An estimated 226 workers will their lose their jobs when ArcelorMittal shutters a wire rod mill in South Carolina later this year, but that could be just the beginning.
The Luxembourg-based steelmaker, the largest in the world, is taking a deeper look at all its U.S. operations, especially finishing facilities. The company says it needs to eliminate inefficiencies because of record imports, increased competition and high legacy costs.
ArcelorMittal – forged through an international merger of steel companies in 2006 – has pumped a huge amount of money into its U.S operations, but hasn't seen a profit from it, ArcelorMital USA Flat Carbon President and CEO Andrew Harshaw said.
"Our USA business is not getting a return on its investment," he wrote in a blog post. "Since 2010, the company has invested an average $1.5 billion per year into our USA facilities in both capital investment and the long-term maintenance of our assets. During those same five years, our USA business lost nearly $1.5 billion dollars, an average loss of $293.8 million per year."
In the first quarter, ArcelorMittal reported an operating loss of $103 million for its North American division, which had turned an operating profit of $70 million during the same period in 2014.
"Clearly, we have structural challenges within our USA business that must be addressed," Harshaw wrote in the blog post.
The current environment is difficult for U.S. steelmakers. Imports hit a record high 28 market share last year, and account for around 33 percent of the market so far in 2015, according to the American Iron and Steel Institute.
Imports, high input costs and ramped-up competition have led ArcelorMittal to re-evaluate long-term prospects for its operations, such as the wire rod mill that's slated for closure in South Carolina.
"Georgetown employees have worked diligently toward the success of their facility," Harshaw wrote. "Unfortunately, our conclusion is that the prospect of a sustainable turnaround is not likely."
ArcelorMittal largely blamed a "challenging U.S. market" – as well as the collapse of iron ore prices – for its $728 million loss in the first quarter.
"Following a period of unusually high imports, apparent demand in the first quarter was very weak and domestic prices have collapsed," CEO and Chief Executive Officer Lakshmi Mittal said during the earnings call. "Our NAFTA performance was further impacted by inventory write-downs at the end of the quarter."
The steelmaker is restructuring its operations the way it did in Europe, where it closed operations and shed jobs in recent years.
"I think there's a structural opportunity for an asset-optimization program that we implemented in Europe," Chief Financial Officer Aditya Mittal said. Obviously, the downturn in the market is something that increases the urgency of that.... I think we certainly have very significant opportunities in terms of rationalizing our finishing assets."