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Europe’s Steel Industry Set For A Painful Restructuring

Published 03/07/2013, 03:19 AM
Updated 07/09/2023, 06:31 AM
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An article published this week states that if Europe’s steel industry wants to remain a global player, it needs to shed approximately 25 percent of its capacity within the next three years.

“It is a matter of fact that the European steel industry is in a massive structural crisis,” said Wolfgang Eder, who chairs the Eurofer trade body.

Mr. Eder is quoted as saying: “We have an annual capacity of around 210m tons in Europe. In my opinion, there is an excess of about 40m to 50m tons. That is an overcapacity of 25 percent.”

“If the structures and capacities are not adapted in the next two or three years,” he continued, “then over half the steel production sites in Europe will vanish over the next 15 years because of continuous price pressure, and Europe will end up playing nothing more than a marginal role in the global steel industry.”

Governments are hampering the process in several ways.

First, they are resisting attempts by steel companies to cut overcapacity and so improve capacity utilization, said to be running at 75% or less. Secondly, high electricity and gas prices make competition against steel producers in North America (who are benefitting from low-priced shale gas) challenging. Lastly, bureaucratic red tape and labor laws are making social welfare and work costs uncompetitively high in Europe.

In the absence of a highly unlikely massive turnaround in demand, Europe’s steel industry is set for a painful period of restructuring for years to come – during which the pressure for protectionism will only grow.

by Stuart Burns


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