According to the paper, “The Future of the European Steel Industry,” the lowered demand means that producers will have to lop 25 million to 30 million metric tons of capacity for the industry to operate at an 85% utilization rate, the rate at which the industry would achieve sustainability. 

Over the next three years, capacity utilization is expected to recover to between 70% and 75% percent, McKinsey said, assuming a “next normal” of 140 million to 150 million metric tons of demand.

“European steel producers should consider making a series of short-term operational and medium- to long-term strategic moves to ensure economic and environmental sustainability going forward. These strategic moves could encompass restructuring steps aimed at capacity reduction, steps toward strengthening the position of steel companies by diversifying their capabilities, and sustainability moves toward low- and no-carbon steel,” the paper said.