World Economy

Steel Gloom Deepens for Europeans

Steel Gloom Deepens for EuropeansSteel Gloom Deepens for Europeans

The fate of some huge blast-furnaces in the Belgian city of Liege a few years ago may offer clues to where the rest of Europe’s beleaguered steel-making industry is headed—more doom and gloom.

Known for its bike race and meatballs, Liege was home to a steel mill owned by ArcelorMittal, the world’s top producer. While the city had been a metal-making hub since the end of Napoleonic Wars, the aging plant was too far from raw materials and spread out along miles of the Meuse River, making it uncompetitive after the global financial crisis sapped demand. In 2013, ArcelorMittal tired of losses, shut much of the facility, Bloomberg reported.

Since then, things have gotten worse. China, which accounts for half the globe’s output, is exporting the most ever as its own demand slows. That means more supply to compete with European producers who can’t make money at current prices and already aren’t using about 30% of their capacity. Since the 2008 financial crisis, more than 75,000 steel jobs were lost, or 20% of the industry’s workforce in Europe. More will probably follow.

“The European steel industry has never stopped restructuring,” said Edwin Basson, director-general of the Brussels-based World Steel Association, which represents more than 150 producers. “I don’t for a moment think we are at the end of this.”

Even after eight years of cutbacks and plant closings, Europe is still making more steel than it needs. Between 2007 and 2013, when demand plunged by 30%, companies reduced capacity by just 4%, according to Jefferies International Ltd. The continent produced 166 million tons last year, well below its capability of 230 million tons.

ArcelorMittal, which produced a combined 92.5 million tons of steel from mills in the Americas, Europe, Africa and Asia last year, has posted a net loss for four straight years, including a $7.9 billion in 2015. The Luxembourg-based company tapped shareholders for $3 billion this month to help pare its debt.

Tata Steel Ltd., part of India’s largest conglomerate, says the assets of its UK business have almost no value, and the company wants out. It reached an agreement last week to sell blast furnaces in Scunthorpe, England, to a private-equity firm and is looking to unload its remaining plants in Britain.

Meanwhile, China’s crude steel output hit a record high of 70.65 million tons in March, data showed on Friday, as a rally in steel prices and a seasonal pick-up in demand encouraged steel mills in the world’s top producer to boost production.