ArcelorMittal plans to reduce steel output in Europe temporarily, signalling a weak demand for the alloy amidst rising imports to the continent.

The world’s largest steel producer said it would idle capacity by 3 million tonnes (on annualised basis), a decision that would affect the dynamics of the steel business in Europe, including the proposed merger of Tata’s steel business and Thyssenkrupp.

The merger deal, which will create Europe’s second largest producer, is now with the European Commission which is seeking more concession from the two companies to allow the merger.

While announcing a production cut on Monday, ArcelorMittal said imports were on the rise even though the EU had imposed a safeguard duty and steel produced in the continent suffered because of high electricity cost and rising carbon tax.

Cut in production will also translate into the loss of jobs. According to an estimate, as many as 1,000 jobs may be on the line, especially in Poland where the company will idle production at its Kraków facilities, Reuters reported.

Moreover, it will reduce production in Asturias, Spain. In addition, the planned increase of shipments at ArcelorMittal Italia to a 6-million-tonne annual run-rate will be slowed down following a decision to optimise cost and quality over volume in this environment.

“These actions reflect the weak demand environment in Europe today, a situation further compounded by increased imports despite the safeguard measures introduced by the European Commission. High energy costs and increasing carbon costs are adding to the tough environment,” Geert van Poelvoorde, CEO, ArcelorMittal Europe – flat products, said.

The Polish steel market has been particularly hard hit because of a near four-fold year-on-year increase in Russian steel imports in 2018, and among the highest electricity prices in Europe, the statement noted, adding that the cost of electricity is also very high in Spain and that southern Europe has been hit by “an unprecedented rise in import from outside EU”.

ArcelorMittal produced 44.69 million tonnes of steel in Europe in 2018. The continent produced 168.1mt steel in 2018, a marginal drop from the year before.

The Telegraph