High value key for wire rod profitability: ArcelorMittal

The European wire rod market is still subject to pressure from competitive imports and overcapacity, resulting in a focus on higher value products as the key opportunity for profitability in the market, Javier Alvarez-Linera Prado, of ArcelorMittal long products Southern Europe, said at the EUROMETAL Steel Net Forum Iberia in Porto Friday.

Prado said ArcelorMittal will focus on high value wire rod products in a bid to improve profitability, as the overcapacity in lower quality wire rod is expected to continue. Furthermore, increases in raw material prices are expected to squeeze margins more and imports could still continue to plague the sector, he added. “We need to go beyond traditional drivers,” he said, citing improvements in productivity and more value added products as alternatives.

He pointed to positive growth in the automotive and construction sectors as representing potential opportunities for growth in wire rod.

However, risks remain for the product over the next few years. Europe’s wire rod market currently has a 25 million metric ton installed capacity, with apparent consumption standing at only 15 million mt. This 10 million mt excess in capacity, coupled with rising imports, and a decline in exports owing to issues in Algeria, threatens the construction steel product, he said.

“If we still have overcapacity, plus imports, we will continue to be punished.” He said energy costs, particularly in southern Europe, pose further challenges — in that region energy costs account for 40% of overall production costs, compared to 25% in Germany, he noted. “We are competing on unfair ground with other countries,” he said.

In terms of curbing imports he urged the EU markets to come together and take advantage of proximity. “We don’t need commercial barriers but what we don’t want is unfair competition,” he concluded.

Erica Sesay, PLATTS