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Brexit or No Brexit, the European Steel Industry Is in Shambles

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Jun. 27 2016, Updated 8:05 a.m. ET

European steel industry

The EU (European Union) is the second biggest steel-consuming region. The issues facing the European steel industry are no different from those facing the EU’s global counterparts—a demand slowdown coupled with high levels of imports. This deadly duo has negatively impacted European steel production, as we’ll explore in this part of the series.

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Production is in a falling trend

In May, ~14.5 million metric tons of steel were produced in the EU. That was a YoY decline of 5.5%. Notably, the EU saw the biggest decline in steel production in May compared to other major steel-producing countries. In the first five months of 2016, the EU’s steel production fell 6.4% as compared to the corresponding period last year. In the EU, the United Kingdom has seen the biggest drop in steel production with a 37.5% YoY production decline. This could be attributed to the ongoing Tata Steel crisis.

Imports are a challenge

While the United States has taken some decisive steps against steel imports, Europe has been slow in taking action against Chinese steel imports. This is evident in the region’s steel production data. Also, steel prices in Europe have not seen a major recovery as they have in the United States, as imports are still a big challenge for steel companies operating in Europe.

Falling steel production in Europe (DFE) negatively impacts ArcelorMittal (MT), since it gets almost half of its revenue from Europe. U.S Steel Corporation (X) also gets a significant part of its revenue from Europe. However, AK Steel Holding Corporation (AKS) and Nucor (NUE) get most of their revenue from the US market (DIA).

In the next part of this series, we’ll see how the steel supply is shaping up in the United States.

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