EU Action Plan for Steel: “The real emergency in terms of policy is the energy and climate policy in Europe”

The Commission meets 14 member states and the CEOs of the EU’s largest steelmakers

European Commission Vice-President Antonio Tajani and the Commissioner for Employment, László Andor, have convened a High Level Group on the future of the European steel industry, meeting tomorrow, 4 December, in Brussels. The 14 largest steel producing EU member states, the CEOs of the major European steelmakers, representatives of the European Parliament, and the trade unions will discuss measures to preserve the sector’s global competitiveness.

EUROFER welcomes the acknowledgement made by the European Commission and the EU governments that steel production in Europe is essential for the EU’s economy and prosperity. First efforts to improve the business environment for industry in Europe are now being studied by the Commission.

Gordon Moffat, EUROFER Director General: “However, the real emergency in terms of policy is the climate and energy policy in Europe. We need realistic policies and solutions to decrease the gap in energy prices and costs between the EU and its main competitors.”

The share of regulatory costs in the sector’s profit margins has already reached a dangerous level. A study of the Centre for European Policy Studies (CEPS) on EU regulatory cumulative costs for the steel industry has revealed that regulatory costs already today represent a huge share of the EBITDA of EU steelmakers of up to 30% in “normal good years” and 30% to over 100% in economic crisis years (e.g. 2009-2011).

Impact of cumulative regulatory costs on the EBITDA of the EU steel industry 2002-2011, in %

impact28.1%18.9%13.4%17.3%9.4%12.2%14.5%- 53.9%35.0%30.9%

Source: CEPS

EUROFER is in particular concerned about unilateral EU measures in the fields of energy, climate and environment, driving costs of industry in times of economic crisis. Moffat: “The European steel industry is not against ambitious climate objectives. But we need certainty – now – that our most carbon lean steel installations, which are the best performers worldwide, will have no additional costs from that policy until such costs are also being borne by our global competitors. We want a positive dialogue with Climate Commissioner Connie Hedegaard on this to solutions that safeguard both the EU’s climate objectives and a future for steelmaking in Europe”.

The EU steel industry is currently confronted with developments which will significantly increase its costs under current EU climate and energy polices. The benchmarks for steel, which determine free allocation of CO2 permits under the EU emissions trading scheme (ETS), are set about 10% below best performance. They are therefore technically unachievable. The so-called cross-sectoral correction factor, recently adopted by the Commission, will further increase the shortage for even the most efficient European installations to 22% over the trading period 2013 to 2020. The initial objective of policymakers to mitigate the unilateral costs of the ETS for sectors exposed to global competitors is thereby undermined. For post-2020 the current directive even phases out any free allocation of allowances.

Exemptions from the costs for the decarbonisation of the EU are essential, at least as long as these costs are applied unilaterally by the EU or its member states. However, a draft Commission proposal foresees huge restrictions to such exemptions. Moffat: “The energy price differential between Europe and it’s competitors is unsustainable yet little or nothing appears to be being done to find a solution. Energy intensive industries are already leaving Europe. This erodes the viability of many European manufacturing value chains of which steel is an essential part. It may lead to a spiral which cannot be stopped.”

On 11 June 2013 the Commission adopted an “Action Plan for a competitive and sustainable steel industry in Europe”. The Action Plan foresees about 50 actions by the Commission and the Member States. One is the creation of a High Level Group. The Group has the mandate to discuss to discuss and advise the Commission on any steel and related policy issues, to follow up the implementation of the Steel Action Plan, and to promote the development of steel policies by the Member States.

Represented by EUROFER, the European steel industry represents the world leader in its sector, producing on average 170 million tonnes of steel per year with direct employment of 350 thousand highly skilled people. More than 500 steel production and processing sites in 24 EU member states provide direct and indirect employment for millions of European citizens.