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Sectoral Social Dialogue Committee on Steel Working Group Structural Change September 2008 EMF-EUROFER joint position on the Commissions Communication.

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Presentation on theme: "Sectoral Social Dialogue Committee on Steel Working Group Structural Change September 2008 EMF-EUROFER joint position on the Commissions Communication."— Presentation transcript:

1 Sectoral Social Dialogue Committee on Steel Working Group Structural Change September 2008 EMF-EUROFER joint position on the Commissions Communication on Competitiveness of Metals Industries

2 2 I. Characteristics and Challenges of the European Steel Industry II. An integrated Approach to enhance the European Steel Industrys 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 3 EMF-EUROFER joint position on the Commissions 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 4 Steel Production Raw Materials Trade 1st Processors Finished Product Iron Ore Coke Scrap ElectricitySteel MillsEquipmentComponents 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 Commissions Communication on Competitiveness of Metals Industries

5 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 Commissions Communication on Competitiveness of Metals Industries IISI 20072012 F +3% +37% Regional steel consumption (MT) +51% +27% +52% +21% 1202 1518 (+26%) World steel consumption (MT) -2% 1% 8% 2% 7% 10% 6% 9% 7% 6% SBB Steel Markets Europe 2008 +3%

6 6 II. An integrated Approach to Enhance the EU Steel Industrys 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) - Commissions package of legislative proposals to ensure a real and effective choice of supplier and improve market transparency, including on pricing (Sep 2007) - Commissions guidance on the compatibility of long term energy supply contracts with Community law. - Commissions promotion of best energy saving practices within Metals Industries. EMF-EUROFER joint position on the Commissions Communication on Competitiveness of Metals Industries

7 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 Commissions Communication on Competitiveness of Metals Industries

8 8 3. Discussion: A. Energy policy EMF-EUROFER joint position on the Commissions Communication on Competitiveness of Metals Industries

9 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 Commissions Communication on Competitiveness of Metals Industries

10 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 industrys 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 Commissions Communication on Competitiveness of Metals Industries

11 11 B. Climate Change 3. Discussion: Comments on Leakage-paper of the Commission EMF-EUROFER joint position on the Commissions 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 12 B. Climate Change 3. Discussion: Comments on Leakage-paper of the Commission EMF-EUROFER joint position on the Commissions Communication on Competitiveness of Metals Industries

13 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 Commissions Communication on Competitiveness of Metals Industries

14 14 3. Discussion: C. Integrated Pollution Prevention and Control (IPPC) EMF-EUROFER joint position on the Commissions 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 15 C. Integrated Pollution Prevention and Control (IPPC) EMF-EUROFER joint position on the Commissions Communication on Competitiveness of Metals Industries EMISSION EEMMIISSSSIIOONNVALUEVALUEEEMMIISSSSIIOONNVALUEVALUE MARGIN 1 AVERAGE EMISSION PLANT 1 TIME ENVIRONMENTAL PERFORMANCE FOR AN INSTALLATION AND IT'S ELV ELV 1 INSTALLATION 1 BAT AEL AVERAGE EMISSION PLANT X AVERAGE EMISSION PLANT Y

16 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 Commissions Communication on Competitiveness of Metals Industries

17 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 Commissions Communication on Competitiveness of Metals Industries

18 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 Commissions Communication on Competitiveness of Metals Industries

19 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 ESTEPs strategic research agenda in the 7th framework programme. 3. Discussion EMF-EUROFER joint position on the Commissions Communication on Competitiveness of Metals Industries

20 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 Commissions Communication on Competitiveness of Metals Industries

21 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 Commissions Communication on Competitiveness of Metals Industries

22 22 F. External Relations and Trade policies 3. Discussion: Raw materials EMF-EUROFER joint position on the Commissions Communication on Competitiveness of Metals Industries Iron ore – need per main steel region (2006) (million tonnes) 473 174 132 89 56 55 44 Domestic production Imports 58% 88% 100% Iron ore – need per main steel region (2006) (Million tonnes)

23 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 Commissions Communication on Competitiveness of Metals Industries

24 24 F. External Relations and Trade policies 3. Discussion: China EMF-EUROFER joint position on the Commissions Communication on Competitiveness of Metals Industries Iron ore – need per main steel region (2006) (million tonnes) 473 174 132 89 56 55 44

25 25 F. External Relations and Trade policies 3. Discussion: China EMF-EUROFER joint position on the Commissions Communication on Competitiveness of Metals Industries Iron ore – need per main steel region (2006) (million tonnes) 473 174 132 89 56 55 44 Grants, equity infusions and other preferential access to capital Government infusions (18 bn RMB Maanshan 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)


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