Five steel plants post 74 million-euro losses

The main players on the Romanian steel and metal market posted significant losses in the first half, with five plants seeing a total of 309.8 million RON (74 million euros) in losses.
The market practically went from one extreme to another, after most producers had made record profits as a result of the skyrocketing steel price in 2008.
The plants held in Roman and Iasi by the Indians of ArcelorMittal, the leader of the steel market in Romania, posted cumulated first-half losses worth 143.4 million RON (39.1 million euros), over six times higher than in the same time of last year.
The Russians at Mechel, the biggest player on the domestic market of reinforcing steel, saw their two main plants in the country – in Targoviste and Campia Turzii post cumulated losses of 154.3 million RON (42 million euros) in the first half.
The plant owned by Russia’s TMK in Slatina also slipped into the red in first six months, with losses reaching 12.2 million RON (3.3 million euros), down from a net profit of almost 10 million RON (2.7 million euros).
“The losses of the plants are connected to the automotive and constructions industries, which witnessed a similar decline, as they export most of their output. It’s no surprise they are experiencing heavy losses. The steel and metal industry is harder to adjust. Why else was Sidex so much trouble for the Romanian state for so long?” explained Florin Ilie, head of the capital markets department of ING Bank.
“Steel plants have very high fixed costs and variable costs account for a lower share of the total. When business slumps or disappears altogether, as it has recently happened, it is harder for them to make people redundant than for, say, the constructions industry, because there are unions, skilled labour. The equipment is not leased so as to have the option to return it and they have amortisation costs. If they shut down, it takes high costs to restart,” he adds.
The cumulated business of the five steel plants that posted their first-half results fell by 52.4% to 891.1 million RON (242.8 million euros).
The decline was caused by both the significantly lower demand on the market and by the prices that have plummeted since last autumn.