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17. November 2011

European debt crisis hits German steel industry

Reuters reported that Europe's largest steel producer Germany will likely produce less crude steel this year than expected as the euro zone debt crisis creeps its way into the real economy.

Mr Hans Juergen Kerkhoff president of German Steel Federation said that "In the past few weeks business in the steel industry has become bleak, mainly due to the euro zone debt crisis. Crude steel production in 2011 will tentatively be below the forecast level of 45.5 million tonnes but will exceed the previous year's volume of 43.8 million tonnes."

He reaffirmed that he expects demand for rolled steel products for next year to grow by 1.5% but said he was unable to provide an outlook for crude steel output.

Mr Kerkhoff said that contrary to the normal business cycle, new orders of German steelmakers have not recovered from the usual summer lull and was down by 6% YoY in September 2011.

He said that in the third quarter, new orders were around the same level as the same period last year at 8.76 million tonnes. He added that the order backlog has been declining since mid year, and while it was up 8% YoY in the third quarter, it had shrunk 6% from the second quarter.

Mr Kerkhoff said that "The steel industry is experiencing the consequences of uncertainty in the markets, which has arisen due to the continuing worsening of the debt crisis."

Mr Kerkhoff said buyers of steel products were in wait and see mode and were avoiding stocking up their inventory too much in case the economy plunges into a recession. But he noted that new orders in the machine engineering sector and production in the automotive industry showed the steel processing industry remained in robust condition even though it has slowed down slightly.

He said another positive factor was that inventory in the steel distribution sector, which is a good indicator of real demand for steel products, was very buoyant.

Mr Kerkhoff said in September 2011, unit sales of rolled steel products among steel traders and service centers were still above the 1 million level recorded in August and were 8% higher than last year.

Last week the country's largest trade union, IG Metall threatened strike action over wage increases at steel companies. The union has been in collective bargaining talks for steel sector workers in the German regional states of NRW, Lower Saxony and Bremen at about 60 companies including ThyssenKrupp, Salzgitter and ArcelorMittal.

Sourced from Reuters

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