Trade barriers and a focus on protectionist measures alone will not save Europe's increasingly uncompetitive stainless steel industry and have the potential to accelerate deindustrialisation, according to major Italian steelmaker Macegaglia chief executive Antonio Marcegaglia.
Speaking on the sidelines of the International Stainless and Special Steel Conference held in Rome this week, Marcegaglia said that an overdose of such measures threatens to reduce long-term demand while incentivising the import of steel-containing finished goods.
"While trade measures for correcting unfair international competition are welcomed, this is not beneficial if you think about the whole value chain," he said. "We have seen that despite high duties and safeguards, competition from imports has only increased."
Europe's stainless steel sector is under heavy pressure from decreasing demand and growing costs. EU sales of stainless steel producers declined by 26.7pc year on year in 2023 to €16.44bn, with 2024 sales due to decline by a further 18pc to €13.44bn, according to Marcegaglia data. Delegates surveyed by Argus at the conference agreed the industry is severely struggling, with 2024 revenues likely to be below the pre-Covid year of 2019.
On the costs side, Marcegaglia said that while Europe already has the challenge of higher energy, labour, transport and capital costs relative to Asia, more recent hikes to key raw material costs have effectively made it uncompetitive on all fronts. The availability of stainless steel scrap is getting tighter in the EU despite the fall in steel production, which together with high ferro-alloy prices has increased volatility for producers. A rising trend of upstream integration among Asian producers has increased their ability to control the costs of their key input, nickel pig iron, causing European scrap to become expensive relative to Asian NPI.
Battling an unfavourable cost structure and lower scrap availability, European producers moved to start importing NPI in large volumes this year, despite its environmentally unfriendly nature relative to scrap. Europe's NPI imports from Indonesia equated to 10,000t of nickel metal content in January-July, moving up from zero in 2023, according to Red Door Research managing director Jim Lennon.
"The reason for NPI inflows [into Europe] was the differential between the stainless scrap price and NPI," Lennon said at the conference. "NPI was cheaper than stainless steel scrap and so it was a big incentive to bring NPI into the supply chain."
Marcegaglia said decarbonisation is a challenge for the European industry given the region is now wholly cost uncompetitive, and suggested the industry agree on green premiums to share CO2 related costs.
"Given Europe's already high scrap utilisation, efforts for further improvements are complex and costly," he said. "The steel industry has to balance between environmental and economic sustainability."
Delegates at the conference agreed decarbonisation will have to take a back seat as the European industry as a whole focuses on survival.
"As far as 2030 net-zero goals are concerned, you can forget about them," industry equipment supplier Alfa Laval Technologies global sourcing manager and supplier development manager Marcus Lindholm said.
Marcegaglia said that a possible pathway to recovery for the beleaguered industry is through the pursuit of supply chain co-operation, as current fierce competition between EU players is compounding its profitability problems. The group is strategically looking at further opportunities for upstream integration to stabilise its supply chains and improve its carbon footprint, while enlarging its product range to include both flat and long products.
Earlier this week, it announced a £50mn ($66mn) investment to build a new electric arc furnace at its existing plant in Sheffield, in the northeast UK, which will increase the mill's stainless steel products output to over 500,000 t/yr. It is further committed to investment at its Oldbury, UK, tube plant, while also working towards expanding its product range from its Fagersta rolling mill in Sweden.
