ArcelorMittal to Idle Sestao Steel Plant Indefinitely
26 January 2016 - 4:28AM
Dow Jones News
By Alex MacDonald
LONDON--ArcelorMittal, the world's largest steelmaker, has
announced plans to idle its steel plant in Sestao, Spain for an
indefinite period of time due to tumbling steel prices caused by a
sudden influx of cheap steel imports from China and high
electricity costs.
"Our operations in Sestao are facing such challenging market
conditions--caused by a significant increase in cheap steel imports
from China and a heavy fall in prices--that keeping the plant open
in the current economic environment is not viable," said an
ArcelorMittal spokeswoman in an emailed statement Monday.
"We deeply regret having to take the difficult decision...and
are making every effort to mitigate the impact it will have on our
employees," she added. "This decision reinforces the need for the
implementation of swifter trade defense measures to protect the
European steel industry from dumping."
Steelmakers in Europe are laying off workers and shutting down
production capacity in response to a wave of cheap steel imports
from China, the world's largest steel producing nation. Shrinking
demand in China has spurred many Chinese steelmakers to sell their
product abroad.
As a result, Chinese steel shipments to the European Union have
more than doubled over the past two years, resulting in a 40% drop
in EU steel prices during the same period. EU steel demand remains
below the high levels last seen prior to the 2008 financial crisis,
data from the International Steel Statistics Bureau show.
The Sestao steel plant, which can produce 1.8 million tons of
steel a year and employs 330 people, will be idled in February and
will remain shut until market conditions improve, the spokeswoman
said. The plant was previously idled between December 2011 and June
2012 and was then idled every December thereafter in response to
challenging market conditions.
The Luxembourg-based steelmaker isn't alone in taking such
drastic measures. Tata Steel Ltd., Europe's second-largest
steelmaker after Arcelor, announced plans last week to axe 1,050
jobs in the U.K., part of a wider cost cutting effort to reduce its
European workforce to 26,000 employees from 30,000. Meanwhile
Sahaviriya Steel Industries PLC of Thailand said in September it
would shut its steel plant in northern England, resulting in 1,700
job losses.
Globally, crude steel production fell 2.8% to 1.62 billion tons
in 2015, according to data released by the World Steel Association
Monday. A combination of lackluster demand and high steel stocks
resulted in global steel output falling for the first time after
five consecutive years of growth.
All regions reported lower steel output except for Oceania, the
association said. Its members account for about 85% of the world's
steel output. In China, which accounts for about half of global
steel output, crude steel production fell 2.3% to 804 million tons
while steel production in the European Union's block of 28 member
states dropped 1.8% to 166 million tons. North America was also
hit, with crude steel production dropping 8.6% to 111 million
tons-and down 11% in the U.S. alone.
This caused the average utilization rate of the world's global
steel production capacity to drop to 69.7% on average last year
compared with 73.4% the year before.
Write to Alex MacDonald at alex.macdonald@wsj.com
(END) Dow Jones Newswires
January 25, 2016 12:13 ET (17:13 GMT)
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