“Massive dumping imports and increased stringency of EU emissions trading measures threaten the very survival of the EU’s steel industry!”

The European Union needs to act quickly if it wants to retain the steel industry as a core component of its industrial value chains. The survival of Europe’s steel producers is at risk, on the one hand from a dramatic increase in dumping imports that have triggered ruinous price trends, and, on the other, from cost burdens amounting to billions of euros that would be resulting from increasingly stringent EU emissions trading as from 2021.
 
It is in nobody’s interest in Europe to see vast numbers of jobs lost in the domestic industry while, in other parts of the world, even higher emissions are being generated by steel production. In Germany alone, around 3.5 million jobs are either directly or indirectly associated with the steel industry.
 
Dumping imports – China is not a market economy
 
The EU is the only genuinely open steel market in the world; import duties have not been levied here since 2004. In recent years, manufacturers from countries outside Germany, such as China, have been able to increasingly expand their market shares through dumping to the detriment of EU producers.
 
The veritable flood of Chinese dumping imports is attributable to surplus capacities of between 300 and 400 million tons. Faced with a cooling economy, Chinese steel producers are increasingly relocating their structural problems by exporting to other regions of the world. In the process, they are often selling their products on the European market below production cost – in contravention of all market logic. Government funds frequently balance out the enormous losses thereby accumulated.
 
The ruinous price war on the European steel market cannot be combated solely by austerity programs and measures to enhance efficiency. Without political intervention against competitors favored by government policies, Europe’s steel producers will not be able to survive. The EU Commission is called upon to finally fulfill its role as a competition regulator.
 
The EU has trade defense instruments against unfair imports at its disposal. In comparison to other regions of the world, however, and important trading partners, such as the USA, these instruments are considerably more restrictive and entail higher hurdles for domestic industry, as well as being slower to take action. The manner in which they are currently practiced by the EU Commission does not guarantee adequate protection against unfair imports and market damage.
 
Every additional day that dumping imports erode fair competition inflicts material damage on companies and contributes to massive job losses. Against this backdrop, the European umbrella organizations of the European Steel Association (EUROFER) and the industriAll European Trade Union have made a joint appeal to the responsible politicians to take swift corrective measures.
 
It would be grotesque in this situation to grant China market economy status as is currently being discussed by the European Commission. The Commission itself has defined five criteria for awarding this status, four of which China verifiably does not fulfill. Should, however, the EU take the decision prompted by superordinate economic interests to grant China market economy status the – in any case – weak rules on trade defense against China would be virtually useless.
 
Emissions trading
 
The EU Commission’s proposal dated July 15, 2015 on revising the EU Emission Trading Scheme is intended to achieve a decarbonization of the energy and industrial sector through significantly reducing CO2 allowances as from 2021.
 
The reduction of the CO2 allowance volume envisaged for the fourth trading period would lead to significant price increases in emission trading. All the more important is a 100% free allocation of CO2 allowances at least for technology leaders from the sectors of industry that are particularly endangered by emission trading.
 
The Commission’s proposal does not, however, provide for a regulation of this kind despite the request to this end that was stated by European heads of state in October 2014.
 
Manufacturing operations and processes at Salzgitter AG’s integrated steel works and mini mills set the highest standards worldwide. This applies to the steel grades, as well as to the processes and technologies producing the steel.
 
Despite the most advanced technologies and considerable investment in its locations, implementing the Commission’s proposal would place a burden of an estimated €120 million a year on Salzgitter AG. Over the full fourth emission trading period from 2021 to 2030, this would result in additional costs of €1.2 billion from trading allowances alone, a situation that is not even remotely feasible in the international competitive arena.
 
We are counting on close cooperation with the trade unions, flanked at the political level by the federal and regional governments, to deflect the European Commission from its misguided path.
 
Salzgitter AG welcomes the initiative of the State Government of Lower Saxony at today’s Steel Summit Conference that is to be seen in the context of summit conferences held in other federal states since the summer of 2015. These events clearly demonstrate that employees, employers, politicians and federations are all joining forces and taking action to preserve the industrial value chain.