Mexico’s Grupo Simec, which acquired Republic Steel in 2005, announced that it plans to indefinitely idle its operations in Canton, Ohio, and Lackawanna, New York, and move that production to a newer plant in Mexico.

Per multiple reports, Grupo Simec said that it plans to idle steelmaking operations at the two mills. Production will shift to the company’s modern plant in Tlaxcala, Mexico. The changes will result in some 500 employees being “furloughed indefinitely.” That includes 322 positions in Canton and 178 in Lackawanna.

In a statement, James Vigil, a Republic Steel board member and executive advisor, said that Grupo Simec had considered all potential options before making its ultimate decision. “We’re facing an extremely challenging SBQ (special bar quality steel) market in the U.S., with competitive market pricing and decreased demand. At the same time, we’ve had to deal with increasing input costs on all raw materials, consumables, and labor, all as a result of the inflationary environment in the U.S. over the past year.”

A key problem was complying with environmental requirements, Vigil explained. The company took many steps over the past several years to remain compliant with all environmental regulations, particularly the National Ambient Air Quality Standard for leaded steel production. Republic Steel spent some $10 million in the Canton plant—which is 125 years old— but it was unlikely that either of the plants would meet future, tougher requirements. Consolidating production to Grupo Simec’s modern plant in Tlaxcala enables more competitive pricing, increased environmental responsibility, and enhanced product quality.

“As the only producers of leaded steel in North America, we also owe it to our customers, and their customers, to be a reliable supplier of such products,” said Vigil. “Ultimately, we’re responsible to our shareholders and our customers. We’re simply doing what needs to be done to meet our responsibilities.”

Vigil said there had been hopes that inflationary pressures would ease, and that Republic Steel would see a bump in business following the passages of the Infrastructure Bill in 2021 and increased demand from the Inflation Reduction Act in 2022. Neither came through.

Republic Steel was acquired in 2005 by Industrias CH, S.A de C.V. (ICH), a steel producer and processor based in Mexico City. Republic Steel is a subsidiary of Grupo Simec, Guadalajara, Mexico, of which ICH is the majority owner. Simec is one of the largest producers