Job cuts and market challenges: Concerns over Europe's steel industry grows

Recent findings from MEPS International, as reported in their December edition of the European Steel Review, highlight growing concerns about the future of Europe’s steel industry. The sector faces significant challenges, including job cuts, competition from low-cost imports, and delays in green investments, leading many respondents to fear the industry is "in danger."

Job Cuts at Major Steel Producers

Thyssenkrupp Steel Europe announced plans to reduce its German workforce from 27,000 to 16,000 by 2030. This decision, attributed to high energy costs and competition from inexpensive Asian steel imports, also involves reducing annual production capacity by up to 25% from its current 11.5 million tonnes.

Similarly, ArcelorMittal revealed strategic changes that include delaying decarbonization plans at its Dunkirk site and closing distribution centers in Reims and Denain. The company cited factors such as the slow development of green hydrogen infrastructure, high direct reduced iron (DRI) costs, overcapacity in China, and limited import protection under the Carbon Border Adjustment Mechanism (CBAM).

Calls for a Strategic Steel Action Plan

The announcements have renewed pressure on the European Commission to adopt a comprehensive strategy to safeguard the industry. Eurofer, the European Steel Association, and union federation IndustriAll have urged the Commission to publish a Steel Action Plan within 100 days of the next parliamentary elections.

In a letter to European Commission President Ursula von der Leyen, the organizations warned that the industry faces a "crisis" due to ongoing energy and raw material issues, compounded by an influx of cheap foreign steel. They called for increased import tariffs, compliant with World Trade Organization (WTO) rules, to protect the sector.

Challenges from Global Overcapacity and Imports

Global steel overcapacity, which reached 551 million tonnes in 2023 and is expected to exceed 560 million tonnes in 2024, remains a significant challenge for European producers. This figure dwarfs the EU’s annual steel production, which has declined from 160 million tonnes in 2018 to just 126 million tonnes in 2023. Imports now account for 27% of the EU market, further eroding profitability.

Chinese exports, despite efforts by China to cap crude steel production, rose by 22.6% year-to-date as of November 2024, reaching 101.2 million tonnes, according to the China Iron and Steel Association (CISA).

Economic Impact and Price Pressures

Declining steel prices have exacerbated the industry’s struggles. MEPS reported that its Europe Average price for hot rolled coil fell by 25.7% between February and October, squeezing profit margins for producers and downstream businesses. Many Southern European rerollers and service centers are finding it increasingly difficult to maintain viable business models as the price gap between domestic and imported steel narrows.

Outlook for the Industry

Market participants report sluggish buying activity in December, with high inventories and continued discounting. Many expect extended breaks over the holiday season due to a lack of urgency to restock. While tighter import restrictions and fiscal support for decarbonization are seen as necessary, an increase in demand in early 2025 will be critical to stabilizing the market.

This analysis is based on insights from the December edition of MEPS International’s European Steel Review. The monthly publication offers detailed market commentaries, steel prices, and forecasts. For further information or subscription details, contact MEPS International.

Source: MEPS International, Photo: Fotolia