ArcelorMittal's Decision to Close Steel Blast Furnaces Riles the French

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Source: The Economist

We are used to our Gallic friends’ socialist views.

For much of the second half of the 20th century, it arguably stood them in good stead with a high standard of living and an economy shielded from the early onset of globalization. All that came a price, though, and recent outbursts from industrial recovery minister Arnaud Montebourg highlight how deeply entrenched France’s anti-business culture has become.

Playing to the media following the decision of ArcelorMittal to close two blast furnaces, Mr. Montebourg is reported as saying, “We do not want Mittal in France any longer because they do not respect France.”

current steel prices - MetalMiner IndXHe later back-tracked and said he was actually referencing Mittal’s business practices, but it was clear this was yet another case of political pressure being brought to bear on multinationals, steel companies un-spared, faced with hard business choices in a recessionary market.

Mr. Montebourg is fresh from a similar spat with Peugeot over the closure of a car plant and the resultant 8,000 job losses. Once Peugeot had explained the realities of commercial life to the minister, he softened his stance — the same may indeed happen with ArcelorMittal’s Florange site.

The steel company intends to close two blast furnaces and a cokery at Florange, with the probable loss of 629 jobs, saying it is too far from ports to be economically viable in today’s markets. Mittal owns 11 blasts furnaces in northern France, Germany and Belgium and has already shut down two furnaces in Liege and one in Dunkirk.

The steelmaker employs some 20,000 people in France alone, but last month reported a third quarter loss of €547 million ($710 million) because of a slump in Chinese demand and operating losses in Europe.

Europe has too much steelmaking capacity to begin with. Some markets went through rationalization decades ago, such as the UK market, which saw the closure of large parts of its steel-making capacity in the 1980s and 90s.

But others have been protected by state support and political pressure, such as in France.

To be continued in Part Two.

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