Transcript EMF-EUROFER joint position on the Commission`s Communication

Sectoral Social Dialogue Committee on Steel
Working Group Structural Change
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
September 2008
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
I. Characteristics and Challenges of the European Steel Industry
II. An integrated Approach to enhance the European Steel Industry’s
Competitiveness:
A.
Energy policy
B.
Climate Change
C.
Integrated Pollution Prevention and Control (IPPC)
D.
Social aspects
E.
Innovation, Research and Development and Skills
F.
External Relations and Trade Policies
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EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
I. Characteristics and Challenges of the European Steel Industry
Key characteristics:
• High capital and energy intensity (massive long-term investments)
• Dependence on the international markets for raw materials
Need for supportive and predictable EU policies and regulation
(effective competition in the energy markets, undistorted access to raw
materials, avoiding asymmetric environmental cost increases with negative
impact on environment, employment and EU economy)
Challenges:
• Intensifying globalisation
• Growth of the world steel market driven by emerging economies
Need for a truly integrated European sectoral industrial policy
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EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
Characteristics of the Steel Industry
Steel industry - a vital contribution of value creation in European manufacturing
Raw Materials
Steel Production
1st Processors
Trade
Finished Product
Iron Ore
Automotive
Coke
•
Processors
Machinery
Scrap
4
Electricity
Steel Mills
Components
Equipment
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
Challenges for the EU steel industry
Intensifying globalization and growing emerging economies to meet requirements
of expanding industrialization and infrastructure
Regional steel consumption (MT)
1518
(+26%)
1500
World steel consumption (MT)
RoW
+21%
1500
6%
9%
1200
10%
900
-2%
1%
8%
2%
7%
7%
7%
1250
1202
6%
7%
600
CIS
+27%
+52%
+51%
1000
South America
India
+37%
750
China
300
Japan
500
0
+3%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
E
F
NAFTA
+3%
250
5
EU-27
+3%
+3%
0
SBB Steel Markets Europe 2008
2007
2012 F
IISI
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
II. An integrated Approach to Enhance the EU Steel Industry’s
Competitiveness
A. Energy policy
1. Commission's Communication:
- Issues of rapid increase in gas and electricity prices and changes in securing longterm supply contracts.
- Need for legislative action to create a truly competitive internal market for
electricity and gas, including separation of supply and production activities from
network operations (unbundling)
- Commission’s package of legislative proposals to ensure a real and effective choice
of supplier and improve market transparency, including on pricing (Sep 2007)
- Commission’s guidance on the compatibility of long term energy supply contracts
with Community law.
- Commission’s promotion of best energy saving practices within Metals Industries.
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EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
A. Energy policy
2. EMF-EUROFER joint position:
- Rapid rises in gas and electricity prices and challenges in securing long term supply
strongly impairing the cost competitiveness of the steel industry.
- Need for solution to interconnection infrastructures deficit for energy transport
(freedom and equality of election or access to all the sector companies)
- No scaling back of the objective of ensuring real and effective choice of supplier and
improved market (price) transparency (through legislative action and competition
rules) by transitional measures (member states) providing some predictability of
energy costs.
- Examination of the possibility of long-term supply contracts to improve predictability of
supply conditions.
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EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
A. Energy policy
3. Discussion:
Wholesale Electricity Prices
Forward market: Uk v Germany - Baseload (£ per MWh)
Source: Ineos/Heren
100
90
80
UK
70
Germany
60
France
(Tartam tariff)
50
40
30
0
-1
0
M
ay
-1
M
ar
n10
Ja
ov
-0
9
N
9
-0
Se
p
9
l-0
Ju
9
-0
9
M
ay
-0
M
ar
n09
Ja
8
ov
-0
8
N
-0
Se
p
Ju
l-0
8
20
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EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
B. Climate Change
1. Commission's Communication:
- Steel industry required to make a major contribution to climate change
mitigation to achieve high environmental performance and energy efficiency
without losing competitiveness.
- Recognition of the risk and negative environmental and economic consequences
of carbon leakage.
- Recognition of the specific situation of energy intensive industries.
- Determination of “industries exposed to significant risk of carbon leakage” and
possible adjustment measures in light of international negotiations of a global
climate change agreement (free allowances, inclusion of imported products in EU
ETS)
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EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
B. Climate Change
2. EMF-EUROFER joint position:
- EU steel industry facing increased international competition.
- Asymmetric cost increase through improved EU ETS eliminating investment and
therefore job security.
- Need for consideration of:
- EU steel industry’s resource and energy efficiency performance already
achieved.
- Limits of current available technology for further reducing CO² emissions.
- Increasing international competition from non EU producers driving excess
production out of the domestic market towards the attractive EU market (no
carbon constraints).
- Need for early acceptance of steel industry as a sector at risk of carbon leakage.
