For large parts of industrialization, the “steel heart” of the world beat in the USA and above all in Europe. China has long since assumed the pioneering role. But Europe is still a long way from giving up.
Change is the central brand essence of the industry. It’s always about making huge quantities of a product consistently cheaper and / or of higher quality. However, there are differences in the severity of the change. In the case of steel, this was extremely drastic within a good half a century.
In 1967 the world was still an intact world from the European steelmaker’s point of view. Of the top ten largest steel-producing nations, six were in Europe, two of them in the Eastern Bloc. China was ninth, producing 10 million tons of crude steel; the total production of the big ten was 407 million tons.
49 years later, in 2016, this world had is going through a dramatic change. With the exception of one nation, Germany, Europe had completely disappeared from the hit list. On the other hand, China was now unassailable at the top – with a good 800 million tons and thus around 700 million tons alone ahead of the runner-up, Japan. That top ten steel production that year was more than three times its 1967 level is almost a side note.
The fact is that today’s bulk of steel is produced elsewhere. However, that does not mean that, apart from Germany, there is no longer a genuine European steel industry. But their focus is on other areas.
Europe’s steel crisis and China’s rise
Why is it that the cradle of industrial steel production almost completely disappeared within a few decades – at least in terms of production volume per country?
There are two reasons for this:
- The decades of the gigantic post-war European-Western economic boom ended in the 1970s. Less was built, and energy and, above all, crude oil prices rose dramatically due to the two crises in 1973 and 1979. After years of growing together, there was also stagnation within the European economic area, the so-called Eurosclerosis.
- The reduced demand resulted in gigantic overproduction. At the same time, the increased energy costs made production more and more unprofitable and prevented modernization. This ultimately led to ruinous price wars.
As a result, countless European plants had to close their doors, and related industries in the coal and steel sector were also affected – which, however, had already been under enormous pressure in the (German) coal sector. As a result, European steel production was downright shaken.
- In Great Britain, for example, there are now (2021) just two large steelworks and a total of only seven blast furnaces, down from 85 in 1960.
- In Germany there are still 20 blast furnaces, but here too the numbers have dropped considerably: in 1960 West Germany alone had 129 units.
It looks completely different in China. The rise of Chinese steel production began at the same time as the decline of Europe – at least as far as bulk steels are concerned. 1979 became in the post-Mao work-up stated that a state-of-the-art steel industry was one of the key positions for advancement This promise was meticulously kept. Not least thanks to strong Western support, the factories and processes were massively modernized from the 1980s onwards.
In 1987 the country was already in fifth place in terms of steel. In the following years, the processes were also modernized, which improved quality and, above all, efficiency. At the turn of the millennium, China was already at the top of the world – not least because the development of the country created a gigantic hunger for steel, which also caused global prices to explode.
Today the Middle Kingdom produces around 60 percent of the world’s steel and has 260 blast furnaces alone with a volume of over 1000 m³; in the EU it is around eleven percent and around 80 active blast furnaces (in total), which makes the Union the second largest steel producer in the world on paper, but only there – because it is not a single nation.
European steel today: quality instead of quantity
In view of this, the question arises as to how Europe can still score points in terms of steel production today. Above all, it’s quality. In the last two decades before the turn of the millennium, the continent’s steelmakers had to realize that they had no chance of countering China’s quantitative output. So in the midst of a general de-industrialization, they focused on making higher quality steels.
Last but not least, this can be illustrated based on the numerous quality classes in the area of strip steel alone: Europe’s steel production today is one of the masses that has focused on special steels, on stainless steel, on high-alloyed materials that are difficult to manufacture. Such steels are certainly not in demand on the world market in such a quantity as any structural steel; but wherever it is needed, quality is the all-important criterion.
In the past two decades or so, it has been shown that Europe was able to bring a multiple of experience into the balance compared to China – capacities can be expanded quickly with sufficient (political) will, but there are hardly any ways, decades and centuries of learning, to make up for research and development. Because even though steel production is “only” about enough heat, so are they the underlying procedures but extremely complicated. They are especially important when it comes to producing high-quality steel on an industrial level with consistent quality.
In other words: producing tens of thousands of tons of simple steel is comparatively easy; However, producing a few dozen tons of high-quality steel is far more complicated.
From safeguards and catching up Chinese
For many years, Europe’s steel manufacturers have done very well with this policy. The past two decades have therefore been characterized by a – relative – security that is almost reminiscent of the “good old days”.
But once again it has been and is still being shown that the wheel of change mentioned at the beginning cannot be stopped. Because China’s hunger for increasing economic importance is still unlimited. And the country learns incredibly quickly. Just as there has been a policy of buying up foreign companies elsewhere in the past few decades, it has recently also been the case with steel.
At the beginning of 2020, for example, the Chinese Jingye Group bought the ailing manufacturer British Steel (not to be confused with the manufacturer of the same name, which was merged into the Corus Group in 1999). And in 2016 the country had already found access to Europe by buying a Serbian steel mill. The effects in terms of knowledge transfer alone could be alarming. Especially since China itself is of course constantly researching and developing – to leave a certain sub-area of an industry to foreign competition is not only contrary to Chinese, but generally capitalist thinking.
However, it is not just the outflow of knowledge that is so worrying for Europe’s steelmakers. It is also the fact that China is trying to flood global markets with cheap steel. The country can do this because it subsidizes its indigenous steel production on the part of the state. After China’s indigenous hunger for steel was slowly sated in the course of the 00s and 10s, the country was able to allow itself to export on an ever larger scale. This process, which began around 2008, is now beginning to have an impact on Europe.
In an initial reaction, the EU agreed in early 2019 the establishment of so-called safeguards. Every non-EU nation is entitled to set duty-free quotas. If these are exceeded, an ad valorem duty of 25 percent applies. However, it quickly became apparent – not least in the wake of the corona crisis – that these protective measures were set too low. 2020 was improved, but without reduced allowances, what Massively criticized on the part of European steel manufacturers has been.
The future has to be green
Europe not only has a “Chinese problem”, it also has its own: Steel production requires enormous amounts of energy and provides the corresponding CO2Emissions.
At a time when China is not only watering down prices and delivering ever better quality, Europe’s steelmakers must therefore also fight their own hunger for energy. According to experts, this hardly seems to be possible on one’s own. It is therefore necessary not only for the EU to understand the general economic value of its own steel production, but also to help keep the industry here.
The next big change facing the European steel world is therefore towards “green” steel. For this, too, the EU has significantly better cards. Thyssen-Krupp, for example, is currently undergoing massive change, which should ensure the series production of climate-neutral steel as early as the mid-2020s.
This is not just a matter of energy, but of the steel recipe itself – because so far coke has been used to remove unwanted oxygen from the melt. In the future, this should work with hydrogen. The change for Europe’s steel manufacturer is therefore far from over. Perhaps they are now about to take the most significant step in their centuries-old history.
05/10/2021