Today, global steel leader ArcelorMittal (MT) announced that it would be temporarily cutting production in Europe, marking the company’s second production curtailment this month. On May 6, ArcelorMittal announced production cuts in Europe, which accounts for roughly half of the company’s revenue.
ArcelorMittal blamed “weak market demand and high import levels in Europe” for its decision and said it is taking “additional steps to adjust its European production levels to further align its production to the current market demand.” Steel imports into Europe have increased after Donald Trump imposed tariffs on US steel imports. While global steel production is growing healthily and China is churning out near-record levels of steel every month, Europe’s steel production has fallen this year. The region’s steel production fell 4.2% last month and was down 2.1% year-over-year in the first four months of the year.
When tariffs were imposed last year, steelmakers in other developed countries voiced concern that they could see import deflection in their markets. While some regions, including Europe, took measures to control steel imports, they don’t seem to be enough. While the tariffs were expected to protect US steel companies, almost all US steel stocks, including U.S. Steel Corporation (X), are trading at 52-week lows. U.S. Steel also has operations in Central Europe.
Demand has sagged
Europe’s demand has been tepid as its economic powerhouse, Germany, has slowed down. The drama over Brexit isn’t helping investor sentiment, either. The Vanguard FTSE Europe ETF (VGK), which gives exposure to European markets, was down 0.94% today as of 10:30 AM Eastern Time.