Steel industry faces prospect of being cut down to size
More than 40 major manufacturing businesses, employing over 250 persons each have been forced to close since 2008, the majority belonging to the steel sector and related fields, according to European Commission data processed and presented by the Center of Planning and Economic Research (KEPE), Greece’s largest economics research institute.
Besides the country’s recession, local steel producers have also been severely affected by adverse energy cost developments that have prevented most from making up for lost domestic sales with increased export drives. These firms have not been able to compete at an international level as a result of higher electricity and natural gas prices compared those paid by their European rivals.
The annual demand for steel in Greece has contracted from 2.5 million tons prior to the crisis to less than 300,000 tons as a result of the domestic building sector’s collapse and slowdown in the development of major public projects. The industry’s overall production capacity stands at nearly 4 million tons.
The steel industry is one of the country’s most debt-laden sectors. Its total debt is estimated at over 1.2 billion euros. The situation prompted creditor banks to commission an independent consultant, Alvarez & Marsal, to carry out a related study gauging the prospects and sustainability of all corporate groups. The study also assessed the sector’s management of its debt problem.
The findings highlight the extent and depth of the problems faced by Greece’s steel industry. The study’s proposals include permanent closures of certain production units, greater operational cost control at facilities to keep operating, mergers, as well as entries by strategic investors for capital injections and know-how. If implemented, the study’s combined proposals would result in far fewer steel operations than there are today – perhaps just one or two, which, however, would be sustainable.
Sector closures to date have included a Hellenic Halyvourgia plant in Elefsina, west of Athens, whose production dropped to next to nothing from 2011 before shutting down officially in 2014. Also in 2014, Hellenic Steel, a subsidiary of Italy’s Ilva, was placed under compulsory liquidation before ending its activities soon after. Prior to all this, the Arcelor-Mittal production facility owned by Konti Steel and based in Velestino, close to Volos, went out of business in 2011.