European steel producers reduce production

European steel producers are reducing production due to market instability.

The steel sector is one of the major energy-intensive industries. It is particularly vulnerable to the ongoing energy crisis, thus impacting steel prices.

Rising input costs, in addition to eroding demand, have already caused a wave of cuts that threaten the viability of Europe’s entire metals sector.

Spiraling energy costs have forced steel producers to cut production across Europe. The sector employs more than 300,000 people and contributes tens of billions of euros to the region’s economy.

EUROPEAN STEEL PRODUCERS – ITALY

Italy’s steel producer Ilva, recently renamed Acciaierie d’Italia, has no liquidity. It also accumulated a debt of more than 280 million euros to the Italian energy group Eni. The company is 38% controlled by the state agency Invitalia and 62% by ArcelorMittal.

At the end of September, Italy approved energy bonuses for companies. As part of the decree, operational steel producers will receive a 40% tax cut for energy expenses between October and November. According to the GMK Center, waste processors will receive a 30% discount.

EUROPEAN STEEL PRODUCERS – GERMANY

Germany is particularly vulnerable because of its high dependence on Russian gas. The country received two multibillion-dollar aid packages in September. It is hoped that they will reduce energy prices. The first of these packages allocated €1.7 billion to provide tax benefits for 9,000 energy-consuming businesses.

Aid packages have been criticized by some EU member states.

„If Germany were to suffer a really deep recession, it would drag the whole of Europe down with it,” Robert Habeck said in an interview. „We are not selfish – we are trying to stabilize an economy in the heart of Europe.”

Many of the measures approved so far seem limited in scope, given that the energy crisis could last for years. It remains uncertain how effective these efforts will be in preventing the permanent loss of European steel capacity. However, recent actions suggest that countries see protecting their industrial sectors as strategically important.

So far, European countries have so far allocated about 500 billion euros in total to the energy crisis. This should go a long way towards minimising supply disruptions in Europe.

EUROPEAN STEEL PRODUCERS – BELGIUM

Even with four wind turbines and more than 50,000 solar panels at its headquarters in eastern Belgium, stainless steel maker Aperam has been forced to halt production. The company now pays for energy in a month, as much as it used to pay in a year.

„We have temporary levers to overcome a certain period, but this cannot last for years….If this happens, we will witness a deindustrialization of sectors like ours. And Europe will become dependent on imports for base metals,” the European head of Aperam, Bernard Hallemans, told Reuters.

IMPORT BANS ON STEEL FROM RUSSIA

The EU has adopted the latest package of sanctions against Russia.

Finished/semi-finished steel products originating in or exported from Russia will be completely banned for import into the EU. A liquidation period of three months is envisaged. The period allows the execution of contracts signed before the adoption of the ban on the import of steel semi-finished products. For some steel semi-finished products with strict technical requirements for further processing by the EU steel industry (two products), the introduction of the full ban will take place after a transitional period of up to 2 years.

The new package also extends the ban to imports into the EU of Russian steel that has been processed in third countries.