Salzgitter Sees $530 Million Loss in Steel Demand Crisis

Salzgitter AG (SZG), Germany’s second-largest steelmaker, expects a pretax loss of about 400 million euros ($530 million) this year amid a slump in demand due to the European economy.

“The ongoing recession in many European countries has put pressure on the European steel industry in the form of a structural crisis,” the Salzgitter-based company said in a statement today. “Owing to the extreme contraction in construction activities in southern European countries, with no significant recovery in sight in the medium term, sectional steel products such as beams are particularly hard-hit.”

Waning demand from the auto and construction industries in Europe and competition from China has pushed down steel prices and squeezed producers’ profits. Germany’s industry leader, ThyssenKrupp AG (TKA), reported a second-quarter net loss of 656 million euros on May 15. Salzgitter cited “persistently high losses” at beam-making unit Peiner Traeger GmbH and said it would reduce the value of the unit’s assets by 185 million euros.

In addition, Salzgitter said the steel division’s earnings prospects have deteriorated and there are no “notable” projects for large-diameter pipes. Losses from the company’s 25 percent stake in Aurubis AG (NDA) amounted to 60 million euros in the second quarter.

Salzgitter said further details would be released with half-yearly financial statements on Aug. 14.

To contact the reporters on this story: Jeff Black in Frankfurt at jblack25@bloomberg.net; Tino Andresen in Dusseldorf at tandresen1@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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