ArcelorMittal has restarted a blast furnace, which should help stabilize employment there, but also idled several production lines at its Indiana Harbor steel mill in East Chicago.
The Luxembourg-based steelmaker has idled its No. 1 aluminizing line at Indiana Harbor West, 84-inch Hot Strip Mill at Indiana Harbor West, and No. 5 Continuous Galvanize Line at Indiana Harbor East this year. Steel shop No. 2 will be idled next year.
ArcelorMittal outlined its plans during its third-quarter earnings report Tuesday. The company reported making $680 million in the third quarter, down from $1.1 billion in the second quarter but up from a $711 million loss during the third quarter of 2015.
Displaced workers are being given the opportunity to transfer to other positions in Indiana Harbor, Burns Harbor and Riverdale, according to the company and union. Spokeswoman Mary Beth Holdford said layoffs were not necessary and the company would reduce employment through natural attrition.
The cutbacks are part of a "footprint optimization" plan aimed at making the steelmaker more competitive at a time when steelmaking capacity utilization has been mired under 70 percent in the United States for weeks. While the cuts won't result in layoffs, they will mean fewer future employment opportunities at the mill.
ArcelorMittal and the United Steelworkers union agreed to the idlings in their new contract if the steelmaker would in turn invest in other operations at the mill to ensure its long-term viability. ArcelorMittal plans to invest $200 million in projects at the sprawling steelmaking complex in East Chicago over the next few years.
The steelmaker will build a new caster in the No. 3 steel shop this year, and restore the 80-inch hot strip mill and Indiana Harbor finishing and logistics by 2018.
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ArcelorMittal also restarted a blast furnace at ArcelorMittal Indiana Harbor in order to produce raw steel to be fashioned into slabs at its new AM/NS Calvert in Alabama. That steel will be used in the automotive industry in the South and Mexico. ArcelorMittal Chairman and CEO Lakshmi Mittal said during the conference call that much of the new steel made at the revived blast furnace in East Chicago would end up going to Alabama for processing and then to auto plants in Mexico.
The steelmaker had operating income of $1.2 billion in the third quarter.
“Our third quarter results reflect the progress the company is making to improve the underlying performance of the business, as well as improved market conditions since the start of the year," Mittal said.
Demand for steel is stable, but coal prices have unexpectedly soared.
"While expectations are for steel prices to align with the increased costs, in the interim the higher coal price will impact steel spreads and fourth quarter performance," Mittal said. "Overcapacity remains a concern, reinforcing the importance of a comprehensive trade response to minimize the impact of unfair trade across all product categories."
The company's Earnings Before Interest, Taxes, Depreciation and Amoritization rose 7.1 percent year-over-year to $1.9 billion. But ArcelorMittal warned its fourth-quarter earnings would be affected by weak steel prices in the United States.
"But overall we remain pleased with the progress we have made this year," Mittal said. "We are supported by a strong balance sheet, we have seen positive price momentum in our main markets and the organization is fully aligned to successfully implement our five year strategic plan, Action 2020."