Steel industry in Luxembourg

[1] In the pre-industrial period (17th-18th centuries), there were a number of furnaces throughout the country, located near rivers (for water power) or forests (where charcoal was produced).

In 1842, Luxembourg joined the Zollverein (the German customs union), gaining access to a large market in the East.

[4] Profiting from the economic dynamism of its German neighbours, Luxembourg started exporting its iron ore to the Saar and Ruhr areas, but also to Belgian forges.

From the 1870s, the influx of German capital, the exploitation of the mines of the Esch-Alzette area in the south of the country, the use of the Gilchrist–Thomas process in steel-making after 1879, and a high level of immigration—Germans after 1870, Italians after 1890—contributed to make Luxembourg's steel industry one of the most important in Europe.

[6] Five large steel companies were founded from 1870 to 1890: Under a law passed in 1870, the state became the owner of all minette reserves down to a certain depth.

From 1866 to 1868, the Metz brothers built a modern steel mill in Dommeldange, with four blast furnaces, which processed coke and minette.

In the 1880s, there was a further change: the Metz brothers acquired the rights to the process invented in 1879 by Sidney Thomas and Percy Gilchrist, allowing cast iron to be made into steel.

Germany's suppression of customs rights in 1873 and overproduction provoked an economic downturn amplified by the arrival of British cast iron.

The post-war return of Lorraine — hitherto part of Germany — to France meant that the vast Lorraine-Luxembourg-Saar industrial complex was broken up.

The challenge was twofold: firstly, to secure both pre- and post-production markets (that is, on the one hand, the supply of raw materials, minette and coke, and on the other, a demand for the finished products, from nails to grey-beams); secondly, to take the place of the German firms, which had had to withdraw.

The steel war between France and Germany, of which the occupation of the Ruhr area was a part, was highly damaging to Luxembourg.

[13] His knowledge of both countries and their languages, and many contacts in the business world, allowed him to play the role of an honest broker.

[13] Five large steel producers limited their production through a quota system: 40,5% for Germany; 31,9% for France; 12,6% for Belgium; 6,6% for the Saar region; 8,5% for Luxembourg.

[13] During the economic crisis after 1929, employers tended to lay off foreign workers first, meaning that by 1939 their proportion of the steel workforce had sunk to 20%.

[13] With the sale of German companies after World War I, the proportion of Luxembourgish managers in the steel industry also increased.

It had two main goals: to turn the Luxembourgers' minds towards Deutschtum, and to bring the steel industry under German control.

The Rodange foundry, owned by "Ougrée-Marihaye", was allowed to continue its existence; it received a German trustee as its head, and was renamed the "Eisenhüttenwerke Rodingen".

Gustav Simon would not allow this: he recognised the key role that ARBED played in Luxembourg, and was reluctant to lose control over it.

It was, however, intended from the outset that when Germany had won the war, ARBED and the Rodange foundry would also pass into German ownership.

Thus, from Autumn 1942 onwards, hundreds of so-called Ostarbeiter were taken from the occupied territories of Eastern Europe to Luxembourg and forced to work in the foundries and mines.

The Schuman Plan would allow it to export its products to Germany and France, and grant it free access to the raw materials it required.

ARBED managed to reinforce its position, and in 1967 it took over Hadir, thereby becoming a monopoly producer in Luxembourg steel production and processing.

Around the same time, it became the majority owner of the Sidmar factory in Ghent, one of the most modern steelworks in Europe, with direct access to the sea.

Obligatory early retirement at 57 years was introduced for ARBED employees; as well as cash subsidies for those who left voluntarily.

In March 1979, a Tripartite agreement was reached, stipulating that ARBED would invest 23.2 billion francs by 1983 to modernise its factories.

The unions accepted that worker numbers would be reduced to 16,500, and the Luxembourg government granted ARBED a loan of 3.2 billion francs, over 10 years.

Additionally, synergy agreements were made with other steel producers: instead of everyone doing everything across the whole range of products, only the most profitable site for each would remain in existence.

1979 showed that these measures would not be enough: the steel crisis intensified, through increased inflation, which increased interest levels on loans, the second oil crisis, which caused energy and raw material prices to shoot up, and over-production, which was still a factor in different steel-producing countries, despite the Davignon Plan.

ARBED had received relatively little government money at this point, compared to its competitors: from 1976 to 1982 it invested 25.8 billion francs, of which only 10% were from the state.

The individual companies of the ARBED group were structured as autonomous units, which were each responsible for showing good results.