Banks are withdrawing from Europe’s troubled steel sector, putting the survival of even some of the most established industry players at risk and forcing companies to seek alternative funding sources.
Austerity measures have crimped construction and manufacturing across the EU, battering steel demand. Now, the financial sector’s reluctance to lend to the steel industry is threatening billions of euros in existing loans, as well as future investment.
Stemcor, the world’s largest independent steel trader, has given way to the darkening outlook, as expectations for pickup in 2013 have so far failed to materialise.
Having failed to refinance an $850m (£558m) loan the company is now seeking a standstill agreement under which banks agree not to ask for repayment and work with the company to restructure the debt or extend its maturity.
This follows the collapse of smaller steel players such as traders Balli and Carbofer, which were also starved of funds, and comes as Spanish producer Celsa heads towards restructuring and Ukranian producer Industrial Union of Donbass continues debt restructuring talks.
Celsa could not immediately be reached for comment.
As there is little hope of a prompt recovery for steel, which is a key indicator of industrial activity, things are likely to get even tougher in the future.
“Getting funds will be the main problem for steel companies in the next few years. Banks are trying to reduce their exposure...if not to get out altogether,” said Massimo Bolfo, chairman of steel trading firm Trasteel.