ArcelorMittal shrunk its footprint in Northwest Indiana last year as depressed prices cut into its revenue from sales, but the steelmaker says it's now in a more sustainable position going forward.
The Luxembourg-based steelmaker idled its No. 1 aluminizing line, No. 5 galvanizing line and 84-inch strip mill at Indiana Harbor in East Chicago. Those finishing lines were deemed “non-essential operations,” along with four long carbon facilities around the United States that ArcelorMittal sold off.
“Last year was an important transition year for ArcelorMittal USA,” ArcelorMittal USA Flat Carbon CEO John Brett said in his blog. “We spent the year undergoing important strategic restructuring in our operations, setting our business on course for a stronger future. We cut costs significantly across the business.”
ArcelorMittal's sales and production in North America have fallen off significantly since the global import crisis flooded the U.S. market and depressed prices over the last two years.
The steelmaker's North American sales were $15.8 billion last year, down 25 percent from the $21.1 billion the company racked up in sales in the United States, Canada and Mexico in 2014, before imports seized a third of the U.S. market share, according to the company’s recently released annual report. Production in North America fell to 22.2 million tons, down more than 11 percent from the 25 million tons ArcelorMittal's North American operations produced in 2014.
An average ton of steel sold for $672 a ton last year, down 20 percent from the average price of $843 a ton in 2014.
The average steel selling price plunged by 8.2 percent last year, but the price decline slowed markedly in the second half, according to ArcelorMittal’s annual report. The price had plummeted by 15 percent in the first half, but was only down 0.5 percent in the second half as tariffs and trade laws took effect, restricting the supply of foreign steel on the U.S. market.
“Looking ahead, the forecast calls for modest growth in apparent steel consumption; however, we do expect imports to trend lower,” Brett said in his blog. “We anticipate increased demand in the energy and construction markets and expect automotive to remain near peak levels. Finished product prices have stabilized, but prices for key raw materials are certainly higher than last year. Consequently, we must generate operational efficiencies to enhance margins.”
Last year’s cuts are already improving the company’s bottom line, Brett said. ArcelorMittal ended up pulling in $1.8 billion in net income in 2016, the steelmaker's first annual profit in five years.
Though ArcelorMittal is still looking at reducing costs, the steelmaker is investing in local operations to ensure their long-term viability. The United Steelworkers union got the steelmaker to agree to make investments in East Chicago when it negotiated a new long-term agreement last year.
"The restoration work at Indiana Harbor’s 80-inch hot strip mill continues, and the No. 3 caster investments are complete and production is ramping up,” Brett said