sectoral social dialogue committee on steel working group structural change september 2008...
TRANSCRIPT
Sectoral Social Dialogue Committee on Steel
Working Group Structural Change
September 2008
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
2
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
3
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
4
Steel ProductionRaw Materials Trade 1st Processors Finished Product
Iron Ore
Coke
Scrap
Electricity Steel Mills EquipmentComponents
• Processors
Automotive
Machinery
Steel industry - a vital contribution of value creation in European manufacturing
Characteristics of the Steel Industry
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
5
Challenges for the EU steel industry
Intensifying globalization and growing emerging economies to meet requirements of expanding industrialization and infrastructure
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
IISI
0
250
500
750
1000
1250
1500RoW
CIS
South America
India
China
Japan
NAFTA
EU-27
2007 2012 F
+3%
+3%
+3%
+37%
Regional steel consumption (MT)
+51%
+27%
+52%
+21%
1202
1518
(+26%)
World steel consumption (MT)
0
300
600
900
1200
1500
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008E
2009F
-2% 1% 8% 2%7%
7%10%
6%9%
7%7%
6%
SBB Steel Markets Europe 2008
+3%
6
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 long-
term 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.
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
7
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.
A. Energy policy
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
8
3. Discussion:
A. Energy policy
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
Wholesale Electricity Prices
Forward market: Uk v Germany - Baseload (£ per MWh)Source: Ineos/Heren
20
30
40
50
60
70
80
90
100
Jul-0
8
Sep-0
8
Nov-08
Jan-0
9
Mar
-09
May
-09
Jul-0
9
Sep-0
9
Nov-09
Jan-1
0
Mar
-10
May
-10
UK
Germany
France(Tartam tariff)
9
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)
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
10
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)
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
11
B. Climate Change
3. Discussion: Comments on “Leakage-paper” of the Commission
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
- 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.
12
B. Climate Change
3. Discussion: Comments on “Leakage-paper” of the Commission
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
• Graph 1: degree of risk of carbon leakage
in some energy intensive (sub)sectors
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0% 20% 40% 60% 80% 100%
Price increase
No
n-E
U t
rad
e in
ten
sit
y
Recycled Aluminium
Rebar EAF-hot rolling
Hot rolled coil BOF
Primary Aluminium (EU average electricitymix)
Grey portland cement Dry process with multistage cyclone preheater and precalciner kilns(EU average clinker industry energy mix)
Primary Aluminium (Coal-lignite basedelectricity mix)
Clinker Dry process with multi stage cyclonepreheater and precalciner kilns (EU averageclinker industry energy mix)
13
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.
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
14
3. Discussion:
C. Integrated Pollution Prevention and Control (IPPC)
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
- 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
15
C. Integrated Pollution Prevention and Control (IPPC)
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
EEMMIISSSSIIOONN
VVAALLUUEE
MARGIN 1
AVERAGE EMISSION PLANT 1
TIMETIME
ENVIRONMENTAL PERFORMANCE FOR AN INSTALLATION AND ENVIRONMENTAL PERFORMANCE FOR AN INSTALLATION AND IT'S ELVIT'S ELV
ELV 1
INSTALLATION 1
BA
T A
EL
AVERAGE EMISSION PLANT X
AVERAGE EMISSION PLANT Y
16
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.
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
17
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
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
18
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.
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
19
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
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
20
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.
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
21
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).
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
22
F. External Relations and Trade policies
3. Discussion: Raw materials
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
50
100
150
200
250
300
2005 2006 2007 Q1 07 Q2 07 Q3 07 Q4 07 M1 08 M2 08 M3 08
Scrap (Rotterdam, FOB)
Iron ore fine (contract Vale to Europe, FOB)
Iron ore (spot Indian ore, FOB)
Coke (Chinese exports, FOB)
Coking coal (contract, Australia to Japan, FOB)
FROM THIRD COUNT
RIES
0
0,2
0,4
0,6
0,8
1
1,2
1
0
0
0
1
1
1
1
0
100
200
300
400
500
600 Iron ore – need per main steel region
(2006)(million tonnes)
473
174132
8956 55 44
Domestic production Imports
58%
88%100%
100%
Iron ore – need per main steel region (2006)(Million tonnes)
23
F. External Relations and Trade policies
3. Discussion: China does not have a genuine comparative advantage
in steel making
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
369272
128 113
0
100
200
300
400
500
600
W.Europe Brazil Russia India-Integrated
Transport&Logistique
S,G&A
Supplies, consumables, other
Alloys
Maintenance
Labour
Raw materials
China
Slab cash costs for selected cost regions ($/ t)
369272
128 113
0
100
200
300
400
500
600
W.Europe Brazil Russia India-Integrated
Transport&Logistique
S,G&A
Supplies, consumables, other
Alloys
Maintenance
Labour
Raw materials
China
Slab cash costs for selected cost regions ($/ t)
24
F. External Relations and Trade policies
3. Discussion: China
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
Iron ore – need per main steel region
(2006)(million tonnes)
473
174132
8956 55 44
Raw Materials
Coke 14 MT 15% 14 MT 25% 14 MT 40%
Scrap
Ferro-alloys
…
Steel Products
Semis
Hot-rolled coils
Hot-dipped metallic coated
Wire rod / Rebar
…
export quota
VAT rebate export
export tax
restrictive export licensing
2007 January 2008 August 2008
10% (as of June) 10% 10%
15% 20% 20%
January 2007 April / June 2007 January 2008
8% 15% 25%
8% 5% 5%
8% 5% 5%
8% 10% 15%
25
F. External Relations and Trade policies
3. Discussion: China
EMF-EUROFER joint position on the Commission’s
Communication on Competitiveness of Metals Industries
Iron ore – need per main steel region
(2006)(million tonnes)
473
174132
8956 55 44
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 govenment-mandated merger (51% stake in 3 MT Ercheng to Wuhan at no cost)
Access to lending at favourable rates
Tax programmes
45 preferential tax programmes run by central government (40% of cost of new equipment deductible from income tax base Bengang 170 mio RMB tax savings per year ’06–’07)
Preferential access inputs, land and energy
Many steel mills have never paid anything for land, or extremely low prices (Baosteel, Anshang, Xinyu)
State-owned steel companies provide steel substrate (HR) to rerollers at significantly low price levels
47 companies benefited from preferential lending through State Key Technology Renovation Project fund including Anshan, Baosteel and Panzhihua (75 bn RMB ’99 –’01)
Low cost loans ($3.4 bn for major steel companies such as Baosteel, Wuhan, Anshan and Shougang)
China Development Bank committed to provide Anshan with 15 bn RMB loan including 10 bn at preferential rates, to promote strategic development of the company (2005)