ArcelorMittal, one of the largest global steel manufacturers, recently resumed operations at its Spanish steel mills, including the Gijon steel plant and the long products division, after a temporary shutdown in mid-December 2024. The shutdown was triggered by a combination of factors, including weak demand for steel products and the increasing competition from cheap steel imports, particularly from non-EU countries.
This temporary shutdown highlights the ongoing challenges faced by steel manufacturers in Europe, which continue to struggle with overcapacity and the adverse effects of cheap steel imports. The industry has been under increasing pressure due to rising energy costs, as well as political and economic uncertainty in key European markets.
Reasons Behind the Shutdown
The decision to temporarily halt production at ArcelorMittal’s Spanish mills was driven primarily by market conditions. According to a company spokesperson, the decline in demand for steel, coupled with a surge in imports of cheaper steel from countries outside the European Union, played a significant role in the production pause. These factors made it increasingly difficult for local producers like ArcelorMittal to maintain competitive prices while covering rising costs, particularly energy expenses.
ArcelorMittal’s Gijon steel plant and long products division in Spain were most affected, especially given the import competition from regions where steel production costs are lower. The wire rod production at the Verigny plant in Gijon had already been suspended for a period earlier in October 2024, indicating a growing issue with demand.
Temporary Employment Regulation Scheme (ERTE)
In an effort to adapt to the challenging market conditions, ArcelorMittal has agreed to implement a Temporary Employment Regulation Scheme (ERTE) for the year 2025. This initiative, which was negotiated with Spain's largest trade unions, aims to introduce flexibility in the company's operations. Under the ERTE, ArcelorMittal will have the option to adjust production schedules or implement temporary work stoppages if the demand for steel remains low or if the market conditions do not improve.
This scheme will affect approximately 6.6 thousand employees, giving the company the ability to adjust its workforce based on production needs, without resorting to widespread layoffs. This move is part of ArcelorMittal's broader strategy to manage fluctuating demand and maintain operations while also protecting jobs and limiting the impact of economic uncertainty on its Spanish workforce.
Impact of Cheap Imports on European Steelmakers
The rising competition from cheaper imports remains a significant challenge for European steelmakers. Over the past several years, steel imports from countries like China and other non-EU producers have flooded European markets, often at prices lower than those of local manufacturers. This phenomenon, known as dumping, has forced many European steelmakers, including ArcelorMittal, to scale back production in response to these unfair competitive pressures.
In addition to the import issue, rising energy prices in Europe, particularly in 2024, have placed even more strain on steel production costs. High energy prices, compounded by political and economic instability, particularly in the EU's energy-dependent markets, have made it even more difficult for European steel producers to remain competitive against global players with lower production costs.
ArcelorMittal’s Production Adjustments in Other Regions
The temporary shutdown at ArcelorMittal's Spanish mills is not an isolated incident. In Romania, the company also announced a production cut at its Hunedoara plant from December 9 to the end of 2024. This decision was similarly driven by a lack of orders due to weak market demand. In addition to these production cuts, ArcelorMittal had to postpone its plans for investing in new direct reduced iron (DRI) plants, including a proposed facility in Gijon, due to unfavorable political, energy, and market conditions in Europe.
These decisions indicate a broader trend in the steel industry, particularly in Europe, where steel production capacity is being closely monitored and adjusted based on the volatile market conditions and ongoing external challenges.
ArcelorMittal’s Response to Market Conditions
ArcelorMittal has emphasized its commitment to constantly assessing market conditions and adapting its production processes to current challenges. The company has made it clear that it will continue to monitor demand closely and adjust its production activities as needed in response to economic factors, market trends, and shifts in global steel demand.
By leveraging initiatives like the Temporary Employment Regulation Scheme (ERTE) and adjusting its production schedules, ArcelorMittal aims to remain flexible and protect its business interests in uncertain times. However, the ongoing concerns around cheap imports, energy costs, and overall market instability point to the broader challenges facing the steel industry in Europe.
