Steel crisis spreads to Europe as Arcelor Mittal shuts Spanish plant

Most of China’s steel industry is government backed, with Beijing subsidising production so that plants can run at a loss.

There was further evidence of the pressure Chinese steel is putting on European industry, with Germany’s steel trade association WV Stahl and union IG Metall releasing a study warning that “political over-regulation and cheap imports” will steal plants away from the region.

The research claimed green levies placed huge extra costs on German steelmakers, preventing companies from investing in new equipment that would allow them to compete with rivals around the world.

Hans Jürgen Kerkhoff, president of WV Stahl, put a €10bn price tag on the expected European Emissions Trading System, under which companies will have to pay a tariff relating to how much pollution they produce.

“Companies and jobs, which are exposed to international competition, should not be put at risk by disproportionate costs,” Mr Kerkhoff.

Chinese mills are currently pumping out steel at a $34-per-tonne loss, according to trade body UK Steel.

The crisis has already claimed more than 5,000 jobs at British steel companies, who are even under even greater pressure than their European counterparts because of higher costs and less generous tax regimes, UK steelmakers claim.

Last week, Tata Steel announced 1,050 redundancies mainly at its giant Port Talbot plant in South Wales, adding to the more than 2,000 positions the company cut last year. In October, SSI shut its steel plant in Redcar with 2,200 staff being made redundant.

Steel companies across Europe are lobbying the European Commission to copy the US by introducing import tariffs on imported steel to stem the flow of imports, arguing that unless action comes soon, they will be unable to survive.

Arcelor Mittal is the world’s largest steel producer according to World Steel Association data, with an output of almost 100m tonnes in 2014, about a 16th of the global total. Its Sestao plant produced almost 2.5m tonnes of steel a year, according to the company website.

Peter Brennan, European editor at steel industry data provider Platts, said: “Arcelor Mittal is the industry’s biggest producer by some distance so it’s quite likely it will be cutting capacity as the crisis goes on and could be looking at shutting down plants in the US. However, Arcelor Mittal is so large and important to several countries that it is seen as too big to fail.”