There seems to be a temporary truce in the ugly spat between ArcelorMittal, the worlds largest steel maker, and the French government over the closure of two blast furnaces in northeastern France, after French President Francois Hollande met Lakshmi Mittal, who heads the company, at his office in a bid to mend ties. President Hollande is seeking solutions, including a temporary nationalisation of the surrounding steelworks, to avoid shutting down the furnaces.
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Lakshmi Mittal, who ranks 21 on the Forbes list of the world's richest people, is engaged in a dispute with French ministers over the future of the company's Florange plant in the heart of France's steel industry in the eastern Lorraine region. He wants to shut down two blast furnaces from December 1 unless the government can find a buyer to operate them.
The company has cited tough economic conditions in Europe and says it wants to concentrate "efforts and investment on the high-quality finishing operation, which employs more than 2,000". The closure of these furnaces will affect 629 employees, it says.
The fate of the Florange site has become a litmus test of the Socialist President Hollande's strategy to rescue Euro Zone's second largest economy, struggling to improve competitiveness and create jobs. A failure to save jobs at Florange will add to a list of industrial shutdowns in the country and risk deepening fears in the public that the government is powerless to save jobs. Unemployment in France is at a 13-year high of over 10 per cent.
The row intensified on Monday after French Industry Minister Arnaud Montebourg said that the Indian steel magnate was no longer welcome in France due to years of broken promises. "We no longer want Mittal in France because they haven't respected France," he told a newspaper. He accused Mr Mittal of having told "shameful lies" since 2006 about the group's plans and of not keeping his promises to the French government.
"The problem with the blast furnaces at Florange is not the blast furnaces at Florange, it's Mittal," Mr Montebourg said. The outspoken minister also threatened to nationalise the Florange plant and accused Mr Mittal of breaking a 2006 commitment to keep the blast furnaces running and not considering offers from potential buyers to take over the site. Qualifying his statement later on Twitter, Mr Montebourg said in a message that while ArcelorMittal's methods were questionable, the group would continue to operate in France, where it has more than 100 industrial sites.
ArcelorMittal has denied having received any such offers. It has said the two blast furnaces, which were damped down for 14 months prior to their full closure, were uncompetitive in a tough trading climate, partly because they are too far from ports for transportation.
Reuters earlier quoted a source close to the company as saying that plans to shut down blast furnaces, including those at Florange pre-dated the merger between Arcelor and Mittal, which had never promised to keep the site operating when it signed the deal in 2006.
Mr Montebourg's statement forced other officials to issue clarifications. Finance Minister Pierre Moscovici denied that the government was contemplating mass nationalisations of its troubled industries. He also explained that what is under consideration for the ArcellorMittal unit is a temporary mechanism. French officials have said they could take over the entire Florange complex along with a private investor if ArcelorMittal would sell it. This would be a temporary solution while the state continued to seek a private buyer for the idled furnaces.
France has until Saturday to find a buyer for the furnaces. It says it has two offers, but only for the entire Florange site, including other facilities which Mr Mittal wants to retain and keep operating. Mr Mittal has refused to sell the full operation and warned that nationalisation of the Florange facilities would threaten the viability of all of its activities across France, where it employs 20,000 people. He also warned that he will start to close the idled furnaces if no private buyer expresses interest in acquiring them by a December 1 deadline.
ArcelorMittal, created through the merger of Arcelor and Mittal Steel in 2006, reported a core profit of $1.34 billion, in line with market expectations, for the third quarter but its lowest level in three years. That resulted in a net loss of $709 million (Rs. 3,932.47 crore). The $500 billion steel industry, a gauge for the global economy, has slowed sharply this year from last. Economic weakness, particularly in Europe, prompted ratings agency Standard & Poor's to cut the steelmaker's debt to junk status in August. In early November, Moody's cut the rating for the debt of ArcelorMittal to junk with a negative outlook.
(With inputs from Reuters)
