„Up to 70% of European Steel Capacities are Endangered“
Wolfgang Eder, CEO of Austrian voestalpine, thinks that the European steel industry faces fierce competition from the East.
Europe´s steel industry currently faces low steel prices anyway, Eder explains. In addition, fears of a growing competition is rising. The steel industry expects growing pressure from the East, Eder said to the German newspaper „Handelsblatt“. Eder also acts as President of the European steel association Eurofer.
In September, when Russia joins the WTO, tariffs on Russian steel will be abolished. „In total, 60% to 70% oft he European steel capacities are threatened.“
In the long term, the major rivals oft he European steel industry will not be Chinese or Indian competitors. The main problems will be Russian, Turkish and Ukrainian steel producers. At the moment, China exports 8 million tons of steel to Europe per year. However, transport costs come at € 50 per ton.
Eder thinks that the European steel industry should cut its current annual capacity of 210 million tons by 25%. The current demand would only amount to 160 million tons. „If the downszing should be socially acceptable, it should be initiated soon.“ For Eder, the European steel industry is mainly focused on quantity instead of quality. Voestalpine´s CEO refers to his own company and ThyssenKrupp, which has specialized in the production of high-quality steel.
The European steel industry would still hesitate to lower its capacities, Eder asserts. This would cause an increase in volatilities. „The cycles in the steel industry became substantially shorter.“ Eder says. In the past, the steel cycle had a duration of several years. Now, the cycle would end after a few months. After a rise in demand in the first quarter of 2012, demand has worsened since April, Eder states.
In 15 to 20 years, there are no commodity steel suppliers in Europe anymore, Eder considers. The competitiveness is shrinking, the executive says. However, voestalpine could develop new products in the last years. About two thirds of voestalpine´s revenues are made up of processed, high-quality goods, Eder states. „Our steel production only generates 33% of our sales. Here, we supply premium customers like the German automotive industry.“ Eder explains. Five years ago, voestalpine´s plan was to build a new major steelworks at the Black Sea coast in Romania. The project´s volume was about € 7.0bn. Right before the financial crisis started, voestalpine knocked this plan on the head.