EUROPEAN COMMISSION
MEMO
Brussels, 11 June 2013
Ensuring a future for steel in Europe
Since the Davignon Plan of 1977, this is the first time that the Commission has proposed a
comprehensive action plan for steel, eleven years after the expiration of the European
Coal and Steel Community (ECSC) Treaty in 2002.
The European steel industry has many assets in the form of modern plants, advanced
products, demanding clients forcing constant product innovation, an important domestic
market and a skilled workforce. However, today it faces major challenges: low demand,
increasing energy costs, reliance on imported raw materials, stiff and often unfair
competition and challenging environmental requirements. There is a heightened risk of
plant closures and job losses.
This memo analyses the challenges the steel industry is facing and presents the European
Commission’s Action plan, which was published today. It recalls the strategic importance
of steel to the EU and its close links to many downstream industrial sectors such as
automotive, construction, electronics. It emphasises in no uncertain terms that steel
making has a future in Europe.
A. The challenges
Steel demand in Europe is currently 27% below the pre-crisis level. Employment in the
sector fell by 10% from 2007 to 2011, as several production sites closed or reduced
output. But the EU is still the second largest producer of steel in the world, employing over
360 000 people, with an output of over 177 million tonnes of steel a year, accounting for
11% of global output.
Globally, steel industry currently has approximately 542 million tonnes of excess capacity,
of which almost 200 million tonnes are located in China. If capacity remains constant after
2014, it could take five to seven years for demand to match capacity, at the current rate
of growth.
Competition is fierce, the Chinese steel industry now accounts for almost 50% of global
steel production and China is the largest steel exporter worldwide. In the United States,
the fall in energy costs resulting from the shale gas revolution has improved the
competitive cost position of the industry, which is now attracting new investments. The US
may soon become a net exporter of steel, further increasing global over-supply. Some
neighboring countries (Russia, Ukraine and Turkey) have substantially improved their steel
production capacity to export to the EU.
MEMO/13/523
This being said, competition is not always fair - There is an increasing trend to protect
domestic steelmakers through the imposition of export restrictions and export duties on
raw materials, unduly raising steel production costs in the EU. This is the case in India,
China, the Russian Federation and Egypt. Investment limitations in, and public
procurement preferences for domestic steel sectors are in place in China and the US.
The OECD expects global steel demand to increase to 2.3 billion tonnes by 2025, mainly
from the construction, transport and mechanical engineering sectors, in particular in
emerging economies. It is vital that the EU steel industry is fit to take full advantage of
this next surge in demand.
B. The steel action plan – Steel has a future in Europe
Clearly, we need to stimulate growth in demand for EU steel both within the EU and in
third countries, cut costs and increase innovative, sustainable steel production. Only if
there is targeted action by the EU, Member States and business will the EU steel industry
regain competitiveness and develop the next generation of steel products vital for other
key European industries.
1. Ensuring the right regulatory framework
In line with the Commission’s Smart Regulation agenda1, EU legislation must be effective
and efficient in achieving its objectives. The Commission is determined to identify
excessive burdens, inconsistencies, gaps or ineffective measures.
In this context the Commission will finalise a cumulative cost assessment for the steel
sector in 2013 to assess the overall EU regulatory burden, as well as thoroughly assessing
the impacts of any new initiatives which can be expected to have a major influence on the
competitiveness of the steel industry.
In some Member States value-added tax evasion in the domestic steel market negatively
affects the operational conditions for steel producers. As a result, they suffer from unfair
competition from the black market, leading to cuts in production or closures. The
Commission, together with Member States, will therefore investigate possible initiatives
against the illegal EU market for steel products, including VAT evasion.
European standards can also promote sustainable production of steel construction
products. The steel industry is already developing the Steel Construction Products Mark –
SustSteel. It aims to promote sustainability in general, and in the production of steel
construction products in particular. Its use may require require specific standardisation
activities.
2. Easing restructuring and addressing skill needs
The outlook for employment in the steel sector is of serious concern and deserves full
political attention, not least because 40 000 jobs have been lost in recent years, due to
restructuring.
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COM (2010) 543 and COM (2012) 746
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Structural funds, and in particular the European Social Fund and the European
Globalisation Adjustment Fund, as well as several policy instruments can alleviate the
social cost of adjustment and ensure that the necessary skills required are retained.
