coking, finishing operations are not affected.)

(Additional reporting by Euan Rocha in Toronto, Nicole Mordant in Vancouver and David Ljunggren in Ottawa; Editing by Janet Guttsman, Matthew Lewis and Bob Burgdorfer)