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. Last Updated: 07/27/2016

EU Steel: Restructure In Limbo

BRUSSELS -- The European Union's ailing steel industry has won more time from the European Commission to restructure, but questions remain about exactly how or even whether it will do so.

With signs that the steel market is improving, some analysts fear that companies will simply put off making the capacity cuts that are needed to restore the industry to profitability.

Alan Coats, a steel analyst at Paribas Capital Markets in London, said the industry could be competitive only if it reorganized into three or four major European companies.

"But with elections in Germany and unemployment such a big problem in Europe, it's difficult to see how the problems will be tackled," he said.

Coats said that Russia could pose a competitive threat in three or four years.

The Commission agreed at a meeting with steel company heads last week to ask EU ministers to extend until November a steel rescue plan that includes money to cushion at least 50,000 job losses, loans to finance capacity cuts and import restrictions on steel from the former Czechoslovakia.

It said the companies, members of the industry group Eurofer, were prepared to find 8 million tons of extra cuts in hot-rolled steel capacity and also promised not to request any more subsidies for an unspecified time period.

That would bring total capacity cuts to only 19 million tons -- compared with about 25 million tons the Commission expected last year. The November date falls more than a year after the original September 1993 deadline given by the the EU to qualify for the rescue plan.

Some of the new cuts will come from a group of privately owned steel mills in Italy's Brescia region, others frommergers and specialization agreements, a Commission spokesman said. But he had no details about companies in the latter category and a spokesman for French state-owned steelmaker Usinor Sacilor said companies had not discussed specific plans at the meeting.

"You cannot put your strategy on the table in front of other people," he said. Companies had simply agreed that there was a "possibility" for new cuts and they would do all they could to find them.

The main element discussed was the emphasis on "specialization agreements," similar to the accord between Luxembourg's Arbed SA and Usinor Sacilor's Unimetal. Germany's Krupp Hoesch Stahl AG and Thyssen Stahl AG have also agreed in principle to merge some operations.