Home Company Profile Steel Industry Analysis Meps Publications Consultancy Independent Studies
 
Subscriptions MEPS World Steel Prices MEPS Steel Reports On-line MEPS Steel News Links

Company Profile
Steel Industry Analysis
MEPS Steel Publications
Steel Consultancy
MEPS World Steel Prices
Independent Studies
Request Free Publications
MEPS Index Steel Prices
Subscribe to Publications
MEPS Steel News
Industry News
MEPS Sponsored Events
Steel Links
Subscription Rates
Add Link To Website
Content for Websites
Contact Us
Site Map
 
MEPS STEEL PRICES ON-LINE
MEPS STEEL REPORTS ON-LINE
World Carbon Steel Price
World Carbon Steel Price Index
EU Carbon Steel Price
EU Carbon Steel Price Index
Asia Carbon Steel Price
Asia Carbon Steel Price Index
North American Carbon Steel Price
North American Carbon Steel Price Index
Flat & Long Carbon Steel Price
Flat & Long Carbon Steel Price Index
All Products Composite Steel Price & Index - Free
Stainless Steel World Price
Stainless Steel World Price Index
EU Stainless Steel Price
EU Stainless Steel Price Index
Asia Stainless Steel Price
Asia Stainless Steel Price Index
North American Stainless Steel Price
North American Stainless Steel Price Index
Home > MEPS Steel News - 02.05.2013

RATIONALISATION IN EU STEEL SECTOR TO CONTINUE - MEPS

Overcapacity remains a significant problem in the global steel industry. A healthy rate of plant utilisation is around 85 percent - allowing 15 percent to cover maintenance stoppages and unforeseen factors.

One part of the world where the crisis of excess supply can be seen most acutely is in the EU. Steelmakers in the region are presently operating at approximately 70 percent of maximum production potential. Even at this level, there is severe competition between mills for orders as demand is so weak and buyers are keeping purchasing to a minimum. Consequently, the financial performance of European mills continues to deteriorate.

Numerous key figures within the steel industry have been calling on decision makers to act for some time and the European Commission (EC) has heeded the call. It is preparing an action plan, due to be unveiled in the middle of this year, which aims to increase the global competitiveness of the sector. The EC will cover a range of concerns including energy prices, trade, labour, raw materials and climate change policy. Although changes in the regulatory environment are required in order for European steel companies to compete effectively on the world stage, many would agree that market forces should ultimately decide the fate of individual steelmaking facilities.

ArcelorMittal has taken the lead with capacity closures in Europe. Many other local steelmakers have yet to follow and have instead chosen to idle plants temporarily or run mills at a reduced level of operation. ArcelorMittal has the advantage of being a global organisation and can adjust its portfolio accordingly. Whereas, a local steelmaker, with just one or two units, is unable to benefit from such economies of scale.

It is clear that the decision to permanently close facilities involves significant opposition by political and labour forces, as seen by the recent experience of the Luxembourg-based steel producer. The future of a number of the company’s west European plants remains unresolved.

Some of the current overcapacity is due to cyclical factors. Apparent steel consumption in 2012 declined by approximately 10 percent, year-on-year, and stood more than 50 million tonnes below the level witnessed in 2007. No gains are forecast this year. Only moderate rates of growth are envisaged thereafter.

The apparent level of structural overcapacity and the resultant effects on long term profitability have led some producers to exit the region’s business altogether. This scenario can be seen in the export-orientated steel industry of eastern Europe. Mechel has recently disposed of assets in Romania. US Steel in Serbia made a similar decision last year. Evraz is considering the future of its operations in the Czech Republic, including a possible sale.

Despite the drive for rationalisation, capital expenditure by European mills is likely to continue in the future, albeit at a reduced rate. Investment will be made for environmental upgrades and energy efficiency, rather than in expanding production potential. Furthermore, there will be an ever more increasing focus on value-added products - targeting niche, high-end markets, with less and less commodity material being manufactured.

The long term sustainability of the region’s steel industry does not solely rely on changes in policies and the elimination of excess capacity. The prospects are tied to the performance of steel consuming sectors - construction, automotive, energy, engineering, home appliances. A stronger economy will provide a significant boost to the steel industry. Conversely, as we have seen in recent times, a weak economy will create sizeable problems.

Source: MEPS World Steel Outlook Quarter 1-2013 - Now available

Also See: MEPS Steel Reports Online

 

Sign up for free MEPS steel news alerts

Enter e-mail address *Required

Name:      


Company: 
If you are a journalist please tick here: