Steel and Aluminium

ArcelorMittal to stop factories, furlough workers

Nov, 17, 2023 Posted by Gabriel Malheiros

Week 202342

ArcelorMittal, Brazil’s largest steelmaker, will furlough around 400 employees at its Resende plant, in the state of Rio de Janeiro, and temporarily suspend operations at different units, carrying out technical shutdowns, amid an accelerated increase in imports of steel products.

ArcelorMittal Brasil’s CEO Jefferson De Paula said that the moment is critical, that there is an imminent risk of layoffs and that this situation in the industry could affect economic growth. “Brazil is completely unprotected when there is overcapacity [in the global steel market,” he said.

Compared to last year, steel imports, which come mainly from China and other Asian countries, Russia and Turkey, are expected to grow by 50%. The Brazilian industry has already asked the federal government to adopt a 25% import tax on an emergency basis. The perception is that the government is sensitive to the issue, but no such measure has yet been announced.

Representatives of the sector have already met twice with Vice President Geraldo Alckmin, who is also the minister of Development, Industry, Trade, and Services. Three weeks ago, they met with Finance Minister Fernando Haddad to discuss the matter.

The United States, Europe, and Mexico have already imposed a 25% tariff on steel imports to curb their advance on domestic demand—in Mexico, the share has reached 40%. In Brazil, the share of imports in apparent consumption, which was 12%, jumped to 23% and has reached 30% in recent months. The sector expects a further advance if there are no protective measures.

Faced with worsening market conditions, Gerdau has already laid off 700 workers and reduced production at different units. At ArcelorMittal, said Mr. De Paula, production in the fourth quarter will be 30% below capacity and, for the year, 1.3 million tonnes will no longer be produced by the multinational. In Resende, of the 400 workers affected by the 45-day shutdown, 320 will be on compensatory time and 87 will be furloughed between November and December.

“We’re very worried because the pace of imports is increasing. I believe in free trade, but not the way it’s happening. Competition is unfair,” said Mr. De Paula. According to the executive, if the current scenario is maintained, the investment plan of $2.4 billion a year announced by the sector between 2023 and 2027 is at risk.

Within the Brazilian factories, he said, there are competitive conditions. At ArcelorMittal, which works with monthly performance indicators and internal costs, the Brazilian operation appears to be the best in 75% of them, ahead of Europe and the United States. “So I would say that the Brazilian steel industry is competitive.”

For economist Lia Valls Pereira, a researcher with Fundação Getulio Vargas’s Brazilian Institute of Economics (Ibre-FGV) and a professor at Rio de Janeiro State University’s School of Economic Sciences, in terms of trade policy, if the industry feels threatened and the threat is real, the government could grant some kind of protection, but of a temporary nature.

“Protection won’t solve competitiveness issues. If there is a structural change, there could be a permanent measure, but it is a cost to society to protect a sector that is less competitive than that of other countries,” she said, adding that this is a matter of government policy.

Ms. Pereira recalls that for years the U.S. government has been protecting the local steel industry, which invested heavily in the 1970s and 1980s and has been facing new competitors for some time. “Sectors that use steel won’t like the protection. The final solution is always one of balance, in everyone’s interest. But we know that this is not easy to achieve,” she said.

Source: Valor Econômico

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