ArcelorMittal Poland is planning to temporarily idle the operation of the blast furnace and steel plant at its Krakow unit. Preceded by a detailed market analysis which confirms weakening demand, the decision is an unavoidable outcome of rising prices of CO2 emission allowances and high imports from countries outside the European Union, as well as high production costs.
The steel industry is struggling with global overcapacity, and its negative effects are compounded by the inadequacy of existing safeguards to protect the European Union market against imports. European producers are charged with additional carbon costs that are not borne by competitors from outside the EU. Prices of CO2 emission allowances have already exceeded EUR 25 per tonne - increased by approximately 230 per cent since the start of 2018. And this is just one of the headwinds that face the Krakow unit of ArcelorMittal Poland.
The Polish market, due to its proximity to the CIS countries, is flooded with steel imported from some of these countries. Only last year, imports of strip mill products from CIS countries increased by 500,000 tonnes (volumes almost tripled over the previous year).
The decision to temporarily idle the primary steelmaking operations in Krakow is also the result of high energy prices, which in Poland are currently 50 per cent higher than, for example, in Germany. ArcelorMittal Poland is an energy-intensive company, therefore such a difference in price significantly reflects in the cost of its production. In addition, steel plants in Poland still cannot count on the long-term compensation for indirect CO2 costs that steel producers in many EU countries receive. This is a topic of intense ongoing engagement of energy intensive steel producers and the government of Poland.
- We have reluctantly made an uneasy decision to temporarily idle the operations of the primary part of our Krakow unit, because our competitive position is undermined by the costs of CO2 emission rights, which are a burden only for producers from the European Union, and we are seeing a continuous increase of imports from CIS countries, at a time of low demand due to weakening market conditions. In addition, the energy costs in Poland are among the highest in the EU - says Geert Verbeeck, chairman of the board and CEO of ArcelorMittal Poland. - We are a steel producer and we want to be able to continue to produce steel here, in Krakow. We hope that the market conditions will improve and that the level playing field is restored so that we can restart the installations here - he adds.
The management team of ArcelorMittal Poland understands the impact this decision has on employees and the local communities and will be working together to ensure social measures are in place to support them during this period.
