Aluminium boss: Chinese dumping a ‘slow death’ for European industry

Gerd Götz, director general of European Aluminium. [European Aluminium]

Unfair Chinese aluminium trading is killing the European industry and, if the country is given market economy status by the European Union, it could have a catastrophic impact on EU jobs and production, warns Gerd Götz.

Gerd Götz has been the director general of European Aluminium since 2013. Before that he was in charge of professional and public affairs at Philips and headed the company’s European affairs office in Amsterdam. He spoke to EURACTIV deputy news editor James Crisp.

What challenges is China posing to the aluminium industry in Europe?

Since the beginning of this year there has been double digit growth in imports to Europe from China. About 50% of global aluminium is produced in China. In the past when you look at the growth strategy of China, you could see this was consumed domestically. But now that growth in China is slowing down, there is suddenly overcapacity. Other regions, such as Europe, would bring down their capacity but China is exporting it into the world economy.

We are talking about production of 28 million tonnes of aluminium in China and ten million of that is overcapacity. In Europe we have a primary production of two million – so you can see why the industry, companies, unions, everybody is really alarmed about the situation.

And this is new aluminium being extracted and created rather than recycled aluminium?

We are talking about new aluminium.

Doesn’t that have an environmental impact that the Chinese need to take into consideration given the commitments they have made on global warming?

The carbon footprint of Chinese aluminium is certainly different to it in other regions. China exports aluminium with a footprint that is not helping our ambitious environmental and low carbon economy goals in Europe.

A big part of the transition to a low carbon economy involves the circular economy. I am right in thinking that aluminium is recycled a lot?

Oh yes. It is and that will continue and grow. But the demand for aluminium is so high that we do not have enough to recycle. Today we still have 75% of all aluminium ever made still in use and if you look at the applications, they are also all long-lasting. It can take sometimes 15 or 20 years before you can get the aluminium back into the circular economy.

That’s why there is also a lot of competition to get scrap aluminium from the market and unfortunately, we lose scrap aluminium to other markets every year in Europe.

Including China?

Yes it is one of those regions.

Does that mean that Europe’s aluminium recycling industry is already losing ground to China because it is not as competitive?

They are certainly as competitive.

Then why is all the aluminium scrap going to China?

Because you have different cost structures and there’s European legislation that does not allow all kinds of recycling.

Surely those cost structures and the regulation makes European scrap recyclers less competitive?

It plays a role. But this Chinese aluminium comes with a price tag on it that you can only call close to dumping.

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+Dumping+

Are you concerned that we might see what happened with solar panels happen to the scrap aluminium industry? China overtook Europe in that sector and has also been accused of dumping.

We know today that more than 50% of all antidumping cases in Europe are against China. Let me be clear though, we absolutely support free trade. The point is not to protect Europe against any producer but to have fair trade.

We don’t see the fair trade element as long as these Chinese production facilities are strongly subsidised and don’t meet the high environmental standards we have in Europe and just flood our markets – at the price of our jobs and production.

Once you lose these industries, which are long term investments, you don’t get them back. It’s a slow death but it is a death and we have seen this in Europe in our aluminium industry in the last ten years.

We have a competitive disadvantage because of the much high regulatory costs we have in Europe compared to the rest of the world and the fact that aluminium has a global price mechanism. The price is same all around the world so if you have a different cost production level you suffer.

So aluminium has a set global price?

Yes it is set by the London Metal Exchange. That makes a huge difference if you have to live up to the standards we have in Europe. We don’t, for example, allow small hands in the sorting process, but a trader may find it easier to sell to regions where the rules are not so strict.

+Market economy?+

China has been pushing for market economy status at the World Trade Organisation. Does that cause you concern?

Yes. A market economy normally does not have a five year plan!

When you look at the criteria China must meet to gain market economy status, it is failing on four of those counts. They include the absence of state intervention, a full set of bankruptcy laws, an independent financial sector and a company law that is transparent and not discriminatory. That is not a passing grade. 

I hardly see that we are on a level playing field as long as these criteria are not being met.

How likely is it that China will get market economy status?

