LUXEMBOURG (Reuters) - ArcelorMittal ISPA.AS, the world's largest steelmaker said on Tuesday it will extend the closure of its blast furnace in Schifflange, Luxembourg, indefinitely, a measure which highlights the deep crisis affecting the EU steel sector.
ArcelorMittal's decision, which will affect 282 employees at the site, is due to weakness in the construction sector in Western Europe, the company said.
"Unfortunately the construction market, for which the products at Rodange and Schifflange are made, has not recovered from the downturn that started at the end of 2008 and there is still no sign of meaningful improvement," Nico Reuter, ArcelorMittal's Europe vice-president for long carbon steel, said in a statement on Tuesday.
This closure extension follows similar ones at other European sites.
Other high-cost European steel plants are also likely to be shut in the near future as low steel prices and poor demand make them unprofitable, analysts and traders said.
"Steel prices are not too spectacular, underlying demand is not great while costs are rising so there is still potential for many high cost mills to be shut down in Europe," said Kaye Ayub, steel and iron ore consultant at Meps.
Competition from lower-cost producing areas such as Turkey, Russia and Ukraine, and Asia has also reduced steelmakers' margins.
"This is the beginning of a number of shutdowns across Europe; Europe can simply no longer compete with the cheaper material being produced in other parts of the world and consumption of standard-grade steel is also falling in Europe," said a source at a UK-based steel trading house.
"There is only one solution: steel mills have to shut down. ArcelorMittal is likely to be the leader in this field as they are so large and diversified, that they are able to shut down one or two plants and still remain a competitive player. Small mills will either have to change the type of steel they produce, or eventually go bust."
At its sites at Rodange and Schifflange, considered a single operational unit, ArcelorMittal produces long carbon steel products such as reinforcement bars, crane rails and special sections.
The mill in Rodange will continue to operate on two shifts, the company said.
Writing by Silvia Antonioli; editing by Keiron Henderson