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March 3, 2013 5:04 pm
Europe’s beleaguered steel industry needs to shed around 25 per cent of its capacity within the next three years if it hopes to remain a global player, the head of Europe’s main steel trade association has warned.
“It is a matter of fact that the European steel industry is in a massive structural crisis,” said Wolfgang Eder, who, as well as chairing the Eurofer trade body, has been chief executive of Austrian steelmaker Voestalpine since 2004.
A recent study by the OECD, the rich countries’ think-tank, found that between 2007 and 2011, excess capacity in Europe’s steel industry ranged between 26m and 123m tonnes per year.
However, Mr Eder said that this range had been skewed upwards by the slump in demand caused by the global financial crisis, and that he thought the actual surplus capacity was in the region of 50m tonnes a year.
“We have an annual capacity of around 210m tonnes in Europe. In my opinion, there are about 40m to 50m tonnes too much. That is an overcapacity of 25 per cent,” he said.
“If the structures and capacities are not adapted in the next two or three years, then more than 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.”
Despite the fact that many steel plants in Europe are running at well below full capacity – the average utilisation rate has hovered around 75 per cent since 2010, according to the OECD – very few have been closed, in part because the sector is seen as strategically and symbolically important by politicians.
Late last year, the French government threatened to nationalise ArcelorMittal’s plant at Florange in northern France unless the company guaranteed that the planned closure of two blast furnaces at the site would not result in job losses.
Mr Eder said that it was not the role of governments to decide the fate of individual plants, and that they should instead focus on ensuring that the regulatory and business environment allowed European companies to compete on the world stage.
European industrial groups have long complained about the continent’s high non-wage labour costs and more recently have expressed concerns that they are paying far more for electricity and gas supplies than their North American rivals due to the shale gas boom in the US.
Mr Eder argued that EU politicians should focus on reducing these cost factors within the next 5 years, or run the risk that Europe “permanently” lose its competitiveness in steelmaking.
“If these factors aren’t reined in, the real economy will suffer. We will become less and less competitive, and industrial activity will simply shift abroad,” he said.
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