ArcelorMittal Poland has today announced that it intends to permanently close its primary steelmaking operations at its unit in Kraków. The shutdown process in the blast furnace and the steel shop will begin in October and will last a few weeks before the assets are permanently stopped.
The blast furnace and steel shop in Kraków were temporarily idled in November 2019, as a result of the market downturn, coupled with large volumes of steel imports from outside the EU. Since then, the majority of the affected employees have been either redeployed to other ArcelorMittal Poland sites, or – since March 2020 and the arrival of the Covid-19 pandemic – put into temporary unemployment. These measures were taken when the longer-term outlook for steel demand was unclear.
The EU steel sector has been hit very hard by the pandemic, with all the steel-using industries reducing their activity, including temporary closures. As the macro-economic indicators now suggest, a fast recovery in steel demand is unlikely. ArcelorMittal Poland therefore had to take permanent measures in order to adapt to this lower demand.
“The Covid-19 pandemic has had unprecedented consequences for the European steel industry. Although demand in recent weeks has revived somewhat - mostly driven by inventory corrections - it is still considerably below pre-Covid levels. This means that we have to take some very difficult decisions, which will regrettably mean the closure of the blast furnace and steel shop in Kraków”, said Sanjay Samaddar, CEO and chairman of the board of directors of ArcelorMittal Poland.
In addition to the impact of the Covid-19 pandemic, a number of other structural issues have made the company’s activity economically unviable. They include:
- the lack of emergency trade measures, coupled with the European Commission’s recent decision to further increase the quota of tariff-free steel imports from outside the EU, at a time when steel demand in Europe has fallen dramatically;
- high energy costs and the introduction of additional capacity market fees coming into force in January 2021;
- the lack of a level playing-field in terms of carbon costs between EU and non-EU steel producers; with Emissions Trading System costs continuously rising, and no Carbon Border Adjustment yet in place to equalise carbon costs, this is seriously eroding the competitiveness of European steelmakers.
The cumulative impact of these structural issues is carbon leakage, when steelmaking moves outside Europe, to countries where producers are not subject to the ETS.
“Taking all these factors into consideration, we have taken a decision to concentrate the production of hot metal in our two blast furnaces in Dabrowa Gornicza, to improve our cost competitiveness. We are committed to producing steel in Poland, and to serving all our customers without interruption, based on the concept of a single location for primary steelmaking. We will work in close cooperation with our social partners to define the best possible solutions for those employees affected by this decision”,said Sanjay Samaddar, CEO and chairman of the board of directors of ArcelorMittal Poland.
The coke plant in Krakow will continue to operate as well as the downstream operations (two rolling mills, the hot dip galvanizing line and the new organic coating line) in which the company has invested about PLN 500 m (EUR 110m) over the last five years.
The slabs for the rolling mills in Kraków will come mainly from the steel shop in Dabrowa Gornicza, where the company will invest PLN 180 m (EUR 40 m) in debottlenecking projects, and to produce special grades for further processing into grain-oriented steel.
