By Alex MacDonald
LONDON--The European steel industry needs to permanently
shutdown excess production capacity to realign production with
long-term demand expectations, but policy changes in energy,
climate and trade are also needed to ensure the sustainability of
the European steel industry, said the director general of the
European steel body association Eurofer in an interview.
"Restructuring is going to happen," Gordon Moffat told Dow Jones
Newswires. "There is excess capacity that needs to be taken out
...[but] we need to do something about policy" to make sure it is
able to adjust to different economic situations, he added.
European steelmakers are suffering from protracted anemic steel
demand since the European Union's sovereign debt crisis took its
toll on Europe's fragile economy and resulted in shrinking
industrial activity. European steel demand is estimated to have
fallen nearly 9% in 2012 to nearly 30% below the pre-financial
crisis high level of 2007.
Steelmakers such as ArcelorMittal (MT), the world's largest
steelmaker and Europe's largest, have reacted by idling blast
furnaces and in some cases announcing plans to close them
permanently.
Mr. Moffat estimates that about 30 million tons out of Europe's
210 million tons of production capacity needs to be removed,
although he didn't provide a timeframe for such closures.
He said the future strength of the European steel market was in
the production of higher quality, high technology steel products
but noted that not all steelmakers will be able to make the
necessary transformation nor will they want to.
"There will be some closure and, yes, it will affect communities
but there will always be a mix" of steel products since "you can't
rely on imports from China and elsewhere" for all of Europe's steel
needs, he said.
Mr. Moffat noted that as part of the restructuring, Europe would
need to revisit its energy, climate and trade policies in order to
make them better suited to help the European steel industry regain
its footing. The European Commission, which has held several high
level roundtable talks on steel and is due to unveil its EU steel
action plan in June, already recognizes that high energy costs need
to be addressed, he said. The roundtable recognizes the need to
address why Europe pays three times as much for its gas and twice
as much for electricity than its global competitors, Eurofer said
in a statement.
On the climate change front, Mr. Moffat said that the European
steel industry has no technologies currently in development that
would allow it to achieve more aggressive emissions reduction
targets being considered beyond 2020. As a result, the European
Commission is recommending that future emissions reduction targets
be readjusted to reflect what can be achieved using available
technologies and what has been achieved based on the benchmarking
of the best performers by sector.
On the trade front, he called for the commission to more
aggressively pursue favorable trade agreements rather than focus on
academic exercises of what would be good policy. A high level
roundtable of stakeholders in the European steel industry urged the
commission to tackle different kinds of export restrictions on raw
materials in third countries amongst other things.
-Write to Alex MacDonald at alex.macdonald@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires