EAF steelmaker shutters operations in Louisiana
Bayou Steel Group says its lack of liquidity made it impossible to buy raw materials.
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EAF steelmaker shutters operations in Louisiana

Bayou Steel Group also files for Chapter 11 bankruptcy protection.

October 3, 2019

Bayou Steel Group, LaPlace, Louisiana, has announced that it will shutter its operations in November, laying off nearly 380 employees, according to an Associated Press article available on MarketWatch.

The electric arc furnace (EAF) steelmaker was formed in 2016, but operations at the company’s LaPlace headquarters date back to 1979, according to Bayou Steel Group’s website. The company operates a melt shop, in-line rolling mill, scrap-processing facility and shipping and receiving dock at its LaPlace site. In 1995, Bayou Steel Group added a location in Harriman, Louisiana, with rolling and distribution operations.

According to the article, the company sent a letter to St. John the Baptist Parish and the Louisiana Workforce Commission stating that “unforeseen circumstances and the inability to secure necessary capital” necessitated the closure.

In addition to idling most of its operations and beginning workforce reductions, Bayou Steel Group filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code Oct. 1. According to a statement issued by the company, “This unfortunate situation was created by a severe lack in liquidity at the company, which resulted in a default with its senior secured lender and created a situation where the company could no longer purchase raw materials.”

Bayou Steel Group says it will “continue to engage in limited production to finalize finished goods over the next few weeks and will use the bankruptcy process to sell off the remainder of its inventory and attempt to sell substantially all of its reaming assets via section 363 of the Bankruptcy Code to a strategic or financial buyer that will hopefully restart operations.”

Information regarding the bankruptcy case can be found at www.kccllc.net/BayouSteel.

Louisiana Gov. John Bel Edwards released a statement regarding the closure that reads in part, “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. 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.”

According to the governor’s statement, Louisiana experienced the largest decline in tariffed metal imports: $682.57 million in the first half of 2019 compared to $1.40 billion in the first half of 2017; followed by Missouri’s decline of $516.41 million. Louisiana experienced a 48.68 percent decline in tariffed metal imports in this period.

Louisiana is one of the top 10 largest importers of tariff steel and aluminum, having imported $719.54 million in the first half of 2019.

Louisiana is the third state most dependent on tariffed metals, comprising 4.5 percent of total imports in the first half of 2019.

“Bayou Steel is particularly vulnerable to tariffs because their steelmaking production process uses recycled scrap metal as their raw material, which is largely imported,” the Edwards’ letter reads. “Tariffs increase steel prices by about 12 percent.”

Edwards wrote President Trump in July of last year to express his concerns about the impact of tariffs on the competitiveness of Louisiana ports, liquefied natural gas facilities, agriculture producers and other industries that sustain communities across the state.