By Alex MacDonald
LONDON--The European Commission on Tuesday presented its action
plan to safeguard the bloc's ailing steel industry as it grapples
with challenging economic conditions.
"With today's blueprint for the revival of the steel sector, we
send a clear signal to the industry that it is a strategically
important sector for Europe and a potential motor for growth," said
the European Commissioner for Industry and Entrepreneurship Antonio
Tajani in a statement. "The European Union needs its real economy
more than ever to underpin the economic recovery and we aim for
industry to deliver 20% of gross domestic product by 2020," he
added.
Europe's steel industry employs about 360,000 people and
generates about 170 billion euros ($224.6 billion) in sales
annually, but lost about 10% of its workforce between 2007 and 2011
due to weak demand and the need to shut down excess production
capacity.
As the world's second-largest steel producer after China, it
produced 177 million tons of steel last year, accounting for 11% of
global output, but it currently faces about 40 million tons to 50
million tons of excess production capacity, according to Wolfgang
Eder, the president of the European steel body Eurofer and chief
executive of Austrian specialty steelmaker Voestalpine AG (VOE.VI).
The protracted demand weakness stems from the negative effects of
the EU's sovereign debt crisis and lackluster global economic
growth.
Dr. Eder said earlier this month he doesn't expect the region
will ever return to its 2007 peak steel production level of 210
million tons in part because automakers are moving their factories
to emerging markets where demand is more robust than Europe. He
also expects construction demand will remain subdued for years to
come since EU member states aren't in a position to allocate large
sums of money for infrastructure projects given current austerity
measures.
The EU steel sector has also been buffeted by the need to import
all of its steelmaking raw ingredients and more stringent
environmental laws make it cheaper to produce basic steel products
abroad.
The Commission proposed Monday a plan that aims to safeguard the
steel industry's future by allocating EU funds to help retrain
employees and mitigate the social costs of potential redundancies
from industry-wide restructuring. It also proposed channelling
funds into research and technology in order to make the steel
industry more competitive and pushing through targeted measures to
stimulate automotive and construction activity, which account for
about 40% of steel demand.
European steel demand is currently 27% below the pre-financial
crisis high of 2007 and shrank by 9% in 2012, according to
ArcelorMittal (MT), the world's largest steelmaker. It is forecast
to shrink another 1.5% this year before rebounding next year.
ArcelorMittal has responded to protracted anemic demand by
permanently shutting or mothballing its loss-making operations in
Belgium and France, while Germany's ThyssenKrupp AG (TKA.XE)
earlier this year announced plans to cut 3,800 jobs and dispose of
its electrical steel operations.
From a policy perspective, the Commission will carry out a
cumulative cost assessment of its regulatory burden on the steel
industry this year with a view to putting in place the right
framework for the steel industry. It will pay particular attention
to the EU's energy and pollution-abatement policies given that
energy costs represent about 40% of steelmaking costs.
It will also review its trade agreements with the aim of
supporting EU steel exports, fighting unfair practices and ensuring
access to raw materials. Scrap markets will be monitored closely to
ensure security of supply, the Commission said.
"This is the start of a process; I am committed to monitoring
the situation carefully so we can adapt our efforts as needed,"
said Mr. Tajani. "Within a year, we will look at whether the
actions proposed are having the effect we aim for," he added.
-Art Patnaude in Brussels contributed to this article.
Write to Alex MacDonald at alex.macdonald@wsj.com