Steel shortage puts mills in overdrive, but gives little hope to laid-off workers

A cruel irony has fallen upon the country's sagging steel industry. In the midst of steady decline, of shuttered mills and unemployed workers, America is short of steel. The steel furnaces are melting ore as fast as they can. Prices are up by 10 percent. Lead times - an important measure of demand - have stretched to 20 weeks for some products from their usual eight.

Yet demand for steel continues to outstrip supply by a large margin.

The cruelty is that the tantalizing boom will be shortlived. Steel executives predict that by August or September the industry will return to its accustomed slump. Meanwhile, despite the filled order books, employment continues its long-term decline and mill closings go on and on.

``There's nothing out of the ordinary,'' says William Andrews, president of United Steel Workers Local 1010 at Inland Steel Company in East Chicago, Ind. Inland began a program last year that has cut employment at the plant.

``In May 1986 the open-hearth furnace shut down. But in the future there are going to be some more,'' Mr. Andrews says.

Industrywide, hourly employment stood at 150,000 in the first two months of 1987. Last year, 194,000 hourly workers were on the job.

Why is Andrews looking at more unemployment among his members while buyers scramble for steel?

The shortage is concentrated in sheet steel which accounted for over 7 million tons of the 11.2 million tons of domestic steel shipped in January and February, according to the American Iron and Steel Institute in Washington. Sheet steel is heavily consumed by auto and appliance manufacturers, where demand has been strong.

Last year, the country's biggest steel producer, the steelmaking division of USX Corporation, was forced to close its doors from August until February because of a labor dispute. Meanwhile, it announced it would idle 5 million tons of capacity, which had already fallen nationwide to 112 million tons from 128 million tons last year.

While America banks furnaces, overseas exporters rein in shipments because of the dollar's decline and the continuing effect of import restraints.

Elsewhere, market sources speculate that General Motors and Ford have been stocking up on steel to boost output in case of a United Auto Workers strike when the union's contract expires this summer. However, others point out that auto production has been declining this year.

Many buyers predicted prices would plummet when USX cranked up the mills this spring after the long work halt. Surprisingly, this did not happen, prompting desperate inventory building and what a mill executive calls ``panic buying.''

``It caught everybody in the lurch,'' the mill executive says.

Steel service centers, which process steel from the mills and sell it to smaller customers, have been spending long hours on the phone trying to hunt up enough material to fill orders.