A shift in the nature of demand from European steel buyers has made the proposed joint venture between Tata Steel and thyssenkrupp very timely.
It would also be a logical development in the context of the European and global steel market today. Although Axel Eggert, Director General of the European Steel Association (EUROFER), spoke positively of the 'continued recovery of EU steel demand' in February, worldwide overcapacity remains huge at over 600 million tonnes.
Furthermore, the nature of this demand is shifting. Steel buyers in Europe increasingly want highly technical steels, to keep up with consumer demand for more advanced products, such as photovoltaic coatings, as well as more fuel-efficient cars and electric-powered vehicles. Tata Steel published a study last year that showed how demand for the advanced steels needed for these types of vehicle structures could increase by around 2.6 million tonnes by 2050.
Together, by combining strengths, Tata Steel and thyssenkrupp can create a business that is more sustainable and better able to meet demand for these premium quality, technologically advanced, products.
It would also create a business that is better able to withstand other challenges looming on the horizon – for example the US Government’s recent announcement of a proposed 25% tariff on global steel imports. EUROFER has warned the move could see EU steel exports to the US – which totalled five million tonnes in 2017 – cut by more than 50%. The US is an important market for Tata Steel, accounting for 10% of sales, or more than half a billion euros.
Over the past three years, Tata Steel has made a number of structural changes to lay the foundations for a strong, fully stripfocused steel company. The intended joint venture with thyssenkrupp would mark the next step on the journey towards a more sustainable future.