ArcelorMittal Dofasco is slashing production by 40 per cent as the financial meltdown continues to weaken demand for steel.
The move comes as parent firm ArcelorMittal prepares to reduce global steelmaking by one-third, double what it anticipated in September.
“The orders just aren’t there,” Dofasco spokesperson Larry Meyer said today.
“It all tracks back to the consumer. If you’re not buying houses and not buying cars, it eventually rolls out to manufacturers.”
The former Dofasco began easing off production in September and will further reduce steelmaking to about 60 per cent capacity by next month, Meyer said.
The firm will also postpone a $119-million project to start up a third blast furnace in Hamilton. That project, announced this summer when steel prices were still robust, was slated to be completed by March 31.
Coke production and purchases of raw materials such as iron ore will be cut in favour of using up existing supplies.
No layoffs of permanent staff are planned, Meyer said. Overtime and contracting hours will be reduced first at the plant, followed by cuts to casual workers if necessary.
The Hamilton production cuts are part of ArcelorMittal’s strategy to dramatically cut global output as steel orders evaporate and prices tumble.
The world’s largest steelmaker said it would decrease global production by more than 30 per cent. In September, the company said it would reduce output by just 15 per cent.
“Things have worsened in the last three weeks and as a result we’ve had to accelerate our cuts,” chief financial officer Aditya Mittal told analysts during the company’s third quarter earnings call today.
ArcelorMittal posted profits of $3.8 billion US, up from $3 billion US during the same period last year.
Though it benefited from prices and demand that soared during the summer, the outlook for steelmakers has since taken an abrupt turn. As the global economy slows, demand for the steel used in cars and appliances has plummeted and customers are struggling to secure credit.
Considering the market conditions, the company was making “appropriate production cuts to seek to rebalance supply and demand,” CEO Lakshmi Mittal said.
In addition to production cuts, Mittal said his company will “pause its growth strategy until we have a more settled economic outlook.”
A long list of expansion projects, particularly those that add steelmaking capacity, will be put on hold until demand recovers, he said.
Mittal said he could see the steelmaker increasing output again when demand returns next year — but was cautious about saying when that might happen.
Locally, U.S. Steel Canada has already shut down its Hamilton blast furnace for six to eight weeks due to a decline in orders.
“Looking ahead, our shipments into 2009 could remain low and our challenges may well continue into the new year,” Daniel Janczak, ArcelorMittal Dofasco’s vice-president of manufacturing, wrote in a recent letter to staff.
Since late September, “the market for steel has slowed even more than was anticipated,” he wrote.

npowell@thespec.com
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— With files from the Associated Press