European Union steel production has already been cut by 50% as a result of the current coronavirus crisis with further losses expected as mills' new order bookings are down by as much as 75%, European steelmakers' association Eurofer told S&P Global Platts on Wednesday.
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Steel mills had already put production restrictions in place in March. However, weakening order books are likely going to result in more outages, possibly resulting in 50% of EU steelmaking capacity at key mills being put out of production by the current crisis, the association said.
"In some regions there are no customers anymore. We estimate that around 40% of the workforce is affected or considered by temporary lay-offs and reduced working," Eurofer said.
The EU 28 nations produced 159.4 million mt of crude steel in 2019, according to the World Steel Association.
"Steel mills are preparing or considering further significant cuts in production as demand continues to fall, notably given the almost complete shutdown of the automotive industry (some sources say 70-80%), the significant decrease in construction activity (some sources say down by around 40%) and other manufacturing sectors," said Eurofer.
In Italy, the EU's second biggest producer after Germany with 23 million mt/year crude steel production in 2019, all steel mills except ArcelorMittal's Taranto and Arvedi's plant have had to shut down their operations under the government decree to fight COVID-19, which had been lifted after Easter.
Ramp up of production in Italy however remains slow as demand continues sluggish.
The entire steel supply chain has been affected by the drop in demand from end-customers. German steel processor association WSM said earlier this month that around 90% of processors in Germany have reduced operations.
John Meyer, analyst at broker SP Angel, told Platts that European steel mills were quicker to cutback on production than mills in other regions as they are not expecting the European Union to stimulate demand as much as, for example, the Chinese government would be able to.
"Most private housebuilding has slowed significantly or stopped entirely while major public projects like HS2 continue in the UK. Housebuilders can not get steel out of steel mills and warehouses due to lockdown restrictions which will inevitably feed back into slower production," Meyer said.