ArcelorMittal Bets on Auto Steel Redemption

The fortunes of steelmaking have hardened since Lakshmi Mittal, chairman and CEO of ArcelorMittal, came to Calvert two years ago as part of a renaming ceremony for his new south Alabama complex.

In a 50-50 joint venture, ArcelorMittal and Nippon Steel & Sumitomo Metal Corp. bought the facility for $1.55 billion from ThyssenKrupp AG, which spent $5 billion to build the plant and a twin stainless steel plant sold to Outokumpu Oyj in 2013 for $3.6 billion. The complex is hailed as one of the most advanced steelmaking facilities in the world.

Steelmaking woes today come from a price collapse triggered by sluggish global demand and industry overcapacity, fueled in part by China’s steady stream of cheap steel imports. China now manufactures half of the world’s raw steel.  

ArcelorMittal, which does business in Europe, North America, Brazil, South Africa and Kazakhstan, announced in February that it lost nearly $8 billion last year and plans to seek $3 billion in new capital from shareholders to shore up its finances.

“We are sad as my other shareholders would be, ” Mittal said in an interview with the Financial Times. “[But] we are doing the right things.”

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The Financial Times report on ArcelorMittal noted that the company’s Action 2020 plan to return to profitability includes the eventual closings of less efficient European blast furnace plants. There was, however, good news for the Alabama facility.

ArcelorMittal plans to increase production at AM/NS Calvert, located about 35 miles north of Mobile. The plant has the capacity to produce 5.3 million tons of flat rolled carbon steel products annually.

The Financial Times story noted that cost cutting traditionally hasn’t helped in the steel industry, where competitors often take similar action and global selling prices become further depressed. 

But ArcelorMittal counters that its size gives it advantages that others can’t match, and it also plans to focus on higher margin steel products, particularly steel for cars, given the strong automobile demand in Europe and the United States.

That plan creates an interesting circle. In 2015, China was the top export market for Alabama vehicles, growing nearly 9 percent to $2 billion and knocking Canada from the top of the heap, according to the U.S. Department of Commerce.

Text by Dave Helms

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