ArcelorMittal posted a US$ 3.7 billion loss last year, largely on the back of falling sales in Europe and China.
In comments to a domestic publication reported in the FT, the firm blames Europe’s politicians for not doing more to boost domestic demand and the Eurozone’s competitiveness. In particular, Lakshmi Mittal singles out France for criticism, although France’s problems are reflected in several other European states, particularly when it comes to steel.
Mr. Mittal is quoted as saying, “In France, the cost of labor is 20% higher than in Spain, for example, and labor laws remain too rigid.” The FT also quotes Mittal as saying steel demand had fallen by 9% in Europe. Though he expected it to rise by 3% per year from 2014, he added: “At this rhythm, in 2020 we will still not have got back to the levels we saw in 2007.”
Harking back to the cost of production in Europe, he added the production overcapacity could not be solved through exports because, “the European steel industry is not competitive enough for exports.” More controversially, he went on to repeat calls for Europe to adopt more protectionist policies shielding it from low-priced emerging market imports.
Europe’s steel industry is caught in a two-pronged grip. On the one hand, costs are high; variously for power and labor, but also capital and environmental legislation depending on the market. On the other, falling demand is increasing the level of overcapacity, making the industry struggle to compete profitably, even in its home market.
Lower industrial production and reduced investment in large-scale infrastructure projects have resulted in a marked decrease in steel demand worldwide, but particularly in Europe.
A Standard Bank report states the debt crisis is weighing heavily on economic activity, such that apparent steel use in the EU is expected to have declined by 5.6% in 2012. Spain and Italy are expected to see particularly dramatic drops in 2012, with apparent steel use falling by 11.9% and 12.6%, respectively.
Even Germany, the most resilient of European economies, is estimated to experience a decline of 4.7% in 2012 – and with the country joining many other EU states in recession in the first quarter, the omens for 2013 are worse.
Unfortunately, with unemployment a major political issue and austerity measure across Europe contributing to a rise in jobless numbers, the possibility of major re-structuring is remote. The only consolation for producers elsewhere is the cost of manufacturing means European producers are unlikely to be a major threat in overseas markets.
If they are, Europe may be the brunt of that same protectionism that Mr. Mittal is so keen for the EU to embrace.