The age structure in most European steel-producing companies is such that more than
20% of the current workforce will have left the industry in the period 2005-2015, and
close to 30 % will leave up to 2025. The industry thus needs to be able to attract young
and creative talent.
The Commission will launch a series of measures, but also calls on Member States and
industry to join in implementing the actions:
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promote the employment of young people in the sector through the reinforcement
of apprenticeship schemes and youth-oriented recruitment processes,
set up a European Skills Council for the steel industry to bring together existing
national organizations working on skills development and employment,
support Sector Skills Alliances, through the Erasmus for All programme, to design
and deliver joint curricula and methods,
support active training and life-long-learning policies including in relation to energy
saving skills through the training of energy auditors and energy managers,
when requested, streamline the use of EU funds via a dedicated task force in major
cases of plant closures or significant downsizing,
present a Quality Framework for anticipating change and restructuring setting out
the best practices to be applied by all stakeholders,
continue the possibility to apply co-financing rules and decreased own contribution
in structural funds for programme countries.
Ensure that the granting of EU fans takes into account the durability of the investments in
creating and maintaining jobs.
3. Boosting demand for steel
In the EU, steel demand depends on the economic and financial status of a few key
sectors which have themselves suffered in the financial crisis.
The construction and the automotive sectors account for a combined share of
approximately 40% of steel demand. The EU initiatives targeting these sectors –
CARS2020 stimulating demand for vehicles using alternative fuels and "Sustainable
Construction" encouraging renovation of buildings – must be implemented.
4. Supporting demand by improving access to foreign markets and
ensuring a level playing field at international level
The EU is an open market, but too often non-EU steel producing countries use trade
restrictions or distortions including tariff barriers, non-tariff measures, export incentives
and subsidies to give unfair advantages to their own steel industries
There is a particular need in this sector for fair international competition and a level
playing field. Steelmaking depends on resources that are scarce in Europe. Europe
recycles steel scrap, which is one of the inputs to steel-making, but even here there is a
shortage in part due to illegal exports.
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Bilateral and multilateral trade policy and notably negotiations of free trade agreements
(FTAs) are the key instruments to ensure access to third country markets and raw
materials, backed up by Trade Defence Instruments to address unfair trade practices. In
2012, eleven new investigations on iron and steel products were initiated following
complaints by the industry.
The Commission will also:
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take action against unfair trade practices and provide timely reports on the
evolution of steel imports from non-EU countries,
monitor scrap markets and come forward with a proposal to strengthen the Waste
Shipment Regulation and Member States capacity for inspections to tackle illegal
exports so as to enhance security of supply to steel makers that use it as a raw
material,
include coking coal in the list of Critical Raw Materials in addition to other key
essential elements for steel production,
engage with the main non-EU steel-producing countries, to have an overview of
trends in the sector and to develop common approaches to the challenges facing it
worldwide.
5. Boosting competitiveness with the right
resource and energy efficiency policies
energy, climate,
Energy costs represent approximately 40% of operating costs in steelmaking. As in other
Energy Intensive Industries (EII), energy costs are one of the main competitiveness
drivers.
European industry pays higher energy prices than most of its international competitors,
prices which rose by 27% in real terms between 2005 and early 2012. Future energy
policies must identify ways to reduce or compensate for adverse impacts on the
competitiveness of EIIs.
Differences in end user electricity prices between EU Member States are due to a complex
interaction of various factors, including fuel costs, taxation policy, market structure,
renewables policies and different approaches to price regulation. While high shares of
renewable energy with low marginal costs can have a downward pressure on wholesale
prices, the impact on end user prices from expansion of renewable energy can be negative
in the short to medium term through the addition of renewables levies by the Member
States. An efficient internal energy market will stimulate competition and reduce prices
but this requires adequate cross-border and trans-European energy infrastructure, which
will only be achieved through targeted action by the EU and its Member States.
Another challenge is the ETS related increase of electricity prices which hit producers using
Electric Arc Furnaces and recycled scrap as the primary raw material particularly hard.
Continued investments in energy efficiency are needed: plants using best technologies are
already operating close to their thermodynamic limits.
