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03/12/2016

EU ministers pledge concrete action for embattled steel sector

Trade & Society

EU ministers pledge concrete action for embattled steel sector

china_steel_0.jpg

European Union ministers agreed a list of “concrete actions” to deal with the crisis facing the steel sector – but failed to agree on urgent measures that steelmakers are demanding to stem a flood of cheap imports from China which caused 5,000 job looses in the sector over the past three months.

Economy and industry ministers had gathered in Brussels at the request of Sajid Javid, business minister for Britain, where the majority of jobs have been lost.

Luxembourg Economy Minister Etienne Schneider, whose country holds the six-month rotating presidency of the bloc, told a news conference that they agreed on the gravity of the situation and the need to take concrete actions. Luxembourg has called for a conference later this year to consider a response.

“The EU steel sector suffers from major global overcapacity in production, which pushes down prices and encourages trade distorting behaviour from competing regions. High energy costs are eroding margins. And the resulting closure of steel plants is costing thousands of jobs,” the ministers said. 

EU steel executives want the European Commission to cut the time it takes to impose duties and restore a system of monitoring steel import volumes and prices, making trade cases easier to mount and possibly acting as a deterrent in itself.

>> Read: Eurofer boss: Europe’s steel industry needs modern trade defence instruments

They said the surge of cheap Chinese steel imports during the third quarter was unprecedented, with prices “falling like a rock” amid clear evidence of dumping.

Chinese flat steel export prices have dropped 40% this year, according to EU steel body Eurofer.

The economic slowdown in China, the world’s largest steel producer and consumer, has reduced domestic demand, meaning its steel exports are set to exceed 100 million tonnes this year, from 93.8 million tonnes last year.

“China’s steel market is loss-making, so how can prices fall? These losses must be covered by subsidies or other measures,” Tata Steel Europe head, Karl-Ulrich Koehler, said.

Robrecht Himpe, Eurofer president and chief technology officer of ArcelorMittal, said the EU took more than a year to put duties in place, rendering them obsolete in such a fast-moving market.

ArcelorMittal, the world’s largest steelmaker, last week cut its outlook due to Chinese exports hitting prices.

Eurofer has said that EU demand for steel could grow by 1.5% this year, but that third country suppliers rather than domestic producers would be the main beneficiaries.

British steelworkers union Community said the ministers had failed to grasp the urgency of the situation, with the promise of another conference only delaying action.

But Luxembourg’s Etienne Schneider said he was “very satisfied” with the outcome of the meeting. He said ministers have agreed EU’s answer “should be part of a comprehensive approach aiming at creating competitive framework conditions for EU industry as a whole, including through a predictable and consistent regulatory environment as well as measures to stimulate innovation, since many of the issues faced by the steel sector are shared by other energy intensive industries.”

Here is the full list of “actions” agreed:

  • To intensify or launch discussions involving all important steel producers in the context of the OECD Steel Committee and through the Commission’s bilateral steel dialogues with third countries like China, Russia, Belarus, Turkey and India.
  • To make full and timely use of the full range of EU trade policy instruments to ensure a global level playing field and to address restrictive measures in third countries in particular as regards the steel sector.
  • To take a constructive approach when it comes to the modernisation of Trade Defense Instruments that further streamline and expedite their operation, increase transparency, predictability, effectiveness and enforcement.
  • To further improve access for the EU steel industry to third markets, including through public procurement, through bilateral and multilateral negotiations and implementation.
  • To make full use of the Investment Plan for Europe to upgrade and modernise the steel sector through use of the European Investment Advisory Hub and the European Fund for Strategic Investments.
  • To make best use of the possibilities given under the revised State Aid rules to support Energy Intensive Industries in R&D&I, training, environment, employment and ETS costs.
  • To improve the competitiveness of sectors most at risk of carbon leakage, including the steel industry, by considering, as part of the reform of the European emissions trading system (“EU ETS”):
    • a more focused mechanism for free allocation of allowances, for example through a tiered approach;
    • elements to minimise the need for a cross-sectoral correction factor by the end of ETS phase IV, while creating the right incentives for industrial innovation and enhancing the possibility to increase production levels, in line with the conclusions of the October 2014 European Council.
  • To support the swift implementation of the European Energy Union to ensure access to secure, affordable and climate-friendly energy.
  • To fully exploit the possibilities under the forthcoming Communication on the Circular Economy.
  • To make best use of the available EU instruments and funding, such as the European Globalisation Adjustment Fund and the European Social Fund, for upskilling workers and facilitate their re-integration into the labour market in case of mass redundancies in any industrial sector, including the steel industry.

Background

China makes nearly half the world's 1.6 billion tonnes of steel. It is expected to export a record 100 million tonnes of steel to world markets this year to help address its spare steelmaking capacity - estimated at 300 million tonnes.

Global steel prices are at the lowest level in over a decade due poor demand growth and structural oversupply. Consultants CRU estimate that some 700 million out of a total 2.3 billion tonnes of global steelmaking capacity is spare. 

In 2008, the European Commission launched an investigation into imports of steel from China, South Korea and Taiwan, which European steelmakers have complained are being dumped on the market at below cost price, putting thousands of jobs at stake.

>> Read: Commission to probe cheap China steel imports

Further Reading

Council of the EU