Steel Mills

Trade War Contributes to Bayou Steel's Demise

October 1, 2019

Merchant bar producer Bayou Steel in LaPlace, La., closed its doors without warning on Sept. 30, putting 376 stunned employees out of work. A letter to parish and state workforce officials cited “unforeseen business circumstances” and a lack of financing as reasons for the closure.

The plant operates an electric arc furnace turning scrap metal into structural steel for the construction industry. Much of its scrap is imported, leading to speculation that the ongoing trade war with China is responsible for the company’s demise.

“While Bayou Steel has not given any specific reason for the closure, we know that this company, which uses recycled scrap metal that is largely imported, is particularly vulnerable to tariffs,” said Gov. John Bel Edwards.

“Louisiana is among the most dependent states on tariffed metals, which is why we continue to be hopeful for a speedy resolution to the uncertainty of the future of tariffs,” added Edwards.

The letter from Bayou Steel said layoffs at La Place would begin Sept. 30 and “continue until the plant is permanently closed.” Bayou Steel’s Harriman, Tenn., facility will begin layoffs on Oct. 7 continuing through Nov. 30, 2019, displacing 72 employees.

Bayou Steel filed for Chapter 11 protection early Tuesday in Delaware, listing as much as $100 million in liabilities and a default on its senior secured debt.

“I am really surprised because it was a ‘minimill’ and they are so much more efficient than other mills,” Tulane business professor Peter Ricchiuti told NOLA.com. He noted that the facility’s location on the Mississippi River could allow it to receive low-cost scrap from offshore. “I think the tariffs just killed them,” he said. “And if they threw in the towel, there have to be a lot of traditional steel mills out there where they’re thinking the same thing in the executive boardrooms.”