As one of the largest sources of CO2 emissions, the steel industry is at particular risk of
carbon leakage. Consequently, it will be allocated emission allowances at 100% of the
benchmark based value for free. Under the ETS state aid guidelines it may benefit from
financial compensation from 1st January 2013 until 31 December 2020.
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Climate policies will be another important driver for technology changes. A stable and
transparent regulatory framework is necessary to ensure that long-term investments,
indispensable for the renewal of the industrial base, take place. The EU’s climate policy
post-2020 will play a crucial role as will the commitments and ambitions of non-EU
countries. In the short term, an increase in the use of scrap material could make an
important contribution to emissions reduction, but the EU availability of quality scrap is
limited. Increasing scrap use further necessitates improving and stimulating the recycling
market.
A critical area is the successful demonstration of breakthrough technologies for CO2
emission abatement including industrial carbon capture and storage (CCS). There are
however important challenges to be taken into account like high costs and lack of public
awareness and acceptance.
Ensure global comparability – Standards for emissions
Improved commitments as well as efficient systems of monitoring, reporting and
verification must be in place to ensure transparency of the future international climate
change agreement and internationally recognised measurement standards are essential to
ensure the EU steel industry is not unfairly handicapped.
One innovative idea to support the implementation of the EU Climate Policy and to
facilitate achieving the objectives of the UN Framework Convention on Climate Change is
to adopt European Standards for assessing the greenhouse gas (GHG) emissions in EII.
Identifying quantifiable contributions to emissions reduction, at plant and industry sector
level, requires transparent methodologies and a solid consensus on monitoring, reporting
and verification procedures as well as key performance indicators. The standards will
enable the performance of plants to be compared globally.
Amongst other initiatives, the Commission proposes:
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to issue guidance to Member States on renewable energy support schemes and the
competition assessment of long-term supply contracts,
to analyse the composition and drivers of energy prices and costs and report on
end-user electricity prices for industry and its components in the EU and other
major economies,
to analyse the impact of the ETS on electricity prices in the EU and, in the context
of 2030 climate policy discussions, examine the need for appropriate measures to
address the risk of carbon leakage for specific sectors,
add the manufacture of certain forged ferrous products to the list of sectors
deemed exposed to carbon leakage,
promote best practices and investments in energy efficiency (e.g. new boilers, Top
pressure Recovery Turbine plants (TRT) waste heat recovery, etc).
Member States can contribute to these reduction goals by
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assessing the impact of all national measures on the price of energy for EII and
considering appropriate measures to reduce the cost of energy for EII,
earmarking part of the ETS revenues for research and innovation projects for EII,
strengthening market functioning and security of supply in the energy sector,
considering initiatives related to pooled electricity generation, long term contracts
and partnerships.
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The Commission will assess the impact of the measures taken and if necessary give
additional recommendations to minimize energy costs for energy intensive industries (EII).
6. Boosting Innovation
The European steel industry is constantly developing new types of steel for specific
applications. To further boost this competitive edge, there is a need to stimulate
innovative R&D to a much greater extent than in the past, particularly the economically
risky and very expensive pilot and demonstration phases.
The European Innovation Partnership on Raw Materials (EIP) fosters innovation through
the value chain of steel, from exploration and extraction, to efficient processing, recycling
and substitution.
The Commission will:
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give adequate support, in the framework of Horizon 2020, to R&D demonstration
and pilot projects for new technologies for cleaner, more resource and energyefficient technologies, including Public Private Partnerships such as SPIRE
(Sustainable Process Industry through Resource and Energy Efficiency) and the
Strategic Energy Technology Plan (SET)
focus financial support on the up-scaling and piloting phase going beyond the
research phase,
explore, in the context of the European Innovation Partnership on Raw Materials,
all the options to foster innovation in the steel industry along the raw materials
value chain, including recycling.
This action by the Commission can be complemented by dedicated programmes at the
Member State level. European Investment Bank can also contribute by considering longterm financing applications for projects that aim to ensure compliance with requirements
under the Industrial Emissions Directive based on best available techniques (BATs).
Additionally the steel sector benefits from state support measures that contribute to EU
2020 objectives, notably R&D, innovation training and employment aid as well as aid to
increase environmental protection.
Within twelve months of the adoption of the Action Plan, the Commission will assess how
its implementation has impacted the competitiveness of the steel industry and, if
necessary, provide additional recommendations and guidance
More information
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