On the French steel industry

So, Mittal is closing down a French steel plant.

What a bastard Mittal is, eh?

Now, the exact ins and outs of this I have no idea about. But there is something more than just international capitalism screwing the worker:

Mittal is not shutting the entire site, but the so-called \”hot line\”, the blast furnaces, where the iron ore is melted to produce steel, and the neighbouring coke plant.

Today the two furnaces, closed \”temporarily\” last year, are idle. The nearby heating stoves are on hold, emitting wisps of smoke into the grey sky. \”It\’s a sad sight,\” says Maurice Nicotra, 47, surveying the abandoned plant. \”It\’s dead here now. Mittal told us he would put money into our steel industry, but look where we are.\”

We\’ve a technological change going on. As well as whatever there is about competition from China and the bastard capitalist.

We simply need fewer blast furnaces than we used to.

As it turns out there\’s something akin to a Kuznets Curve in iron production (and I wouldn\’t be at all surprised to find the same being true for copper and some other metals). In order to build a civilisation you need to produce vast great gobs of iron, the basic ingredient in steel. This requires smelting iron ore in blast furnaces. (There\’s also direct reduction, a newish technology, but that\’s still marginal). However, you get to a point where you\’ve got, if not all the iron and steel you ever need, at least most of it. A stock, circulating through the economy over the decades, rather than requiring that huge flow of virgin material.

Just as an example, while you\’re building up the stock of cars from none per person to one per head you need a tonne of steel for each new car that gets put on the road. But when you\’ve reached that one car per head level and have been there for 20 years then you need a very much smaller input of virgin steel as you can recycle the old tonne in the old car into the new tonne in the new car.

You do not use blast furnaces to do this: you use electric arc furnaces.

We can get more sophisticated on this: new cars are smaller than old so our scrap old car produces more than one new. There are losses in the conversion possible.

And perhaps most importantly the most difficult steel to make from scrap is automotive steel. For boring technological reasons it has been, until recently, something that could only be made from virgin steel, not recycled. Nucor, the US company, pretty much sorted that out back in, I think, the 90s (might even have been 80s).

Oh, and this plant where the blast furnaces are closing? Makes automotive steel.

As I said up at the top I don\’t know the details of this particular case. But there is still this underlying technical point. As a result of technological advance in steel recycling we don\’t need blast furnaces to make automotive steel. We do need the rest of the line, the rolling mills and so on, but not the blast furnace. We can now make new cars out of old. Further, we\’re a great deal closer (although perhaps not quite at) the stage where we have our necessary stock of iron and steel and can just recycle that, perhaps with small additions of virgin material, rather than continually smelt more iron ore.

What is being closed? Blast furnaces that make automotive steel.

It might still be oppressing the workers, might still be international capital screwing them over. But even in the absence of those factors it\’s still going to happen at some point.

Because, you know, the hippies are right: recycling stuff is good.

14 thoughts on “On the French steel industry”

  1. All true, plus:

    1) everyone in France has a car that works reasonably well, so they only need replacing every 5-10 years (and can be replaced from scrap steel as above).

    2) most people in China don’t have a car, and many are reaching the point where they can just about afford one. But now that China is reasonable enough at building cars and at making steel, it’d be stark staring mad to send iron ore from Australia to France to make it into steel for Chinese people’s new cars.

    ie to the extent that there’s competition from China, it’s for stuff that should have been done in China in the first place but that the Chinese weren’t historically good enough at doing.

  2. In this case Tim is incorrect. Or at least partially incorrect. Globally the blast furnace business is still growing. This is why iron ore from Australia is worth a lot more than it used to be (but less than at peak). Chinese blast furnace production is 565 mn tonnes this year, up from 450 mn in 2007. In the EU in 2010 it was 83 mn in 2010 down from 100 mn in 2007.

    It is true that in some local economies electric furnace (recycled) steel has displaced blast furnace steel – the US now produces 39% of total steel production in blast furnaces, it was 51% in 2001. The EU15 (eg non-accession) produce 56.3% in 2010 via blast furnace, it was 59% in 2001.

    One of the reasons why blast furnaces are closing is that the old furnaces in Europe and the US just dont have the modern technology and economies of scale of newer plants in China, Korea and Japan. While the electric furnace plays a role in the decline of blast furnace production, it isnt the only reason. Chinese exports of steel and of products that contain steel are also a major factor.

    Tim adds: Perhaps I should have added that the effect I am describing is a localised one. I agree absolutely that China hasn’t reached the stage where they’re recycling much for they’re still at the earlier part of that curve.

    It’s a standard assumption in iron that no one will ever build a new blast furnace in the advanced countries ever again.

  3. Ken: yes, absolutely. But the reason they’re building huge blast furnaces in China isn’t because the Chinese are better than the French at running/building blast furnaces, it’s because China is where the demand for steel is. It is not the case that large amounts of steel are being exported from China to Europe, which is the only situation under which the French workers might have a reasonable-ish gripe.

  4. john b. It is true that exports are marginal (4mn mt) or so from China to the EU in 2010, but growing as their economy slows. Given the 85 mn mt produced in the EU15 this is small. Also the Chinese are supplanting the Europeans in other markets. My knowledge about efficiency comes from Korea and Japan, who certainly were more efficient (their plant was newer, so had better locations for where ore came from and where steel was to be used, had new work processes and tended to be bigger). I assume that the Chinese have been able to follow this path. The electric furnaces (mini mills) are one factor, but the Chinese are probably contributing.
    If we look at steel production via blast furnaces in EU15 in

    2001 93 mn
    2007 100mn
    2010 83mn

    Electric furnace:
    2001 65 mn
    2007 75 mn
    2010 64 mn

    And if the Chinese are more efficient at making steel it is a good thing that the French move to new businesses.

  5. I think we’re in violent agreement here. It makes sense for Europeans to export steel to Asia only if Asians are rubbish at making steel. Now they aren’t, Europeans need to move on.

  6. “the blast furnaces, where the iron ore is melted to produce steel”: that’s not awfully accurate, now is it?

  7. I believe ArcelorMittal plan to focus on their more productive sites, near the coast (transport or water supply maybe?). Too many carmakers in Europe and it looks like the French may lose out the most.

    If they didn’t share a currency with Germany, the likes of Spain and Italy could probably export cheap steel to the States.

  8. Josh
    Yes, the trend has been to coastal plant which tends to be newer. In the old days Florange, where this plant is, was probably near ore and or/coal mining areas and was near heavy industry that used the iron and steel they produced. Nowadays everyone buys their ore and coal from Brazil and Australia. Inevitably the extra costs of old plants in the wrong places make them less efficient. This was a major issue for the old British Steel.

  9. Surely the government has to act Like a Courageous State and keep the plant open due to the disruption that will be caused to the honest worker if the plant closes? Arnald, that’s got to be the right solution, no? We don’t have to worry about the cost- once we install a Europe wide FTT that will cover it!

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