Brazil-based Gerdau Corporation on Friday will lay off about 31 union employees who work at its St. Paul steel plant, according to a Pioneer Press report
The move comes as the company is undergoing a $50 million upgrade that will increase the mill’s production capacity. Gerdau received several local incentives for the upgrade, including a $500,000 forgivable loan from the St. Paul Port Authority, which the company does not need to pay back if it employs at least 330 at the mill until 2015. Separately, the City of St. Paul has reportedly approved a $250,000 loan, and Xcel Energy gave the company also received a break on its electricity rates for five years.
According to the Pioneer Press
, Gerdau will employ about 340 at the St. Paul mill after Friday’s layoffs, which keeps employment levels just above the minimum of 330 required by the forgivable loan from the St. Paul Port Authority.
“It’s based on market conditions right now,” Gerdau spokesman Philip Bell told the St. Paul newspaper. “This just underscores the need to get our [modernization] project finished, so St. Paul is a modern mill, and St. Paul won’t be faced with these unfortunate choices in the future.”
Layoffs have reportedly been announced at three other Gerdau plants across the country, and workers’ hours have been cut at two other mills.
The ongoing upgrade at the St. Paul plant, which is slated to be completed by 2014, will increase the mill’s production capacity by about 100,000 short tons of steel—to about 550,000 short tons; one short ton is equivalent to 2,000 pounds.
Gerdau announced plans to upgrade its plant in May
, saying that the “investment demonstrates [its] commitment to the St. Paul area.”
Bill Blazar, the Minnesota Chamber of Commerce’s senior vice president of public affairs and business development, told Twin Cities Business
at the time that the mill’s equipment was more than 40 years old and it was fairly clear that if Gerdau didn’t make the investment, the plant would soon become “obsolete” and its employees would have found themselves out of work.
Gerdau said at the time it announced the upgrade that it didn’t have plans to hire additional workers once the upgrade was completed. In connection with the upgrade, the company and its union workers agreed to extend their current contract—which was scheduled to expire in July 2013—to July 2015.