Countdown to Saturday’s deadline on ArcelorMittal plant in Florange has begun

Following President Francois Hollande’s face-off with steel baron Lakshmi Mittal in Paris on Tuesday, the countdown to Saturday’s deadline that will seal the fate of the ArcelorMittal steel plant at Florange in northeastern France has begun.

Details emerging from the meeting indicate that the discussions were tense and that Mr. Hollande brandished the threat of nationalisation against Mr. Mittal.

The crux of the matter is: A part of the activity at the Florange plant is not profitable and Mr. Mittal has shut down the factory’s blast furnaces in response to a global slump in the demand for steel. Of Florange’s 2,800 workers, 630 have been affected by this closure. In a bid to save the 630 jobs, the French government is asking Mr. Mittal to sell off the plant to another buyer willing to re-start the furnaces. But Mr. Mittal is unwilling to sell off the profitable side of the business and there are no takers for the gigantic furnaces alone. The government has now threatened to nationalise the plant to resell it to the right buyer. Mr. Mittal has resisted. Who will blink first?

Informed sources said Mr. Mittal was willing to make a minor concession, throwing in the profitable coking plant in the vast, sprawling complex of Florange to make a possible buyout more attractive to a prospective customer. But he is not willing to make too many concessions and has threatened to pull out of France altogether. ArcelorMittal employs some 20,000 persons in over 50 sites in the country.

As the countdown to Saturday began, workers from various ArcelorMittal plants began arriving in Paris to stage a sit-in outside the French Parliament. “We are determined to camp here until there is a resolution to the problem. We get the feeling both sides are playing hide and seek, cat and mouse with us, and the workers now want concrete answers,” Eduard Martin of the CFDT trade union told The Hindu.

Mr. Mittal is being painted by Minister for Industrial Renewal Arnaud Montebourg as a liar, blackmailer and a predator. His mantra is taken up by the workers who are determined to keep their jobs. Mr. Mittal has been anything but an ideal boss — he was fined over € 300 million (nearly Rs. 2,000 crore) by the French competition authority for price fixing and by labour courts for violation of workers’ rights on at least 10 occasions. The fines for violating workers’ rights range from €1000 to €30,000, to individual workers go up to € 475000 in damages to various trade unions.

That said, the situation is not easy for Mr. Mittal. “We all know that steel is a notoriously volatile commodity. We see highs and slumps all the time. You only have to look at the economic slowdown in Europe and the slowing construction demand in China and India to realise that there is over capacity and job cuts and closures are inevitable,” steel industry executive Olivier Chevallier told The Hindu. “Arcelor in France was already sick when Mr. Mittal took over the company in 2006. It surprises me not at all that the company is facing trouble, not just in France, but across Europe, and that the furnaces have closed. The French government has to do make the right noises and it can threaten all it likes. But Mr. Mittal is after all a businessman who will follow the logic of the market. He is not a charity and the government cannot expect him to act like one,” Mr. Chevallier said.

In 2007-08, just before the economic downturn began, financial indicators were going up and up. The Spanish construction boom was in full swing and ArcelorMittal reported an operating profit of nearly €10 billion. The situation is dramatically different now. Income in the last quarter fell to less than €1 billion with sales down over 10 per cent. China has become a net exporter of steel and now gobbles up over half the supply of iron ore. The prices of raw material that go into steel production have skyrocketed while the demand for steel has slumped. The arithmetic is not difficult to understand.

Starting with the recession in 2009 the company has received setbacks and ArcelorMittal has severely curtailed production in Europe and America with more cutbacks in the pipeline. Europe is home to nearly 1,00,000 of the company’s 2,60,000 employees. So the possibility of good news in France is difficult to envisage.

ArcelorMittal’s share price has fallen steeply since 2008, reducing the value of the Mittal family’s controlling stake of 40 per cent to $9 billion from an estimated $55 billion in 2008.

“The benchmark price of European steel in 2008 was about €850 ($1,030 at Wednesday’s exchange rates) a metric ton. That price has dropped to around € 560,” commodities trader Marc Cohen told The Hindu. “Of course, companies like to keep a tight control over inventories and when they see falling prices they no longer want to stock up on materials, preferring to do spot buying when there is a glut in the market. It is, therefore, difficult for Mr. Mittal today to predict sales or to chart out a clear strategy for the months ahead,” he said.

Mr. Mittal’s situation is, therefore, not as simple or black and white as Mr. Montebourg makes out. Mr. Mittal has repeatedly said he wants to keep his plants in France and Belgium going. But he is going to cut back on the sick units. And the blast furnaces at Florange are amongst those.

Mr. Mittal would like to cut wages and have greater flexibility in hiring and firing — laying off workers or cutting salaries during a slump. But that is not permissible under France’s tough labour laws that guarantee worker protection. Clearly, this imbroglio is gong to be a protracted and difficult problem to resolve.

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