ArcelorMittal Dofasco cutting production, overtime

Globally-speaking, steel has been having a strong year. But Thursday, there was a big indication the local sector is going through some troubles. James MacDonald has more.

In a letter released to employees this morning, ArcelorMittal Dofasco announced a cut in production.

Overtime hours are being reduced, and the number of casual employees may be cut back as well.

Full-time jobs will not be affected.

"It's part of a global trend by Arcelormittal that's decided to cut 15 per cent of its output in the last quarter of this year."

James May, May Commodity Associates

CEO Juergen Schachler blames the downturn in global financial markets, writing "closer to home we continue to hear of our customers being forced to idle operations."

He goes on to say "the sudden market shift and diminishing demand for steel mean we need to take action now to protect our long-term position."

The most recent numbers available show its parent Arcelormittal had record second quarter profits. But things have changed abruptly.

What you've seen in the last two or three months is the beginning of a slowdown in China, in Asia, a little bit of excess steel being sold around the world. Very very high prices discouraging some purchasing.

Steel consultant James May says he expects Hamilton's other mill, U.S. Steel Canada, to follow suit. But he doesn't expect this to signal the return of the bad old days.

"You're probably looking at a reduction in profitability and a reduction in output over the next quarter. And possibly some weakness through the first half of 2009. But I don't see a calamitous meltdown on the scale of 2002."

And Arcelormittal Dofasco says $180 million worth of planned investments in the plant are going ahead.