Declining oil prices affecting Vallourec

Vallourec Star in Girard

GIRARD, Ohio (WYTV) – Declining oil prices are having an effect on steel pipe producers like Vallourec Steel.

In a letter obtained by First News that was sent out to Vallourec employees on Monday, company president Judson Wallace talked about the decline in drilling and how it has impacted pipe orders to the point where the company needs to adjust forecasts and reduce production schedules.

According to the letter, many of the measures will go into effect immediately, while others will take place in the second and third quarters.

The employee who sent First News the letter said there are layoff plans in the works, but officials with the steel maker would not confirm anything. Youngstown Warren Regional Chamber President Tom Humphries said this was not unexpected at Vallourec and that the price of oil will affect a lot of things.

“But the issue is for how long? And I think we really have to look at Saudi Arabia and what they are doing because I believe they are the ones driving the prices down right now to keep it below $50 a barrel,” Humphries said.

Humphries said depending on what Saudi Arabia does, this downturn could last up to 5 to 6 months.

However, he said Ohio will weather the storm, simply because the industry is so new here. Girard Mayor Jim Melfi said they have been done this road before and knows how fickle the steel market can be. Any kind of layoff at Vallourec will impact the city’s tax revenue.

“We have to live within our budget and we are going to be very cautious and look to that budget very closely during 2015,” Melfi said.

Wallace was optimistic in the letter, writing that the company has adapted to similar cycles in the past and will adapt to this cycle as well

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