The head of the Ohio-based company set to close on a $3 billion deal to acquire AK Steel next week warned lawmakers Thursday that “the workers in Butler, Pa., and the workers in a plant in Ohio in Zanesville need help.”

Otherwise the company may be forced to close the soon-to-be acquired plants.

Testifying before the Congressional Steel Caucus in Washington, D.C., Lourenco Goncalves, chairman and chief executive officer of Cleveland-Cliffs Inc., strongly cautioned that increased protections against imports of grain oriented electrical steel products into the United States were needed if the company expects to keep the two plants open.

During the hearing, Goncalves pointedly told the caucus chairman – U.S. Rep. Connor Lamb, D-17th – that if the situation wasn't corrected by March 13 that “I'm talking 1,500 jobs in Butler, Pa., and 100 jobs in Zanesville that will be gone – and I promise they will be gone – if I don't get help.”

Cleveland-Cliffs, the country's largest producer of iron ore pellets, announced its acquisition of AK Steel in December. The Butler plant employs about 1,400 hourly and salaried workers and has 1,469 retirees and 562 surviving spouses.

The AK Steel mills in Butler and Zanesville are the last U.S. producers of grain oriented electrical steels. The iron-silicon alloys were developed to provide low core loss and high permeability required for efficient and economical electrical transformers.

At the heart of the issue raised by Goncalves is that some “bad players” found ways to circumvent the system set up to protect the steel industry under President Donald Trump's Section 232 steel tariffs imposed in 2018. One of eight steel industry executives and union leaders who testified for more than two hours, he warned the 25 percent tariffs on steel imports aimed at boosting U.S. national security failed to include electrical steel laminations and cores used in transformers and motors.

Goncalves argued buyers of electrical steel used in the manufacture of transformers for the nation's electrical grid have found ways around the tariff's by buying lower-grade steel from countries like China, South Korea or Japan and then having it shipped to Mexico or Canada for partial processing.

Instead of building entire processing plants in the neighboring countries, he said some companies simply installed “pieces of equipment” in plants across the border. According to Goncalves, the lower grade, subsidized foreign steel is shipped to those plants, processed, and then the laminations and cores sent into the U.S. market without being subject to nation's metal tariffs due to agreements with Mexico and Canada that were relaxed last year.

Goncalves went on to warn lawmakers such “circumvention” has caused a massive increase in imports of partially processed “downstream” products from China and other countries into the United States through its neighbors to the north and south.

“We've watched for 50 years the erosion of this business and we've let it happen. You can't forfeit the game and then cry because you lost,” argued U.S. Rep. Mike Kelly, R-16th. “It's time for us to stand up and actually defend these industries.”

Goncalves said he has warned Commerce Secretary Wilbur Ross the combined company would be forced to close the two plants, unless the laminations and cores are included in the Section 232 tariffs. The move would aim to halt companies from circumventing the system and bringing in the products through Mexico and Canada.

He stressed during his testimony that Cleveland-Cliffs bought AK Steel not because of its rich history in the steel industry, but because of what his company sees as a future in the industry with regards to grain oriented electrical steel in the production of transformers and the manufacture of electrical cars.

“We're the last man standing between this country's ability to produce transformers for the electrical grid and having to import everything,” Goncalves said.

This is a breaking news story. For the full story - including local reaction to Goncalves' testimony - make sure to pick up Sunday's Butler Eagle.