Steel giants join forces As 2017 draws to a close, the European metals sector can reflect on a year in which long-anticipated deals consolidating the Continent’s steel industry finally came to fruition. Ben Hargreaves reports.
T
he big news, finally announced in September after more than a year of negotiations, was the merger of German steelmaker thyssenkrupp and the European operations of India’s Tata Steel. The combined company – thyssenkrupp Tata Steel – will have shipments of about 21 million tonnes a year, and create Europe’s second largest steelmaker, with the new venture to be headquartered in Amsterdam. Meanwhile Europe’s largest steelmaker has been busy doing deals of its own. ArcelorMittal announced a major acquisition to take over Italy’s Ilva works – Europe’s largest steel production site, whose plant at Taranto is equipped with five blast furnaces – in June, in a deal worth €1.8 billion. These moves mean that ArcelorMittal now has the capacity to produce about 60 million tonnes of steel a year.
Need for change Combined, ArcelorMittal and thyssenkrupp Tata Steel will now account for approximately 50 per cent of Europe’s steel output. Why is large-scale change necessary in the EU steel sector? The answer is that the 6 Industry Europe
industry has struggled with dealing with its environmental responsibilities, global overcapacity, access to raw materials, and energy costs. Europe’s share of global steel production declined to 10 per cent in 2016, and in general the sector in Europe has suffered since the global financial crisis, with each tonne of steel worth around €215 in 2008, but just €46/tonne in the first quarter of 2016, recovering to approximately €83/ tonne in the first quarter of this year. Producers in Europe have suffered from weakened demand since 2008, combined with a flood of low-cost imports from outside the EU. The impact of these fundamentals was keenly felt in the UK when Tata Steel announced a decision to pull out of its Port Talbot facility in Wales in the Spring of 2016, citing imports of Chinese steel, high energy costs, and weak demand as key factors. Although some of Tata Steel’s sites in Britain were sold off piecemeal, the Port Talbot facility, which employs 3500 people, survived thanks to a deal agreed to separate and reduce the company’s UK pension liabilities. That deal, thrashed out with unions and the Government, and approved by the British
pensions regulator in September, removed one of the major barriers to the merger of thyssenkrupp and Tata Steel. In a sign that the Port Talbot plant has a future as part of the new entity, Tata Steel announced a £30 million investment in the Port Talbot plant in November. Unions in the UK remain concerned about the impact of the merger on British jobs, but as prices have improved and the industry has moved to restructure, there have been signs of a tentative recovery in European steel production this year, with steelmakers on the Continent also returning to profitability. Production of steel is also up on last year. Within the EU, Italy’s crude steel production for October 2017 was 2.3 million tonnes, up by 6.1 per cent on October 2016, according to the latest data from the World Steel Association. France produced 1.4 million tonnes of crude steel in October 2017, an increase of 1.6 per cent compared to the same period last year, and Spain produced 1.3 million tonnes, an increase of 11.9 per cent on October 2016. Turkey’s crude steel production for October 2017 was also at 3.3 million tonnes, up 11.1 per cent on October 2016.
