MT Arcelor Mittal New

By Alex MacDonald

LONDON--ArcelorMittal, the world's largest steelmaker, has announced plans to idle its steel plant in Sestao, Spain for an indefinite period of time due to tumbling steel prices caused by a sudden influx of cheap steel imports from China and high electricity costs.

"Our operations in Sestao are facing such challenging market conditions--caused by a significant increase in cheap steel imports from China and a heavy fall in prices--that keeping the plant open in the current economic environment is not viable," said an ArcelorMittal spokeswoman in an emailed statement Monday.

"We deeply regret having to take the difficult decision...and are making every effort to mitigate the impact it will have on our employees," she added. "This decision reinforces the need for the implementation of swifter trade defense measures to protect the European steel industry from dumping."

Steelmakers in Europe are laying off workers and shutting down production capacity in response to a wave of cheap steel imports from China, the world's largest steel producing nation. Shrinking demand in China has spurred many Chinese steelmakers to sell their product abroad.

As a result, Chinese steel shipments to the European Union have more than doubled over the past two years, resulting in a 40% drop in EU steel prices during the same period. EU steel demand remains below the high levels last seen prior to the 2008 financial crisis, data from the International Steel Statistics Bureau show.

The Sestao steel plant, which can produce 1.8 million tons of steel a year and employs 330 people, will be idled in February and will remain shut until market conditions improve, the spokeswoman said. The plant was previously idled between December 2011 and June 2012 and was then idled every December thereafter in response to challenging market conditions.

The Luxembourg-based steelmaker isn't alone in taking such drastic measures. Tata Steel Ltd., Europe's second-largest steelmaker after Arcelor, ​announced plans last week to axe 1,050 jobs in the U.K., part of a wider cost cutting effort to reduce its European workforce to 26,000 employees from 30,000​. Meanwhile Sahaviriya Steel Industries PLC of Thailand said ​in September ​it would shut its steel plant in northern England, resulting in ​1,700 job losses. ​

Globally, crude steel production fell 2.8% to 1.62 billion tons in 2015, according to data released by the World Steel Association Monday. A combination of lackluster demand and high steel stocks resulted in global steel output falling for the first time after five consecutive years of growth.

All regions reported lower steel output except for Oceania, the association said. Its members account for about 85% of the world's steel output. In China, which accounts for about half of global steel output, crude steel production fell 2.3% to 804 million tons while steel production in the European Union's block of 28 member states dropped 1.8% to 166 million tons. North America was also hit, with crude steel production dropping 8.6% to 111 million tons-and down 11% in the U.S. alone.

This caused the average utilization rate of the world's global steel production capacity to drop to 69.7% on average last year compared with 73.4% the year before.

Write to Alex MacDonald at alex.macdonald@wsj.com

(END) Dow Jones Newswires

January 25, 2016 12:13 ET (17:13 GMT)

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