European steel makers, including some top producers are pressuring the EU Commission to impose export restrictions on steel scrap from the EU to help preserve their domestic raw material stocks, industry sources said this week.

The dire state of the European steel making industry, afflicted by sagging demand and overcapacity, has forced most steelmakers to cut production capacity in the last year.

“European steel makers are lobbying the EU Commission to ban scrap exports from Europe,” a European industry source said on the sidelines of a conference organized by the Bureau of International Recycling (BIR), a body that gathers a large number of metal scrap recyclers and traders.

“As an entrepreneur this doesn’t make me happy but as a European man I think maybe this would be the right thing to do to save the steel industry.”

Some US steelmakers as well as some European producers are pushing for a scrap export restriction, sources said. “One steel maker has got its lawyers on the case, looking for a way to present this,” a second source who works at a metal scrap recycler said.

“I don’t think the EU would move in this direction just yet but if things start to get just a little bit worse for the steel industry I am sure many countries would be in favour of such a measure.”

Among those cutting production, some, like ArcelorMittal, had to close unprofitable plants leading to social unrest and attracting political intervention.

Austrian steel maker Voestalpine on Wednesday said prospects for a European sector upturn were fading as demand wanes in the car and energy sectors and excess capacity triggers “destructive price wars”.

The downbeat view came after Germany’s two biggest steel makers, ThyssenKrupp and Salzgitter, earlier this month gave a grim outlook as the eurozone crisis crimps spending on factories and equipment.

The European steel producers association, Eurofer, said earlier in May it expects a gradual rebound for the steel market from recessionary pressures in the EU from the second quarter of 2012 onwards.

However, the strength and timing of any economic turnaround remains mired in uncertainty stemming from lingering eurozone fears.

Global steel production capacity has grown faster than demand in the last few years.

In 2007, with steel mills working at full capacity, the world produced 1.3bn tonnes of steel while in 2011, with producers cutting capacity utilization to 80%, it produced 1.5bn tonnes, Ruggero Alocci, a BIR ferrous board member said.

This means global capacity is currently at 1.8bn tonnes, an already large number destined to grow further as about 150,000-200,000 tonnes worth of additional capacity are currently being installed too.

A third industry source said it was unlikely the EU would take any step to restrict exports, at least in the near-term, as if it did most other countries would follow, making international trade extremely hard.

Two BIR members said they were strongly against any such trade restriction moves.

About 20% of the global steel scrap trade is currently subject to export restrictions, against 14% of the copper scrap and 4% of the aluminium scrap trade, said Barbara Fliess, a senior analyst in the OECD trade directorate, who was a guest speaker at the conference.

In most cases, governments which do apply export bans, taxes or quotas do so to safeguard domestic supply or control illegal activity, she added.