Steel Industry Mergers: Structural Crisis and Crowding Out in the Steel Market

Europe's steel industry is suffering from cheap Chinese competition, falling prices and the high cost of energy and raw materials. High overcapacities are also causing problems for producers. How can the European steel industry prevail in the face of competition, especially from Asia? According to Roland Döhrn, RWI Essen, capacity adjustments in Europe are inevitable, but difficult to achieve. Companies seeking to leave the market face both economic and political barriers in Europe and worldwide. This means that overcapacities are only being lowered very slowly. To reduce the debate to China does not go far enough. As long as large capacities remain unused in Europe, producers still have an incentive to win market share from other providers by lowering their prices. Trade reducing measures ultimately reduce the pressure to make capacity adjustments. According to Christian Obst, Baader Bank, the international steel industry has been in a structural crisis for decades. This is due to the lasting over-capacities, which are at a historically high level. Governments could invoke the reduction in state-controlled capacities and/or the reduction in privately-owned capacities. Moreover, the attempt to preserve as many jobs as possible, as well as governments focusing on their own region, means that these processes take a very long time. André Küster Simic, HSBA and Q&A Banner Küster Unternehmensberatung and Malte Knigge, Q&A Banner Küster Unternehmensberatung, see overcapacities in a regionally differentiated way. Massive overcapacities tend to burden the Chinese steel market. These capacity problems are also being imported into the German and European steel industry at the moment and cannot be resolved with mergers. Hans Jürgen Kerkhoff, Steel trade Association, also believes that the global steel market is burdened by overcapacities totalling several hundred million tonnes, 60% of which are in China alone, and thinks that there is a significant consolidation backlog in the steel industry. Finding a solution to the global structural crisis calls for international cooperation and the systematic application of trade protection instruments. Anti-dumping or anti-subsidy measures are indispensable as a corrective for the European Union. The protective measures need to be in line with WTO rules, but also need to be applied consistently and effectively.