Andrey Kuzmin/Adobe Stack
Europe’s steelmakers are cutting production and idling factory lines as an industry already buckling under a severe market downturn girds itself for the economic fallout from coronavirus, the Financial Times reports.
Companies such as Thyssenkrupp and Tata Steel have taken action because of falling orders, a lack of available personnel or as a safety precaution against infections, while market leader ArcelorMittal, the world’s largest steel producer, has reduced output at most of its plants on the continent.
Steel producers cite a number of reasons, chief among them being worker safety, but collapsing sales are probably as much of a dynamic.
European steel producers were struggling against a rising tide of imports before the COVID-19 virus arrived, hampered by the E.U.’s carbon credits scheme that taxes big polluters but so far has left imports from even more polluting suppliers exempt.
That is all changing later this year, as we reported, with importers ranked and penalized for the carbon content of their product.
But many in the industry think it is too little too late.
Falling demand as lockdowns spread across the continent has already hit steel producers, with orders canceled or delayed. Automotive manufacturers across Europe are shutting or slowing car production; the sector consumes some 20% of steel output in the region.
Some 80% of the U.K.’s car makers have halted production, with only Jaguar Land Rover still operating this week. The Financial Times says while steel mills from Spain and Italy to Germany, the Netherlands, and Poland are all affected, some observers think Britain’s steel industry is especially exposed because of high costs and a legacy of underinvestment.
“The UK steel industry is the weakest link in Europe, even if less exposed to automotive,” the article reports one source saying. U.K. steelmakers are more exposed to construction than automotive, but here, too, there was a U-turn this week, with construction sites across the country closing as firms realize they cannot maintain safe working distances between workers.
British Steel only just having concluded a purchase by Chinese group Jingye has its primary production based on blast furnaces, to close one or more of those down is an immense and costly undertaking, a Daily Mail article suggests.
With sales plunging 50%, it may be the only option.
UK Steel has asked the government for a range of measures to help prop up the industry, including suspending state aid rules if necessary, providing loans, deferment of tax payments, support to cover late payments by customers and help with energy costs, the Daily Mail reports. At present, such assistance is not part of the government’s wider aid package for the economy, but like the special case being pleaded for the airline industry, steel may be considered a strategic resource and get special help to preserve jobs and facilities.
Governments are trying to find measures to support key industries like steel and metals producers, knowing they will need them when they emerge from the other side of the pandemic lockdowns.
The price will be high, but the price of failing to do so will be even higher.