Steel industry to play key role in Valencia’s recovery

Steel-consuming reconstruction works are set to follow Valencia’s devastating October floods, increasing demand in the region.

Data published by the University of Valencia shows that the floods affected a 563 square kilometre area to the south of the city. Around 10% of this is urban, it estimates, with homes, factories and infrastructure suffering damage. More than 220 people died in Spain after torrential rains brought flooding on October 30. 

• This content first appeared in the November edition of MEPS's European Steel Review. The monthly report features steel prices, price indices, market commentaries and forecasts from across the region. Contact MEPS for details of how to subscribe.

Spanish Prime Minister Pedro Sanchez has announced EUR3.76 billion in funding to reconstruct the Valencia area. That money was committed in addition to the EUR10.6bn previously pledged to help victims of the disaster. The European Investment Bank is also providing an initial financing package of EUR900m. 

Road and railway bridges and commercial premises are among the steel structures damaged by October’s floods that will require repair or replacement. 

MEPS respondents said that 35-40% of Valencia’s manufacturing operations were temporarily closed due to the floods. Transport to and from the region’s steel stockists was affected by road and rail closures. Nonetheless, the two main ports in the Valencia region – Valencia and Sagunto – were not affected. 

One of the major causes of transport disruption is vehicles damaged by the floods. The destruction of up to 140,000 vehicles could trigger an uptick in regional automotive demand in the near term. 

Spain’s positive economic outlook 

The floods in Valencia will pause activity in an economy that is currently among Europe’s strongest. The Spanish government expects GDP to rise by 2.7% this year. Its growth forecasts for 2025 and 2026 are 2.4% and 2.2%, respectively. 

The Hamburg Commercial Bank’s latest Spain Manufacturing PMI signals an increase in demand from that sector. It rose by 1.5 points, to 54.5 points in October – its fastest growth since February 2022. 

MEPS respondents say that steel demand in Spain and other countries researched for the European Steel Review remains subdued, however. Following mills’ recent price increases, MEPS hot rolled coil prices rose marginally in November. 

Following the United States presidential election, market participants now fear that trade defence measures imposed by president-elect Donald Trump could leave Europe exposed to increased imports. It would also reduce its export opportunities in the US. This may increase the downward pressure on steel prices in the longer term. 

Calls for European steel strategy 

In November, Eurofer and union federation InudstriAll accelerated their push for a strategic approach to maintain the resilience and sustainability of Europe’s steel industry. They want the European Commission to publish a Steel Action Plan within 100 days of the upcoming election of a new parliament. 

Their joint European Action Plan has received the support of 60 MEPs. It describes global steel excess capacity as an “existential threat” to the sustainability of the European steel industry. According to the OECD it stands at over 550 million tonnes, four times more than annual EU steel production. 

The European Action Plan calls for a tightening of antidumping and anti-circumvention measures. It says that EU CBAM should also be reviewed to ensure its effectiveness for the entire value chain, including “downstream sectors”.  

Furthermore, efforts must be made to reduce energy costs and encourage domestic production of renewable and low carbon hydrogen. The plan also requests that the European Commission formalise a labelling system for green steel and promote its adoption through EU public procurement. 

MEPS respondents continue to express concerns about the lack of any signs of improvement in their demand outlook. Nonetheless, Eurofer and InudstriAll want to ensure the long-term resilience of the region’s steel industry. Until then, unforeseen incidents such as Valencia’s devastating floods might be among the few pockets of increased demand.