Last week, ThyssenKrupp announced the $1.55 billion sale of its Calvert, Ala. plant to a 50-50 joint venture owned by Luxembourg-based ArcelorMittal and Japan’s Nippon Steel & Sumitomo Metal Corp.
ThyssenKrupp spent about $5 billion to build the now three-year-old plant that provides steel for auto manufacturers with production facilities in the southeastern United States.
According to The Wall Street Journal, ThyssenKrupp’s venture in Alabama, which was bringing raw steel from Brazil to Alabama for finishing, was crippled by the the combined forces of a strengthening of Brazilian currency and weakening global steel demand.
The direction of the new ArcelorMittal-Nippon Steel joint venture could now have a significant impact on global steel prices and, according one analyst, local Alabama elected officials will play a big role in what happens next.
One possible outcome is that the mill will be closed altogether. The reduced production capacity brought on by the mill’s closing could spike global steel prices, which is something the industry as a whole would obviously welcome. But a source tells Platts, which is McGraw Hill Financial’s trade publication for commodity markets, that local politics could keep that from happening.
“I think closing steel mills is not the easiest thing to do,” a source told Platt’s Dan Hilliard. “There’s a lot of political implications and what not. Local politicians will scream and yell and offer the world [to keep local jobs].”
Back in March 2007 at the behest of then-Republican Gov. Bob Riley, state legislators took unprecedented action to clear the way for ThyssenKrupp to build the Calvert facility by providing a $400 million increase of the state’s Capital Improvement Trust Fund. That hike was meant to sweeten the pot for ThyssenKrupp to locate its facility at south Alabama site, which at the time was in a competition with another site in Louisiana.
After a long wait, ThyssenKrupp was able to sell its mill, albeit at a huge loss. What happens next will be the source of a lot of handwringing among south Alabama politicians and economic developers, as well as among workers whose jobs will be a constant point of speculation in the months ahead. Approximately 1,400 Alabamians currently work at the mill.
Follow Jeff on Twitter @Jeff_Poor
Don’t miss out! Subscribe today to have Alabama’s leading headlines delivered to your inbox.