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European Steel Industry Facing Potential Collapse

January 13, 2023
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By Paul Homewood

 

Seeking Alpha, an investment advice website, has rather bad news for the European steel industry.

Vale, by the way, are the world’s largest producer of iron ore:

 

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Summary

  • The EU steel industry seems set to shrink dramatically, squeezed by environmental policies, and a seemingly permanent energy crisis situation that makes production costs unsustainable.
  • Vale is mostly shielded from the kind of problems faced by companies that have extensive exposure to Europe, given its mostly Americas-based production infrastructure.
  • The prospects of the European steel industry being decimated should help to keep global steel prices relatively high, which should counterintuitively keep iron ore prices high as well.

Investment thesis: There are growing signs that the European steel industry can potentially collapse, becoming just a shell of itself. Vale is shielded from the problems facing companies that have business ties exposure to the European energy crisis, which is compounded by increasingly draconian environmental policies that make it hard for energy-intensive companies to operate. At the moment the EU steel industry, as well as many other industries are kept afloat by hundreds of billions of euros in aid & subsidies, which is not sustainable in the long term. The assumed collapse in EU steel production is a positive factor for those miners supplying the steel companies, such as Vale that are not directly exposed to the difficulties that the European-based steel production facilities are faced with. On the back of assumed higher global steel prices, Vale stock is likely to see more long-term price appreciation, while the very generous dividend is less likely to be cut.

https://seekingalpha.com/article/4569253-vale-eu-steel-production-cratering-counter-intuitively-positive?mailingid=30234206&messageid=must_reads&serial=30234206.2400952&utm_campaign=Must%2BReads%2Brecurring%2B2023-01-12&utm_content=seeking_alpha&utm_medium=email&utm_source=seeking_alpha&utm_term=must_reads

The European steel industry is already working under draconian environmental regulations and carbon taxes which put it at a disadvantage with foreign steel mills. And now of course high energy prices are putting  the whole existence of the industry at risk.

Meanwhile the climate zealots who run the EU and UK want steel businesses to spend billions more to close down the efficient manufacturing processes which actually work, and replace them with low carbon technology, all enforced by cdrippling carbon taxes..

The net result will, of course, be importing more steel from Asia, made with much greater emissions.

21 Comments
  1. John Palmer permalink
    January 13, 2023 9:58 am

    FFS!!! How much longer can this kind of thing go on before people (like our ‘wonderful’ media etc) see that none of the green emperors have any clothes, let alone credibility!

  2. Philip Mulholland permalink
    January 13, 2023 10:04 am

    The prospects of the European steel industry being decimated should help to keep global steel prices relatively high, which should counterintuitively coincidentally keep iron ore prices high as well.

    It seems to me that Zoltan Ban confuses counterintuitively with coincidentally.

  3. bobn permalink
    January 13, 2023 10:18 am

    Already decimated. Only two blast works left in Uk and scunthorpe is running on subsidies. When they end it will go leaving just the electric furnace recyclers, and they arent economic due to energy costs.

    • mikewaite permalink
      January 13, 2023 10:27 am

      So no home produced steel, relying on imports carried along vulnerable sea trade routes . Just as well we are not in a war then , and having to supply tanks and missiles to a European battlefield.

    • Mr Robert Christopher permalink
      January 13, 2023 1:24 pm

      I would guess ‘decimated’ will mean a reduction of more than 10%.

      • dave permalink
        January 15, 2023 9:20 am

        The very rare punishment called decimation divided the force involved into groups of ten; and in each group one man was chosen by lot to die and the other nine were forced to beat him to death. This obviously was terrible for the morale of the whole force and so was a bad idea. It is doubtful if it ever actually happened. For one thing the basic ‘pals unit’ in the Roman Army was EIGHT MEN which would be the natural target.

        Caesar’s method was to hang one or two troublemakers immediately and then ‘use up’ the rest of the mutineers or cowards or whatever by giving them dangerous tasks.

