GO
Loading...

Where the steel industry will recover and struggle in 2014

Tuesday, 3 Dec 2013 | 2:50 AM ET
I'm not optimistic about European economy: Kloeckner CFO
Tuesday, 3 Dec 2013 | 1:30 AM ET
Marcus Ketter, CFO of Kloeckner, says that the European economy is "through the trough" but the recovery is still fragile.

The demand for steel will pick up in the U.S. thanks to a pick-up in the building and carmaking industries but there will be "pain " in Europe, the chief financial officer of Europe's largest steel distributor told CNBC.

"We hope we will see strong growth especially in the U.S. and we are optimistic [about demand there]," Marcus Ketter, CFO of German-based steel distributor Kloeckner told CNBC on Monday. "We did some major acquisitions and there we are optimising our structure."

"That pain is really in Europe for us," Ketter warned. "We're not so optimistic for Europe, we think that in the steel industry is through the trough and we are slightly improving [but] it's especially the weakness in Europe that we're feeling."

He said the main issue for the company for the region was the glut of steel. "There is no real new demand coming in. The automotive industry is supposed to be doing better but the construction industry is not doing so much better."

While there was "no real push for growth in Europe," however, in the U.S. "it's quite the opposite," Ketter said.

"We see that the automotive industry is doing much better and the construction industry should do much better. With the low energy prices too we expect that there should be a push for steel demand in the machinery and equipment and market. There is basically no oversupply currently in the U.S."

Kloeckner's bleak European outlook is no surprise given the region's slow progress in recovering from the financial crisis that struck in 2007 and the sovereign debt crisis that arrived a few years later. Even in the third quarter of 2013, the European Union as a whole only managed to eke out 0.1 percent growth year on year.

(Read more: Charts signaling definitive bottom in this industrial metal?)

For the region's steel industry, which relies heavily on manufacturing and automobile production, a decline in the demand has hit companies like Kloeckner hard.

In September 2011, the company announced a large-scale program of restructuring. Furthermore, despite a sharp rise in underlying third quarter net profit this year, the German-based company announced its latest round of restructuring in November, on top of measures that have already reduced its workforce by 17 percent and have seen the closure of 70 sites around the world – the majority of which were in Europe, Ketter said.

(Read more: Structural issues see Europe steel facing decline)

In a survey of 33 chief financial officers (CFOs) from Europe and Asia, which was carried out by CNBC in October, two-thirds of the business leaders questioned said they believed the global economy was steadily improving and over half said they would hire actively over the next six months.

In spite of its newest round of cost-cutting measures – called KCO WIN by the company -- the restructuring phase was coming to an end as 2013 came to a close, Ketter insisted.

"KCO WIN is more focused on sales and price-oriented so that's where we're going in 2014, finishing with the restructuring and laying off – unfortunately we had to do this."

Despite his optimism that the demand for steel would pick up in the U.S., Ketter said that the government was not helping to promote economic growth in the country. In addition, he felt that tapering of the U.S. Federal Reserve's monetary stimulus program would not cause "that much of a negative effect but let's see – it's also called the biggest bubble created ever so if it bursts, let's see what happens."

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt

Featured

CNBC Global CFO Council

Video