EU Unveils Plan to Halt European Steel Sector Decline

Andrey Rudakov | Bloomberg via Getty Images

The European Commission unveiled an array of measures and recommendations on Tuesday to revive Europe's steel industry, hurt by tumbling demand and plant closures.

The "EU steel action plan", presented by Industry Commissioner Antonio Tajani, is the first comprehensive attempt by the Commission to stem the steel sector's decline since the Davignon Plan of 1977.

The plan aims to cut red tape, boost apprenticeship schemes and innovation, create a level international playing field and study ways to lessen the burden of energy costs, which account for about 40 percent of steelmakers' operating costs.

It also says existing EU funds should be used to ease the social cost of restructuring, which has caused the loss of 40,000 jobs in recent years, including the planned closing of most facilities at ArcelorMittal in Liege, Belgium.

"The Action Plan is a good starting point, but there still is a lot of work to be done until our sector will substantially benefit from the proposals," Gordon Moffat, director general of European steelmakers association Eurofer, said in a statement.

Critics said the plan contained few new measures and that much more decision action would be required to save a sector afflicted by overcapacity, weak demand and tight financing.

"On the key issue of overcapacity the report has little to offer," Wood Mackenzie steel consultant Patrick Cleary said.

"This is perhaps unsurprising given current fiscal constraints and the lack of direct state involvement in the steel industry and confirms that serious steps to address overcapacity will need to come from within the steel industry itself."

European steel demand is 27 percent below peak 2007 levels and forecast to fall even further this year. The number of jobs in the industry dropped 10 percent between 2007 and 2011.

To boost demand, the plan points to existing EU initiatives — CARS 2020 and Sustainable Construction — to help the automotive and building sectors, which make up some 40 percent of steel demand.

The Commission also invited the EU member-states to consider reducing or removing tariffs on energy-intensive industries to make them more competitive internationally.

It added coking coal to the list of critical raw materials that it monitors for the risk of supply interruption.

The Commission will also start monitoring imports and exports of steel scrap, a measure sought by Italian steelmakers, many of which operate electric arc furnaces, which use scrap as the main raw material.

"What gives rise to concerns here is the fact that Europe has become the second-largest scrap exporter in the world, while at the same time there are more than 20 countries elsewhere in the world that impose export restrictions on their own scrap production," Moffat said.

Social Cost of Closures

The Commission is proposing using existing EU funds to help workers who lose their jobs as a result of plant closures, a measure most steelmakers have called for.

The plan does not propose state intervention to keep local steel plants alive, a measure sought by unions.

The French government last year threatened to take over the ArcelorMittal plant in eastern France after the company of Indian-born tycoon Lakshmi Mittal announced plans to close its blast furnaces.

In Belgium, the Wallonia region is nationalizing the ArcelorMittal steelworks in Liege, where most facilities are due to close.

The majority of European steelmakers oppose giving subsidies to help troubled companies survive, Eurofer President and Voestalpine Chief Executive Wolfgang Eder said in a recent interview.

Eurofer said it was disappointed by the absence of concrete proposals about EU climate policy after 2020, including charges for carbon emissions, a cost steelmakers elsewhere do not face.

Steelmakers say carbon emission costs could drive steel production abroad.