- Sector-specific benchmark (100% free allowances)
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EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
B. Climate Change
3. Discussion: Comments on “Leakage-paper” of the Commission
- Use CO2-cost from direct and indirect emissions for leakage risk-evaluation.
- Grid-type risk-classification is a viable approach, but thresholds for risk-type separation
in need of thorough analysis.
- Both mechanisms for short term leakage (indicator: prices) and long term leakage
(profitability indicators) must be taken into account.
- Market size definition by "the sum of annual EU production and non-EU imports" is
wrongly inflating the market size, due to inclusion of exports.
- Clear differentitation between unilaterally (e.g. CO2) and globally
incurred (e.g. raw materials) cost is needed.
- Most robust quantification of trade barriers is sum of differences in production cost and
transport costs.
- Markets will react differently to unilaterally imposed CO2 prices in cases where there
already is significant international trade and where it is not. Both situations my give rise
to leakage risk.
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EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
B. Climate Change
3. Discussion: Comments on “Leakage-paper” of the Commission
•
Graph 1: degree of risk of carbon leakage
in some energy intensive (sub)sectors
Recycled Aluminium
100%
Non-EU trade intensity
90%
Rebar EAF-hot rolling
80%
70%
Hot rolled coil BOF
60%
Primary Aluminium (EU average electricity
mix)
50%
40%
Grey portland cement Dry process with multi
stage cyclone preheater and precalciner kilns
(EU average clinker industry energy mix)
30%
20%
Primary Aluminium (Coal-lignite based
electricity mix)
10%
0%
0%
20%
40%
60%
Price increase
80%
100%
Clinker Dry process with multi stage cyclone
preheater and precalciner kilns (EU average
clinker industry energy mix)
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EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
C. Integrated Pollution Prevention and Control (IPPC)
1. Commission's Communication:
- Current EU legal framework on industrial emissions includes the IPPC and
“sectoral Directives”; Commission’ recast Directive on Industrial Emissions,
merging the IPPC and related “sectoral Directives” that strengthens the role
of “Best Available Techniques” (BAT) and of “Emerging Techniques”.
- Permitting requirements of IPPC Directive not always matched by equivalent
standards in third countries.
2. EMF-EUROFER joint position:
- Support for harmonization of IPPC Directive.
- Certification and operation of industrial plants taking into account individual
levels of technical performance.
- Avoid further legal demands without consideration of what is technically
possible.
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EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
C. Integrated Pollution Prevention and Control (IPPC)
3. Discussion:
- Full support for principles of current IPPC Directive (integrated approach,
deriving Emission Limit Values - ELV from Best Available Technique - BAT,
flexibility)
- Implementation period for the current IPPC Directive has only come to an end
on 30 October 2007.
-
- Improve implementation (e.g. capacity building) but not radically change the
fundamentals of the current IPPC Directive.
- Need for transparency on how ELVs in a permit have been established in
relation to BAT.
- When establishing ELV's, the flexibility to deviate from BATAELs should remain
but this should be documented and justified by the permitting authorities
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EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
C. Integrated Pollution Prevention and Control (IPPC)
ENVIRONMENTAL PERFORMANCE FOR AN INSTALLATION AND
IT'S ELV
E
M
I
S
S
I
O
N
BAT AEL
ELV 1
V
A
L
U
E
INSTALLATION 1
AVERAGE
EMISSION
PLANT Y
MARGIN 1
AVERAGE
EMISSION
PLANT 1
AVERAGE
EMISSION
PLANT X
TIME
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EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
D. Social aspects
1. Commission's Communication:
- Major restructuring of the industry has led to massive reductions in employment
and the permanent closure of production plants was necessary to improving
labour productivity and competitiveness, new member states are particularly
hard-hit.
- A skilled and available workforce is a major strength of the industry.
- The European steel industry is today confronted with significant demographic
problems.
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EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
D. Social aspects
2. EMF-EUROFER joint position:
- Main challenges:
• Ageing workforce,
• Practicing an active equality and diversity policy,
• Need for new competencies including managerial skills and entrepreneurship,
• Mobility both at the level of executives and technicians,
• as well as climate change and globalisation
- Management of change must be socially responsible
- Urgently need European sectoral policies on training and life long learning
• Establishment of ENTRANCE network within the framework of ESTEP
3. Discussion
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EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
E. Innovation, Research and Development and Skills
1.
Commission's Communication:
-
Innovation is key driver in the competitiveness of the European steel sector.
-
Long term projects pushing forward the R&D agenda should be promoted.
-
Steel industry is finding it increasingly difficult to attract skilled workers:
• Ageing workforce.
-
Need for better use of training structures and clusters between training and R&D.
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EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
E. Innovation, Research and Development and Skills
2. EMF-EUROFER joint position:
- Social partners welcome Commission encouragement to intensify R&D and innovation.
- Integrated industrial policy must address the anticipation of skills needs in the steel
sector.
