Thyssenkrupp Steel Europe cited competition from cheap Asian imports and high energy costs in deciding to cut its German workforce from 27,000 to 16,000 by 2030. The restructuring will also include cutting annual production capacity by up to 25% from its current output of 11.5 million tonnes.
Meanwhile, ArcelorMittal also announced strategic changes that will include delaying decarbonization plans at its site in Dunkirk and the closure of distribution centers in Reims and Denen. In explaining its delayed investments in decarbonization, ArcelorMittal cited the slow development of green hydrogen infrastructure, the high cost of DRI, the impact of China's overcapacity and the weak import protection offered by CBAM.
These statements follow calls for the European Commission to urgently implement a strategic approach to maintaining the sustainability and stability of the European steel industry. In November, MEPS reported that the European Steel Association (Eurofer) and trade union federation IndustriAll want the European Commission to publish a Steel Action Plan within 100 days of the upcoming elections of a new parliament.
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Both organizations have since written directly to European Commission President Ursula von der Leyen. Eurofer and IndustriAll warned von der Leyen that the European steel industry was “in crisis”. They said the sector, already suffering from an ongoing energy and commodity crisis, was again being flooded with cheap foreign steel. The letter said that to solve these problems, it is necessary to strengthen import tariffs, taking into account WTO rules. Current EU import protection measures are due to expire in mid-2026.
Cheap Chinese steel exports have been cited as a catalyst for low profitability for European steelmakers. Despite the Chinese government's efforts to curb crude steel production, data from the China Iron and Steel Association (CISA) showed finished steel exports rose 22.6% year-to-date to the end of November, reaching 101.2 million tonnes.
Eurofer highlights that global steel surplus capacity reached 551 million tonnes in 2023 and will exceed 560 million tonnes this year - four times the country's annual steel production EU. In addition, the OECD forecasts an additional 157 million tonnes of carbon-intensive capacity by 2026.
In contrast, EU steel production has fallen by 34 million tonnes since 2018, falling to just 126 million tonnes in 2023. Imports now account for 27% of the EU market. Moreover, almost 100,000 jobs in the steel industry have been lost over the past 15 years, it says, and capacity utilization in the EU has fallen to an "unsustainable" 60%.
EP respondents stress that any changes implemented by the European Commission will not be implemented quickly enough to save many businesses.
Downward pressure on European steel prices has led to MEPS Europe's average hot rolled coil price fell by 25.7% between the February high of €759 per tonne and the October low. In addition to reducing the profitability of European steel companies, this is affecting the business models of those further down the supply chain.
Broken business models
Southern European market participants report that a narrow gap between domestic and import prices are detrimental to distributors and service centers in Southern Europe. These mills can no longer generate sufficient profits from hot-rolled coils supplied by low-cost overseas suppliers and processed for consumption in the European market.
Most report that purchasing activity has slowed to a standstill in December. High inventories and ongoing discounts from steelmakers mean there is no rush to restock ahead of the new year. There will be long breaks of three to four weeks over the Christmas and New Year period, without fear of missing out on orders.
Tighter import restrictions and fiscal support for decarbonization would be welcomed by the EU steel industry. Ultimately, however, demand growth in the new year is needed to stimulate price growth.
