Brussels pushes ‘fitness check’ of aluminium sector

Tajani Jan 2012.JPG

The European Commission expects to complete a review by October of ways to help Europe's struggling aluminium industry, looking at policies such as climate change and long-term power contracts.

"We are looking at the cumulative cost of EU legislation on the aluminium sector to identify excessive administrative burdens, regulatory overlaps and inconsistencies," said Fabrizia Benini, cabinet member in the office of Antonio Tajani, European Commission vice-president in charge of industry.

The review into the impact of EU policy on aluminium, dubbed a 'fitness check', will look at climate, energy, industrial and competition policies, amongst others.

It was launched in October 2012 as part of the Commission's revised industrial policy, which aims to reverse the declining role of industry in Europe, save jobs and temper reliance on the financial sector.

>> Read: Commission seeks 'new industrial revolution'

"Just because a [competing] country has cheaper labour and less stringent climate rules doesn't mean that all industry should leave Europe. If Europe can produce in a cleaner manner, it's better for the environment and better for growth," Benini said.

About 30% to 40% of the cost of producing aluminium comes from electricity prices, which cannot be passed on to end-users because aluminium is priced globally on the London Metal Exchange.

This puts smelters in Europe, which have higher electricity costs, at a competitive disadvantage to those in Asia and the Middle East, where both labour and energy costs are lower.

"We have seen a number of plants that have closed down due to the fact that they couldn't secure long-term energy contracts," said Mattia Pellegrini, head of the Commission’s raw materials, metals, minerals and forest-based industries unit.

"If you want to do [a contract] for more than five years, there are plenty of conditions. You have to make sure that every five years there is an opt-out clause. In practice it becomes very difficult."

Reversing the decline

As a big energy user, the aluminium industry has since January been eligible for state aid to compensate for the higher electricity bills caused indirectly by the EU's Emissions Trading System, which is aimed at cutting carbon emissions.

The industry, however, says the aid is not far reaching enough and that more production is at risk of closing if more help is not forthcoming.

The focus on the aluminium duty will come as welcome relief to makers of products such as cans and packaging, who set up the Federation of Aluminium Consumers (FACE) for the explicit purpose of ending the tariff.

"The benefit [of the duty] is that you protect producers. The cost is that you impose an additional [burden] on the downstream industry. We are asking consultants to look at this," Pellegrini said.

The European Commission has attempted to re-launch manufacturing activity and bring back industries to Europe, with the publication in October 2012 of a communication, titled Mission Growth: Europe at the Lead of the New Industrial Revolution.

The policy paper set out a new aspirational goal to increase the industry's share of EU GDP to around 20% by 2020, up from 16% currently.

The pillars of the reinforced industrial policy are investment in innovation, better market conditions, access to finance and building human capital and skills.

  • By Oct. 2013: Commission expected to complete 'fitness check' of aluminium sector.

European Commission

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