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ArcelorMittal in France

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History of steelmaking

The French steel industry has its origins in the time of the industrial revolution, when a number of steel dynasties, later known as ‘’les maîtres de forge’’, led the industry. Their influence was cemented nearly a century ago, when François de Wendel became governor of the Banque de France.

At that time, a country’s power was measured by its coal and steel production, so the economic and political power of the steelmakers was considerable. They produced girders for large factories and grand stores and opulent buildings such as those on the Boulevard Haussmann in Paris. Their steels were essential for the manufacture not only of cannons, ships, rails and locomotives but also of all the equipment that was transported throughout the colonial empire.

Steel was in such demand that the producers had control over how much and to whom they sold. Gradually, a social model, later known as paternalism, emerged, where “the factory” presided over nearly every stage of an employee’s life.

Historically, production sites were set up in valleys where water, forests and mines could be found. Hayange and Florange and the Orne, Escaut and Fensch valleys – which featured in the songs of French singer Bernard Lavilliers – mostly operated on the same model, governing the economy of a whole region. This economic and industrial expansion continued for decades, beyond the Second World War and into the ensuing 30-year boom period.

Applications of steel

Big is beautiful
French steel production increased steadily from 1950. This was a period of plenty and of rapid growth, which saw, at the end of the 1960s, the construction of the first integrated coastal iron and steel complexes, as planned in the French State’s 6th Strategic Plan. These gigantic coastal sites were constructed in response to the depletion of natural resources at inland sites, and resulted in increased production and improved logistics.

The first was opened in Dunkerque by Charles de Gaulle in 1966, the second, Solmer, started up for Wendel-Sidelor in Fos at the beginning of the 1970s.

As a result of the progressive consolidation of French iron and steel activities, the two remaining companies, Usinor and Sacilor, operated these complexes.

The coal and iron ore previously mined in the Lorraine region and northern areas was now imported from Mauritania and Canada and before long Brazil and Australia, where open-cast mining was more economically viable and the ore was richer in iron.

These ultra-modern coastal sites were more rational and more profitable as they were much bigger. For example, the Fos plant’s central bay, at nearly a kilometre long, could accommodate 10 cathedrals the size of Notre-Dame de Paris. These new plants were automated and boasted the latest technology, such as continuous casting. At the same time, they provided safer working conditions.

And the cost of labour per tonne produced was lower: where a valley site barely produced 2 million tonnes, a coastal plant could comfortably produce 5 or 6 million tonnes. Proximity to the sea made vast bulk transport possible. Ships could transport around 10,000 tonnes, and up to 400,000 tonnes of coal or iron ore today, whereas trains transporting these materials from the coast to inland plants could carry only 1,200 tonnes each.

Raw steel production since 1950 (source: Fédération Française de l’Acier, L’acier en France, rapport annuel 2011)

The lean years, nationalisation and massive closures
The oil crises and the ensuing economic slowdown in the 1970s had an immediate impact on the steel industry. This recession highlighted the lack of competitiveness of the oldest sites, whose productivity was mediocre and ended up harming a whole industry. From 1973, the iron and steel industry became a bottomless pit of subsidies for the French state. A black year was 1979, which saw many factory closures and job losses in the north and in Lorraine – for example, 12,000 job losses in Longwy alone.

When François Mitterrand became the President of France in 1981, political change brought about the nationalisation of the iron and steel industry. Despite this, the deficits were becoming increasingly burdensome. In 1984, Laurent Fabius’ socialist government conducted an in-depth restructuring of French steel production. Against all union expectations, the Steel Plan closed plants in Longwy, Pompey and across France. Gandrange lost one third of its jobs. This led to steelworker protests, including some that were extremely violent, and communist ministers left the government. However, plants still closed and blast furnaces – including the largest in Europe at Thionville – shut down. From 1976 to 1990, the Usinor and Sacilor workforce dropped from 157,000 to fewer than 40,000. The CGPS (General Agreement on the Protection of the Iron and Steel Industry) was implemented and large numbers of employees took early retirement, on financial terms envied by many private sector employees.

From the 1990s, other production models known as ‘mini mills’ emerged, which replaced blast furnaces with an electric steelworks fed by recycled scrap iron melted down in arc furnaces. From this new production model – one of the pioneers of which was Nucor in the US – came mini plants, which produced around a million tonnes of steel with about 1,000 employees.

Major European manoeuvres and mega-mergers
From 1986, the French state appointed Francis Mer to the dual chairmanship of Usinor and Sacilor. Under his leadership, the two groups merged into one, called Usinor Sacilor and then simply Usinor. Mer tried to expand the group and as early as 1989 made acquisitions such as the German steelmaker Saarstahl for a symbolic one Deutsch Mark.

In January 1992, the Gulf War plunged Europe and the world into a major economic crisis. Usinor Sacilor made a painful withdrawal from its German acquisition in 1993 and in the same year the Caen plant and its brand new blast furnace, which had opened the previous year with great ceremony, shut down.

The company was privatised in 1995, the state initially retaining a minority holding and then withdrawing completely. In 1998, Usinor took over the Belgian group Cockerill-Sambre. Two years later a merger between Usinor and Arbed of Luxembourg and Aceralia of Spain took place. The new entity, Arcelor, was a Luxembourg company with its registered office in the Grand Duchy. Arcelor effectively owned the French iron and steel industry, which then had 25,000 employees. The group’s capital was dispersed between institutional investors, states and small shareholders. Arcelor structured a roadmap, the Apollo plan, to make the company more competitive. In the plan, Florange’s blast furnaces were scheduled for closure in 2010.

In March 2007, Arcelor was the subject of a takeover bid by Mittal Steel. After six months, Mittal Steel and Arcelor agreed to merge to form an industrial giant who's mining and steel production activities were spread over four continents. ArcelorMittal was the undisputed market leader, accounting for approximately 10% of global steel production.

Changes in global production of raw steel (source: Fédération Française de l’Acier, L’acier en France, rapport annuel 2011)

In September 2008, the sub-prime crisis plunged the global economy into its deepest post-war recession to date: steel consumption fell dramatically and prices collapsed. Measures to adapt were taken, aimed at limiting the impact of the crisis. This included the temporary idling of a number of facilities. This necessity of action was acknowledged by some unions in a 2010 interview with the daily newspaper the Républicain Lorrain. The unions said that in France the management team’s crisis management – employing measures such as short-time working – and the critical size of ArcelorMittal had protected the new iron and steel group.

What was initially envisaged as a cyclical problem has proven itself to be a structural one. The crisis has continued in Europe since 2009 and steel demand fell by a further 9% in 2012, taking the total decline to approximately 30% compared with pre-crisis levels. Even if demand recovers by 3% per annum starting in 2013, it will still be 14% below pre-crisis levels in 2020. This structural change necessitated the proposal to permanently close the two blast furnaces at Florange.

The problem is not simple and goes beyond the iron and steel sector.

We believe that Europe can and must have an industrial future, but in order to do so it needs to adapt, focus on becoming competitive, continually innovate and specialise in high-end, added value products. We believe that Europe can and must have an industrial future, but in order to do so it needs to adapt, focus on becoming competitive, continually innovate and specialise in high-end, added value products.

Steel was in such demand that the producers had control over how much and to whom they sold

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