China’s surplus of steel products is flooding global markets, forcing numerous global steel companies into dire straits. German industrial giant ThyssenKrupp Steel Europe announced on Monday (25th) plans to lay off 11,000 employees within six years, roughly 40% of its workforce. Additionally, South Korea’s largest steel company, POSCO, has decided to sell its only steel plant in China and has closed its first steel mill and wire rod factory earlier this year.
ThyssenKrupp revealed plans to reduce its workforce from the current 27,000 employees to 16,000 within six years, about 40% of its total workforce, attributing the “severe competitive pressure” to an increase in cheap imports, particularly from Asia.
The company stated in a release, “Urgent measures are necessary to enhance ThyssenKrupp Steel’s productivity and operational efficiency, achieving a competitive cost level.”
By the end of 2030, through “production and management adjustments,” around 5,000 jobs in its European steel business will be cut, with another 6,000 positions to be outsourced or eliminated.
In a bid to address market overcapacity, the company plans to reduce its production capacity from the current 11.5 million tons to a range of 8.7-9 million tons.
ThyssenKrupp is a German industrial and technology conglomerate with a turnover of 38 billion euros in the 2022-2023 fiscal year, operating in five major business areas: automotive technology, decarbonization technology, material services, steel, and shipbuilding systems. However, the company reported a loss of 1.5 billion euros (1.6 billion dollars) in the 2023-2024 fiscal year, compared to a loss of around 2 billion euros in the previous year.
According to “2023 Major Steel Company Production Rankings,” ThyssenKrupp is the second-largest steel company in Europe.
Dennis Griten, head of ThyssenKrupp Steel, expressed a hope to avoid layoffs by reducing staff through voluntary means. However, the IG Metall union, representing the majority of the workforce, described the plan as a “disaster” for employees.
CNN reported this news as the latest blow to the largest economy in Europe, where prominent manufacturers face fierce competition from Chinese rivals, high labor costs, high taxes, and elevated energy costs due to Russia’s full-scale invasion of Ukraine in 2022.
Volkswagen announced earlier this month plans to reduce employee wages by 10%, close at least three domestic factories in Germany, and lay off tens of thousands of workers.
China Customs data showed that in September this year, China’s steel exports amounted to 10.15 million tons, with an estimated annual export volume exceeding 100 million tons, hitting an eight-year high.
The surge in Chinese steel exports has sparked complaints from an increasing number of countries. Some countries, including Turkey and Indonesia, have imposed anti-dumping tariffs on Chinese steel products due to the influx of Chinese steel at low cost, harming the interests of local businesses.
The official website of China’s Ministry of Commerce shows that China’s steel overcapacity is facing multiple trade investigations by many countries. Since the beginning of this year, 12 economies, including the European Union, the United States, Brazil, Vietnam, and Malaysia, have initiated 28 trade investigations against China.
ThyssenKrupp is not the only steel company impacted by China’s surplus steel capacity; South Korea’s POSCO decided earlier this month to sell its sole steel plant in China.
On November 7, the POSCO Group announced its decision to sell Zhangjiagang POSCO Stainless Steel (PZSS) based in Jiangsu Province, as the plant has been in continuous losses. In 2023, the company suffered a loss of $130 million, ranking as the highest loss among POSCO’s 38 overseas subsidiaries. Moreover, the dim prospects of the stainless steel market for construction due to China’s economic slowdown, coupled with persistent steel surplus issues of Chinese steel companies, points to an unclear medium-to-long outlook.
Furthermore, POSCO’s move aims to steer clear of uncertainties arising from US-China trade disputes, as Trump publicly announced imposing punitive tariffs of over 60% on Chinese steel imports.
On November 19, POSCO announced the formal shutdown of its primary wire rod factory in South Korea, ending its operation after 45 years and 9 months. In July this year, POSCO had shut down its first steel mill.
With a steel production of 38.44 million tons in 2023, POSCO ranks seventh in the world and stands as South Korea’s largest steel company.