        However we had better not tell the greenies about these matters.
        I think they would be very happy to choose one gas-boilered house in eight by lot and make the other seven householders fill it with gas and blow it up.

  4. Mad Mike permalink
    January 13, 2023 10:30 am

    It’s all in the net zero plan. From report in 2019.

    https://www.repository.cam.ac.uk/bitstream/handle/1810/299414/REP_Absolute_Zero_V3_20200505.pdf?sequence=9&isAllowed=y

    “Steel sector: All exsiting forms of blast furnace production, which are already under great pressure due to global over-capacity, are not compatible with zero-emissions. However, recycling powered by renewables, has tremedous opportunities for growth exploiting the fact that steel scrap supply will treble in the next 30 years. There are short term innovation opportunities related to delivering the highest quality of steel from recycling, and longer-term opportunities for technologies for zero- carbon steel making from ore that could be deployed after 2050”

    So relying on recycling and new technologies that might or might not be developed in the future. Sounds like a winner to me.

    • bobn permalink
      January 13, 2023 2:13 pm

      What nonsense these deluded people spout. ‘steel scrap supply will treble’ !!!
      How did he work that out? All the easy access steel scrap has already gone. If anything scrap steel will be less available. As prices rise (as they are) users are being more careful and avoiding waste. Its deluded liars like this that then mislead naive and ignorant politicians who seem to believe any bullpoo they are fed.

      • Tones permalink
        January 14, 2023 4:29 pm

        You are forgetting all the old windmills which are coming to the end of their lives!!

  5. st3ve permalink
    January 13, 2023 10:36 am

    So no steel for electric cars, heat pumps, turbine gearboxes, nuclear containment, solar panel mounting rails.
    Not sure papier mache will quite fill the void, now oil based plastics are being outed.

  6. January 13, 2023 10:58 am

    I think it is just a matter of time, steel may be one of the first.
    Welcome to the agrarian revolution

    • Gamecock permalink
      January 15, 2023 11:55 am

      Send people to the fields!

      H/T Pol Pot

  7. Gray permalink
    January 13, 2023 11:07 am

    Not just steel.
    I read that electric Mini production is to be moved to China.
    ICE cars are going to be banned in a few years.
    Can anybody in government add 2+2 together?
    Oxford’s car hating council is going to reap what they’ve sown when Cowley closes.

    • January 13, 2023 12:29 pm

      But, but…all the Green jobs will take their place. Cleaning the solar panels. Collecting all the dead birds and bats from under the windmills. Pulling the ploughs in the fields.

  8. January 13, 2023 12:31 pm

    There could be a positive side. If the EU has no steel industry to protect, then there won’t need to be a carbon tax on steel imported into to the EU.

  9. T Walker permalink
    January 13, 2023 1:05 pm

    What do we need steel for? I thought wind turbines and electric vehicles grew on trees.

  10. Gamecock permalink
    January 13, 2023 2:03 pm

    You will get your steel from China, and you will be happy.

  11. Douglas Dragonfly permalink
    January 14, 2023 9:13 am

    Scunthorpe is running on subsidies.
    OUR money in other words.
    Then the UK has to source steel from India.
    So we end up paying for it twice.
    Emissions continue to be created only ‘over there and not over here’.
    ‘Steel scrap supply will treble’ !!! If they, the govt., get their way, petrol and diesel cars maybe lorries, boilers, radiators, gas cookers, associated pipe work, boat metal work etc will go.
    No enough objected enough.

    Introducing the Fourth Industrial Revolution.
    Even bicycles could be delivered by 3D printers via 5G all for a very reasonable rental fee.
    Echo – You will own nothing, but you will be happy.
    Indeed heat pumps, handcuffs, chains and bars will all be manufactured in India or China – fear not.
    These permanent wars our against us.
    Food will be manufactured by ICI or Dupont.
    Not much is left. A dwindling supply of water maybe ?
    But then who owns that ?
    British Steel will be something that is only found in history books.

  12. January 15, 2023 3:05 am

    Reblogged this on Calculus of Decay and commented:
    Pain

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