ArcelorMittal to close raw material part of Krakow steelworks

by David Fleschen

ArcelorMittal Poland announced today that it intends to permanently close the raw material part in its Krakow branch. The shutdown process for the blast furnace and steel plant will start in October and will take several weeks.

The blast furnace and steel plant were temporarily shut down in November 2019 due to the decline in steel demand and large imports of steel products from outside the EU. Since then, most of the workers affected by the downtime of these installations have found employment in other ArcelorMittal Poland plants or - from March 2020 and the advent of the Covid-19 pandemic - have been working layoffs. The company took these steps at a time when it was not known what the demand for steel would look like in the long run.

The European steel industry has been hit hard by the pandemic. Virtually all steel-intensive industries have limited their activities; some of them decided to temporarily close their plants. The macroeconomic data indicate that the likelihood of a quick rebound in steel demand is very small. ArcelorMittal Poland had to take sustained measures to adapt to the lower demand.

- The COVID-19 pandemic has huge consequences for the European steel industry. Although we have seen a slight increase in demand for several weeks, mainly due to restocking, the demand for steel is still significantly lower than before the pandemic. And this means that we have to make difficult decisions - in this case, unfortunately, the decision to permanently close the blast furnace and steel plant in Krakow - said Sanjay Samaddar, President of the Management Board and CEO of ArcelorMittal Poland.

Besides the pandemic, several other structural issues made the company's operations unprofitable. These factors are:

the lack of effective measures to protect the European market and the recent decision of the European Commission to further increase duty-free quotas for steel imports from outside the EU at a time when European steel demand has plummeted;
high energy costs and the introduction of additional charges within the capacity market, which will enter into force in January 2021;
imbalance between European steel producers and producers from third countries who, unlike the steel industry in the EU, do not bear the costs of the EU ETS (European CO2 Emissions Trading System). The prices of emission allowances are rising, and the mechanism of the carbon levy has not yet been introduced - this has a negative impact on the competitiveness of European steel producers.

The combined effect of all these factors is carbon leakage, i.e. the relocation of production outside Europe - to countries without the ETS.

- Taking these factors into account, we decided to concentrate the production of pig iron in two blast furnaces at our branch in Dąbrowa Górnicza. This will allow us to increase our cost competitiveness. We want to continue producing steel in Poland and continue deliveries to our customers based on a scheme that assumes the operation of the raw material part in only one location. We will work closely with our social partners to develop the best possible solutions for employees affected by this decision, explained Sanjay Samaddar, President of the Management Board and CEO of ArcelorMittal Poland.

The coking plant in the Krakow branch of ArcelorMittal Poland will continue to work, as will the processing part of the steelworks (two rolling mills, a galvanizing and sheet metal coating line), in which the company has invested PLN 500 million in the last five years.

The slabs (semi-finished products) for the needs of Krakow's rolling mills will come mainly from the steel plant in Dąbrowa Górnicza. In this plant, the company is planning investments worth PLN 180 million in projects that increase production capacity and enable the production of steel grades that will be used in the further production of grain-oriented steel.

Source: ArcelorMittal, Photo: Fotolia

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