LONDON, Feb. 19, 2013 /CNW/ - A recent paper by CRU sets out the impact
of CO2 charging on the cost structure of the EU steel industry,
quantifies the effect on profitability and identifies the reductions in
production volume that are likely to occur under different CO2 price
scenarios. Under a CO2 price of €30, analysis suggests that crude
steel production in Europe could fall by 9%, with profitability falling
by as much as 27%. With the majority of steelmakers struggling to
remain profit-making since the global financial crisis, the additional
strain could force some players onto their knees.
The EU Emissions Trading Scheme (EU ETS) entered into its 3rd phase on
1st January 2013 and steel companies now have to purchase a proportion
of the CO2 credits required to maintain production. Whilst CO2 prices
are low, steel companies only have to concern themselves with the dire
market conditions, but as the recovery takes hold, the full
implications of CO2 costs will become apparent. Adrian Doyle,
Consultant in Steel Costs at CRU says "Given the open nature of trade
in steel products, there are few available options for steelmakers to
mitigate the mounting threat of CO2 costs and we believe that the
industry, in its current form, will be rendered non-viable; some
restructuring, equivalent to the closure of up to 4 integrated steel
making operations, will become necessary as CO2 prices rise. This view
is beginning to be recognized more widely and steelmakers will be
asking whether the 'Action Plan for the European Steel Industry',
currently being drafted by the European Commission and scheduled for
release by June 2013, will provide realistic solutions to this looming
The full paper can be found at the following link.
Paul Butterworth, Research Manager, Steel Raw Materials and Steel Costs
at CRU will be presenting CRU's steelmaking cost outlook and its impact
on mill margins at the World Steel Conference in Hong Kong, 5-6 March, 2013.
CRU is an independent business analysis and consultancy group focused on
the mining, metals and fertilizer sectors. Founded in the late 1960s
and still privately owned to ensure its independence, the group employs
more than 200 experts in London, Beijing, Mumbai, Santiago, Sydney and
key centres within the United States.
SOURCE: CRU Group
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