The members of the WTO made an agreement nearly 15 years ago. The agreement was that if you deliver on the criteria, we will give you market economy status. This 15 year period is running out and a decision has to be made.

Do you think the Black Monday crash on the Chinese stock market and the state devaluation of the currency highlights the risks of dealing with China?

I don’t think we should mix the specifics of our industry and global economic developments. The question is how they get their production sold to safeguard their jobs and production.

If I can ask a question back, can you imagine what would happen to the 10 million tonnes overcapacity of aluminium production if we were unable to file antidumping cases against China and accept Chinese prices as pure market-driven ones?

Would that happen if China got market economy status?

It is what happens already. We see probably the tip of the iceberg.

To be crystal clear – trade with China is currently unfair?

What we see from China coming to Europe is dumping on our markets.

Are you concerned that the EU is aggressively pursuing Chinese investment, in particular, for the Juncker Plan? Won’t the Chinese expect something in return, such as market economy status?

I find it hard to believe that the Commission would consider such a trade. The best way to create jobs and growth is to support companies that have already investment in Europe. Our members have made huge investments in Europe over the last 50 years. Do we really want those companies to leave Europe? To make such a trade against the existing industry won’t be a solution.

+Circular Economy+

In the future circular economy, the idea is almost everything will be recycled…

Aluminium is a poster child for the circular economy. 95% of the energy used in the primary production stays in the aluminium, you can use it again and again, it is a true energy bank.

If aluminium scrap is so useful for the circular economy, then it’s clearly a problem it is going to China…

There’s a problem that we are not yet able to maintain a proper way to get the scrap in the circle.

So what do policymakers need to do to make Europe’s aluminium industry more viable?

They have to understand that this is energy that leaves Europe, energy that is produced in Europe, and that we should only let it be exported if it then gets recycled under the same conditions it would here. A global level playing field.

The Commission made an assessment on the cumulative costs on the industry about two years ago. The result was mind blowing. We have a cost disadvantage of 11% towards the rest of the world through all these regulatory acts. Individually, they may be well thought out but all together they kill our industry – they have killed our industry. I am not talking about what might happen now it will just accelerate it.

The demand for aluminium is growing all across the globe. Even so, we have still lost about 35% of our primary production in Europe, just because we were not competitive anymore against other regions.

Perhaps the future in Europe is in secondary production rather than primary production?

No, it must be both. For the foreseeable future recycling alone is not the answer and in Europe we can produce aluminium in excellent conditions with an excellent carbon footprint. Then we will see how we can keep it in our circular economy and in our value chain. That’s what we want to achieve and not have aluminium shipped across the oceans, which has an impact on global carbon emissions.

We have an industry with a million direct and indirect jobs we have a turnover of nearly €40 billion and this is at stake here. There’s no doubt about that.

+Withdrawn proposal+

What did you think about the Commission’s decision to withdraw its proposal for the circular economy and later retable it?

We were supporting the proposal from the first moment. We hope the Commission’s new proposal is even more sophisticated. It’s about getting the rights targets set, getting better sorting schemes organised.

Do you think the withdrawal has unnecessarily delayed things?

For me, that’s not a yes or no question. The circular economy is a model we all need all over the world. The better it is organised and developed, the better it is for the economy and the system.

How far do you think Europe is from achieving a circular economy?

It’s a very long process. You can’t create it overnight. We are reinventing our economy into a new way of thinking. 20, 30 years ago we were throwing things away.  Landfill was the order of the day. But are we already there? Certainly not.

We don’t have for all materials the right technologies or sorting schemes. I was born in Berlin and lived in Amsterdam and in Brussels, and in all of those places the sorting schemes are different. They are even different in Flanders and Wallonia. There’s nothing wrong with that but it makes things more complicated.

To achieve this re-imagination of the economy, do we need a large amount of public intervention or is it something the private sector can achieve by itself?

I believe it’s a mix of these things. It’s also a market model. We understand today that recycling is not just a cost factor for society; it has an advantage as a market model. In Brazil you have many people living off recycling aluminium cans. It’s also a mind-set change from child to grandparents, to CEO to public officials. We have a great opportunity here and we will do it together. 

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