Steel is an essential material for the modern world. Yet steel producers are becoming scarce. Whether because of poor economics or ecology, not many new steel plants are being built in the Western world. What will the steel market look like in ten years? In China, the steel industry is on a huge upswing compared to other countries. And it is building a tremendously strong position in the world. Are we in danger of becoming as dependent on steel in the future as we are now on gas from Russia?
Europe is a distant second. A strong industrial base is essential for Europe’s economic growth, the preservation of sustainable jobs and competitiveness on world markets. A strong steel industry forms the basis of many industrial value chains, for example in the automotive industry. The EU steel sector has an annual turnover of €166 billion, generates 1.3% of EU GDP and provides 328 000 direct jobs and an even larger number of indirect and dependent jobs. The European steel industry is characterised by modern, energy and CO2 efficient plants that produce high added value products. And products for the world market, based in particular on an excellent research and development network. The European Union produces an average of 170 million tonnes of crude steel per year. However, it is still only the second largest steel producer in the world after China.
“As we know, steel production is not entirely eco-friendly. And this, of course, has a big impact on its price. If you have to produce steel in a country where the ecology is so much guarded, it is hard to scale up production. But China, for example, is the opposite in this respect,” says Patrik Duda, CEO of Atreon.
Destabilising world markets
Despite the strong potential of the EU steel industry, its competitive position in the global market has deteriorated in recent years. The recent economic slowdown in emerging economies has had a negative impact on global steel demand since 2014. At the same time, however, spare production capacity in some third countries has increased significantly. Excess steel production has led to a dramatic increase in exports, destabilising global steel markets and depressing steel prices worldwide. Market prices for some steel products have fallen by up to 40% as a result of the surge in volumes. Some third countries have reacted by introducing trade restrictions and other forms of trade barriers. In addition, overcapacity has triggered an unprecedented wave of unfair trading practices that distort the global level playing field. These trade practices shift the burden of global overcapacity disproportionately onto European producers and their employees.
“I find it interesting that the trend of steel mills around the world is more on the decline. In other words, some steel mills are going out of business because of bad economics or environmental concerns. And not many new ones are being built. Steel is an essential material for the modern world. Yet there are fewer and fewer producers. This creates a lot of questions about what will happen to steel in a few decades. Another interesting point is that in China, by contrast, the steel industry is on a huge upswing compared to everyone else. And it is creating a tremendously strong position in the world,” says Patrik Duda, CEO of Atreon, www.atreon.cz.
China is the dominant player in the steel market
Since 2007, steel production in China has doubled, while in the European Union, production has fallen by a few dozen percent. It is no exception that China is gaining dominance in some parts of the industry. And so it is in steel production. Currently, China produces more than 50% of the world’s steel, which is a huge dominance. In 2022, China will produce about 980 000 tonnes of steel. The gap between China and other countries is really big. In general, it can be seen that there are not many new steel plants in Europe. If there are any transactions, it tends to be large holdings buying up existing steel plants that are being renovated, for example. Whereas in China, new steelworks are being built. So there is definitely a risk of dependence on foreign steel in the future. This trend is clear. On the other hand, the anti-dumping duties on some steel from China partly address this.
“It is interesting that conventional structural steel from China is not very popular in the Czech Republic. And you hardly see it. The advantage is that we have our own steel mills in the Czech Republic, and many others nearby; Hungary, Slovakia, etc. But how it will look further down the road is a question,” says Patrik Duda.
Fading fame?
The downside of this Chinese dominance is the strength of its eventual fall. As of 2022, China faces a crisis in the steel market. Which is primarily due to the real estate crisis and the oversupply of the steel market. Just a few months ago, 6 major steel companies announced bankruptcy and many others are cutting production significantly. How their dominance will turn out in the future is therefore a question mark.
Source: Atreon
