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Steel industry needs more curbs — ThyssenKrupp CEO

2018-10-31

Steelmakers in China and the rest of the world need to do more to reduce overcapacity, according to Guido Kerkhoff, chief executive officer of Germany’s ThyssenKrupp AG.

While China has made good progress in curbing overproduction, there’s room for even more cuts, Kerkhoff told reporters in a group interview in Shanghai on Saturday. The biggest steelmaking nation has reshaped the industry in the past three years by closing plants, tightening environmental controls and imposing targeted production curbs.

“There is still overcapacity worldwide” and reducing that “needs to continue” not only in China, but in Europe and the rest of the world, he said.

China’s steel exports have dropped to the lowest levels in five years, buoying world prices and cementing the sector’s recovery after a devastating crisis at the end of 2015. While the industry has since enjoyed a relatively benign few years, risks are rising amid global trade tensions in which steel has been a leading target. The World Steel Association predicts a slowing of demand next year as China’s growth declines.

Joint venture

Asked which regions needed to take most action in curbing capacity, Kerkhoff noted that China produces about half the world’s steel and the issue must be addressed according to relative size. Europe has also taken steps, he said, including via ThyssenKrupp’s joint venture with Tata Steel that created the region’s second-biggest producer.

Kerkhoff was speaking weeks after he was confirmed as CEO to steer a split of the iconic German industrial conglomerate into two listed units. One will manage its elevator, auto parts and plant construction businesses, the other its steel and metals operations.

US tariffs on steel imports imposed by President Donald Trump earlier this year have triggered inflows into Europe, Kerkhoff said. The European Union was among seven members of the World Trade Organisation that escalated its response to the tariffs last week by seeking a ruling on their legality from the WTO’s disputes settlement body.

“As a company we do not export much into the US, and the qualities we do sell are often products that are not produced there, so our customers stick to them,” he said. “What we see is more an indirect effect. Material that would have gone to the US is entering one way or another into Europe. We see volumes from Turkey, volumes from Russia increasing in the European market.”

SOURCE: Bloomberg