EMF Eurofer Position Communication Competitiveness Metals Industries

Eurofer and EMF welcome the Commission’s report on the competitiveness of the metal industry recognizing its economic, social and innovative importance as a vital contribution of value creation in European manufacturing (investments goods such as mechanical engineering, automotive, shipbuilding, aerospace, construction as well as consumer goods, e.g. white goods).

The social partners applaud the acknowledgement of the need of maintaining a competitive metals industry capable of competing on a level playing field with global competitors as a key objective of European industrial policy. It identifies correctly the decisive political factors affecting the success of the metals industry in Europe including climate change and other environmental challenges, energy, access to raw materials, research and innovation and trade. However, further consideration and clarification of some critical issues identified are needed to lift the analysis up to an actionable program involving the Commission, the Member States and industry, in particular in the area of environmental policy.

Characteristics and Challenges of the Metals Industries

The Commission rightly identifies high capital and energy intensities and dependence on raw material as main characteristics of the metals industry. As production assets as well as technical, logistical, research, innovation and customer services require massive long-term investments in the steel industry, EU policies and regulation need to be supportive and predictable. This means to ensure effective competition within the EU energy markets and undistorted access to raw materials at affordable conditions while avoiding asymmetric environmental cost increases with negative consequences for the environment, employment and the EU economy.

After successful internal restructuring over the last decennia, the social partners see intensifying globalization and growing emerging economies as main evolutions which are challenging today the EU steel industry – an industry which is loosing relative weight in the global market and market share within the EU market.

To face these challenges, a truly integrated European sectoral industrial policy must be operated, ensuring well functioning energy and raw material markets and fair trade conditions, as well as supporting R&D and innovation and anticipating social needs (skilled and available workforce).

An Integrated Approach to Enhance the EU Metals Industry’s Competitiveness

Eurofer and EMF draw particular attention to the following specific issues:

Energy policy

• Rapid rises in gas and electricity prices as well as challenges in securing long-term supply are major issues impairing the cost competitiveness of the steel industry.
  • Solution to interconnection infrastructures deficit for energy transport is crucial, in order to guarantee the freedom and equality of election or access to all the sector companies, regardless the country in which it is placed.
• Transitional measures to provide increased predictability of energy costs should not scale back the objective of ensuring real and effective choice of supplier and improvement of market transparency (pricing) through legislative action as well as through assessing compatibility of practices with Community law.
• Examination of the possibility of long-term supply contracts is a much needed approach to improve predictability of supply conditions, but would require compensation of the electricity consuming parties for incorporated carbon costs.

Environmental policy

• The report rightly leaves no doubt that the EU steel industry, being an energy intensive sector, faces increasing global competition. Moreover, it implicitly recognizes the risk of asymmetric cost pressure resulting from the approach taken in its proposal for improving EU ETS, eliminating investment security, and therefore high quality jobs (risk of carbon leakage). However, it falls short in being more precise and factual on the reality of our sector, notably:
  • EU steel industry’s performance already achieved in resource and energy efficiency over decades.
  • Operation at the limits of the currently available technology, which has reduced considerably the technological potential for achieving further reductions in CO2 emissions putting the objective of saving of 21 per cent by 2020 compared with 2005 out of reach.
  • The increasing risk of market-distorting international competition in the domestic EU market as well as in third markets resulting from worsening government-induced market imbalances in emerging economies demands for early action before an international agreement is in force (acceptance of steel industry as a sector at risk of carbon leakage, fair sector-specific benchmarks defining 100% free allowances).

Integrated Pollution Prevention and Control

• From environmental and competitiveness perspective, the social partners support a harmonisation of the Integrated Pollution Prevention and Control (IPPC) Directive. However, the IPPC Directive needs to be codified as a basis for the certification and operation of industrial plants that takes into account their individual levels of technological sophistication. The competitiveness of European companies cannot be allowed to be jeopardised by further legal demands being implemented without consideration of what is technically possible. Otherwise, the advantages of metal production under optimum environmental and health conditions in Europe, compared to production under lower standards in other parts of the world, would become lost.

Social aspects

• The European steel industry is confronted with demographic problems, arising from the foreseen retirement of a considerable number of steel workers in the next 10 years, and with the increasing difficulty to attract skilled workers, with demand for engineers in the steel sector far exceeding supply. The main challenges include aging workforce, practicing an active equality and diversity policy, need for new competencies including managerial skills and entrepreneurship and mobility both at the level of executives and technicians in order to face the rapid evolution of production technologies and products, the demanding commitments related to climate change and the fierce competition with emerging countries.
  In the light of these elements, there is a continued need for anticipating change and the need for preventive retraining measures. Furthermore there is also a need to work on the image problem of the sector, including the working conditions and health and safety requirements.
  These challenges need to be addressed with an urgent and appropriate European human resources policy on education, recruitment and lifelong learning policies. In this context, ESTEP pays great attention to education and training to hire the necessary skills and to assume the long term competitiveness. To meet its objectives, ESTEP aims to set up a European High Education and Training Space for steel related matters (ENTRANCE network), an initiative which needs full support from European and National institutions to encourage the participation of universities.

Innovation, Research and Development and Skills

• The social partners welcome the encouragement for intensifying R&D and Innovation and further developing high skills. However, the implementation of the ESTEP’s Strategic Research Agenda in the first calls of the 7th Framework Programme leads to very disappointing results (<10% success rate) as these calls appear not to cover priorities of the SRA.

External Relations and Trade policies

Raw materials

• Eurofer and EMF welcome the priority given to the establishment of a level playing field for access to metallurgic raw materials in its trade policy as well as in the framework of its external relations with third countries. Restrictions on exports of raw materials discriminate EU steel producers by reducing availability on the international markets, therefore increasing international prices while keeping prices for non EU steel producers lower.
• However, Community action in this domain must also include application of the EU competition rules to ensure effective competition in the key market of iron ore avoiding over-concentration which would allow the remaining iron ore producers (global duopoly) to dictate price increases, which is not in the interest of the consumer and the EU economy in general.
• Eurofer and EMF consider of high priority the existence of an adequate European trade policy and an unique European voice in order to secure the supply of raw materials to the European steel industry, at sustainable prices and conditions.

Steel products

• The confirmation of the use of all existing instruments to address trade practices in violation of international agreements including reinforced dialogue, is positive. However, recent experience has shown that for dialogue with trading partners to be credible and effective, it must be backed up by clear signals that legitimate trade action will be used in absence of real progress.
• Therefore, EU trade defence instruments must be kept available and operational as a legitimate means of last resort to protect EU steel industry against third countries which do not trade fairly, in particular those economies which do not have genuine comparative advantages.