Don’t faint, but the European steel sector is finally on the up.
Now let’s not go crazy – we don’t mean “on the up” in a Chinese or even a US sense. We are not talking +10% growth or even +4% growth, as in the US, but more like +2%. Even still, it’s a welcome reversal after years of decline.
According to the NY Times, European businesses have been buying about 30% less steel than during the peak in 2007, and steel industry employment has shrunk by about 16% since the downturn began, to around 350,000 jobs.
Wolfgang Eder of Voestalpine, Europe’s third-largest steelmaker, recently estimated that while the European steel industry had permanently shuttered 10 million metric tons of crude steel capacity since the financial crisis, it still needed to remove an additional 25 million tons of capacity to prevent downward price pressure.
The fact remains that while the automotive sector is beginning to do relatively well and some growth is coming back into consumer goods, major consuming sectors like construction are still deeply depressed. Construction accounts for about 35% of European steel consumption, more pre-2008, and yet infrastructure spend is unlikely to be a priority in deficit reduction-focused Europe anytime soon.
Still, ArcelorMittal, Europe’s largest steelmaker with about 25% of the market, is hiring staff and, following rationalization, running some facilities at capacity. The main European business lost $933 million on revenues of $27 billion last year. The company’s comparable business in the Americas made a profit of $852 million by comparison.
But the firm is also investing again – primarily to improve efficiency rather than expand output – but the commitment is a good sign that producers are seeing a more positive year ahead.
Contraction has stopped in southern European states and has slowed in France, with economies continuing to expand in northern Europe; taken as a whole, with the signs of an upturn in Spain, modest growth this year is not expected to falter as previous green shoots have done. Most folks, though, are looking to 2015 before there is a significant recovery.
For now, though, steelmakers will readily settle for 2% growth, even if they are struggling to get any improvement in prices.