European steel distribution ‘highly fragmented’: EUROMETAL

European steel distribution is seeing a trend towards changes in customers’ automotive requirements, while facing overcapacity and a complex structure owing to the co-existence of independent SSCs and mill-tied distribution, said Jens Lauber, President of EUROMETAL and CEO of Tata Steel Distribution, at the EUROMETAL World Steel Summit conference in Duesseldorf Thursday.

Asked in a panel discussion how European distribution compares with other regions, where mills do not establish distribution entities (and where there is a clear split between producer, distributor and customer), Lauber said Europe’s distribution landscape is indeed more complex and complicated, but “the customer side is finally on a good side they can decide on what service they want”.

Of the 80 million mt/year of steel distributed throughout Europe, around 30 million mt is distributed via SSCs, of which a third are mill-tied he said. “An SSC makes sense on its own and it makes more sense that they are independent,” said Josu Calvo, CEO of Gonvarri Services at the discussion, adding there should also be “fair play” within distribution. Pierre de Silly, General Manager of the Edgen Murray Sumitomo Corp., pointed out that the distribution units of mills do function independently.

However, there are other factors that make Europe’s distribution network more complex, according to Lauber. The continent’s distribution is fragmented into regional markets: many regions in Europe have a specific balance in their value chain and each model has to meet end-customers’ requirements, he said.

Calvo highlighted that, although an SSC may have international locations, providing access to new customers, businesses must always act locally. “Being global, you will always compete locally,” he said, suggesting that markets within Europe are not only diversified from a geographical point of view, but must also differentiate within customers’ sectors while a trend towards value-based pricing can also be seen.

Laura Varriale, S&P Global PLATTS