- Need to press forward work on education and training development in the steel
industry.
- Ageing workforce has quantitative and importantly qualitative implications.
- Need to address the currently disappointing results of the implementation of the
ESTEP’s strategic research agenda in the 7th framework programme.
3. Discussion
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EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
F.
External Relations and Trade policies
1. Commission's Communication:
- Priority to the establishment of a level playing field both for metals and
their raw materials in trade policy.
- In the framework of multilateral and bi-lateral trade negotiations,
continuation of efforts to oppose the use of exports taxes on metals and
raw materials. Ensuring market access for FDI.
- To continue to use all existing instruments to address trade practices in
violation of international trade agreements.
- Maintain close industrial dialogue with key third countries.
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EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
F.
External Relations and Trade policies
2. EMF-EUROFER joint position:
- Raw materials: adequate EU trade policy and a unique European voice to secure
supply of raw materials:

Level playing field for access to metallurgic raw materials

Competition rules ensuring genuine competition in key market of iron ore
- Steel products:
•
To address unfair trade practices by using all instruments available, in
particular against those economies which do not have a genuine
comparative advantage (credible dialogue and effective trade defence
actions).
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EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
F.
External Relations and Trade policies
3.
300
Discussion: Raw materials
Scrap (Rotterdam, FOB)
473
500
Iron
– need
per main
Iron
oreore
– need
per main
steel steel
regionregion
(2006)
(Million tonnes)
(2006)
Coke (Chinese exports, FOB)
(million tonnes)
400
0
1
100%
50
2005
2006
2007
Q1 07 Q2 07 Q3 07 Q4 07 M1 08 M2 08 M3 08
44
Domestic production
Ko
re
a
0
0
55
h
0,2
56
100%
Imports
So
ut
C
hi
n
a
0
EU
-2
7
100
0,4
89
1
88%
0
SA
0,6
100
132
1
U
150
1
174
0,8
ia
1
200
1
In
d
1,2
ia
58%
300
pa
n
200
Ja
Coking coal (contract, Australia to Japan, FOB)
us
s
Iron ore (spot Indian ore, FOB)
250
600
R
Iron ore fine (contract Vale to Europe, FOB)
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EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
F.
External Relations and Trade policies
3.
Discussion: China does not have a genuine comparative advantage
in steel making
Slab cash costs for selected cost regions ($/t)
600
China
500
Transport&Logistique
S,G&A
400
Supplies, consum ables, other
Alloys
300
Maintenance
200
Labour
369
272
100
Raw m aterials
128
113
Russia
IndiaIntegrated
0
W.Europe
Brazil
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EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
F.
External Relations and Trade policies
3.
Discussion: China
2007
Raw Materials
January 2008
Coke
14 MT
15%
Scrap
10% (as of June)
August 2008
25% ore 14
MT
40% main steel region
Iron
– need
per
473 10%
10% (2006)
14 MT
(million tonnes)
20%
15%
20%
January 2007
April / June 174
2007
Semis
8%
15%
25%
Hot-rolled coils
8%
5%
5%
Hot-dipped metallic coated
8%
5%
5%
Wire rod / Rebar
8%
10%
15%
Ferro-alloys
…
Steel Products
January 2008
132
89
56
55
44
…
export quota
VAT rebate export
export tax
restrictive export licensing
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EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
F.
External Relations and Trade policies
3.
Discussion: China
Grants, equity
infusions and other
preferential access
to capital
Government infusions (18 bn
RMB Ma’anshan ‘93–’97)
Dept-equity swap (27.5 bn
RMB Anshan, Baosteel,
Lanzhou, Shougang, Taiyuan
’99)
Grants earmarket for steel
facility upgrade (6 bn $ ’00)
‘In-kind’ contribution:
government provides
productive assets to another
company through govenmentmandated merger (51% stake
in 3 MT Ercheng to Wuhan at
no cost)
Access to lending at
favourable rates
Tax programmes
45 preferential tax
47 companies benefited from programmes run by central
Iron ore
– need per(40%
mainof
steel
preferential lending through
government
costregion
473
State Key Technology
of new equipment
(2006)
Renovation Project fund
deductible from income tax
(million tonnes)
including Anshan, Baosteel
base Bengang 170 mio RMB
and Panzhihua (75 bn RMB
tax savings per year ’06–
’99 –’01)
’07)
174
132
Low cost loans ($3.4 bn for
89
major steel companies such
56
55
44
Preferential access
as Baosteel, Wuhan, Anshan
inputs, land and energy
and Shougang)
Many steel mills have never
China Development Bank
committed to provide Anshan paid anything for land, or
extremely low prices
with 15 bn RMB loan
(Baosteel, Anshang, Xinyu)
including 10 bn at
preferential rates, to
promote strategic
development of the company
(2005)
State-owned steel
companies provide steel
substrate (HR) to rerollers
at significantly low price
levels
25