ERNST & YOUNG SRL

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ADRIAN NETEA

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HORIANA ISTODOR

  |  12.11.2013

The meltdown of the iron & steel industry

Even though iron and steel represents a crucial branch of the local metallurgy industry, the global crisis revealed Romania’s vulnerability on external markets.

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ERNST & YOUNG SRL

ADRIAN NETEA

ADRIAN NETEA

CONSULTANT TRANSACTION ADVISORY at ERNST & YOUNG SRL


HORIANA ISTODOR

HORIANA ISTODOR

SENIOR MANAGER TRANSACTION ADVISORY at ERNST & YOUNG SRL

The iron and steel production in Romania recorded a dramatic decline of 50% in the last 5 years, decreasing from 10.2 million tonnes in 2007 to 5.1 million in 2012, while the number of employees declined, but only by a fifth over the same period.

 

Romania, which in 1989 was the sixth largest steel producer in Europe, has recently lost three places in the ranking of iron and steel producing countries in Europe. After 1990, the domestic consumption of steel dropped dramatically to about 2.6 million tonnes in 2012, from 8 million tonnes in 1989. As a consequence, for the first time in 2012, Romania was no longer included in the World Steel Association ranking of iron and steel producing countries.

 

The effects of the global economic and financial crisis were strongly felt in 2009, when country’s GDP contracted by 7.1 %. Even though the world production of iron and steel decreased by 5.3% in 2009, Romania registered a steep 45.8% decrease injust one year.

 

In 2010, Romania’s iron and steel production recovered its losses from 2009, producing 5.4 million tonnes of iron and steel, with 1.1 million tonnes (26%) more than in 2009. The production growth was due, to some extent, to the implementation of the Romanian metallurgy restructuring programs according to the European Union’s requirements, which led to modernization of several steel companies. Despite the 2010 growth, the production of iron and steel registered a small decline in 2011 and 2012, of 1.1% and 6.2% respectively.

 

Because of the iron and steel industry privatization that took place over the past 20 years, a number of metallurgy groups decided to invest in Romania, and now they dominate the local industry. The most important ones are ArcelorMittal, Mechel, TMK and Tenaris, which add to almost 87% of the sector’s turnover, employing 82% of the industry’s workforce.

 

An analysis made by Ziarul Financiar business daily on the major steel production plants in recent years shows that the main cause for steel production decrease was the low production at the plant in Galati owned by ArcelorMittal (formerly named Sidex). By 2011, the production of steel at AcelorMittal Galati was reduced by 57% compared to 2007. According to the company’s representatives, the significant decrease in the plant’s production was due to a lower demand for metal products and the strong competition exerted by producers in countries that are not part of the European Union, where energy costs are less than half compared to those of ArcelorMittal Galati.

 

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