LATIN AMERICA

Temporary stoppage at ArcelorMittal threatens stability in Michoacán

Mexican state already struggling with organized crime, astronomical debt and corruption

Statue of a miner in Lázaro Cárdenas (Michoacán).
Statue of a miner in Lázaro Cárdenas (Michoacán).SAÚL RUIZ

There is a cry that is typically heard at the end of union meetings at the Port of Lázaro Cárdenas, Mexico’s largest seaport. At the close of most assemblies here on the Pacific coast, not far from the country’s richest iron deposits and 600 kilometers southwest of the Federal District, union leaders’ pep talks are usually backed by the workers with an enthusiastic “¡Duro! ¡Duro! ¡Duro!” – roughly translated as, “Stay tough!”

But that was not the case on Saturday.

ArcelorMittal, a multinational steel producer with plants in more than 60 countries and nearly 310,000 employees worldwide, announced a “temporary halt” on some of its Mexican activities starting on Friday.

The company said it had made the decision due to an excess global steel supply and lower prices

Its biggest plant is located in the Port of Lázaro Cárdenas, where the decision affects 13,000 people. At the meeting to confirm the news, union leaders insisted that employees had to prove “their commitment to work.”

But government, employer and union sources all said that the company’s decision to stop activities is a cause for concern, and that any potential withdrawal from Lázaro Cárdenas would be catastrophic.

In a memo, the company said it had made the decision due to an excess global steel supply and lower prices. In practice, conditions have caused imports of Russia- and China-produced steel to shoot up. “Unfair competition” is how the memo describes it.

The Industrial Association of Michoacán State estimates that Mexico has imported more than 3.8 million tons of steel at prices far below ArcelorMittal’s production. The company underscored that the depreciation of the Russian ruble and the Chinese yuan have been beneficial to companies from those countries.

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The ArcelorMittal stoppage affects the area that produces flat steel and represents a 33-percent drop in annual production, from six million to four million tons. But the company insists that the temporary closure will not affect its current obligations with clients and will not result in layoffs, either.

The company has not officially refuted the possibility of a shutdown. “There is no official company position on this,” said the director of governance affairs, Jorge Dillon Caballero, in statements to the daily La Jornada Michoacán. Dillon Caballero met with Michoacán governor Salvador Jara last weekend to discuss the situation.

If the idea of losing more than 13,000 jobs in any city is a cause for concern, in Lázaro Cárdenas the scenario that opens up is simply terrifying. The seaport is one of the main pillars holding the state of Michoacán together, and President Enrique Peña Nieto has made the stability of this region a top priority of his security policy.

The port’s proximity to the open iron sites and its intense commercial activity made Lázaro Cárdenas a prized booty for the Knights Templar, the criminal group that has been laying the state to waste in recent years and had taken control of illegal mining in the city. Servando Gómez aka La Tuta, one of the gang’s ringleaders, was arrested on February 27.

Iron extraction activities at Lázaro Cárdenas.
Iron extraction activities at Lázaro Cárdenas.S.R.

The Mexican government’s first steps to eradicate violence in the region were taken in Lázaro Cárdenas. Troops took over the port in November 2013, two months before the Peña Nieto administration unveiled its strategy to mitigate the violent confrontations between the Knights Templar and the so-called self-defense groups. Local police in the port area were replaced with military personnel, and the Navy took over from the merchant marine in loading and unloading operations.

Yet even then, the violence remains. Rear Admiral José Luis Corro, captain of the port after the federal government took over the city, was assassinated outside his home around 20 days ago. Authorities insist that his death is unrelated to organized crime.

Meanwhile, the governor of Michoacán said he will meet with federal authorities to prevent a crisis that would axe thousands of jobs and deliver a heavy blow to the fragile stability in the state.

The state employers’ association is warning that the ArcelorMittal crisis is the worst ever faced by the steel industry at Lázaro Cárdenas, a place that was founded 35 years ago specifically to encourage growth.

Michoacán is already struggling with astronomical debt, public servants who stand accused of corruption and of ties with organized crime, and by the theft, extortion and murders committed by the criminals who continue to operate on the territory.

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