European Commission: Overview of the Steel Industry

The European steel industry is competitive, well established in a majority of Member States and an important employer. It produces steel in an energy intensive process by reducing iron ore, or by melting recycled scrap. Hundreds varieties of steel products are used in a very wide range of applications by industries like mechanical, shipbuilding, automotive, appliances and packaging, construction and transport. Steel is recovered from end of life goods and recycled without loss of its intrinsic properties, which adds to its competitiveness and environmental benefits.

Turnover in the EU steel sector is approximately €150 billion. The sector employs 410 000 people, representing 1.25% of the total employment in EU manufacturing. With a production of around 200 million tonnes of crude steel in 2008, the EU represents 16% of world output and is the second biggest producer behind China.

Today, the EU steel sector is a modern industry with its main customer base found within the EU home markets, particularly in high-end segments. The main competitive strength is based on high quality products, product innovation and technological development, efficiency, and skilled manpower.

The main challenges for the EU steel industry are linked to obligation to reduce emissions, to the cost and availability of inputs (raw materials, energy), competition from third country producers, and the need of attracting and keeping a skilled workforce.

Important challenges for the steel industry

The European steel industry finds itself hit by the simultaneous effects of low demand and worldwide overcapacity whilst at the same time being confronted with high energy prices and investment needs to adjust to the green economy by producing innovative products in a sustainable manner.

… but global steel demand will increase

Steel demand in Europe is currently 27% below the pre-crisis level. Employment in the sector fell by 10% from 2007 to 2011. Despite this, the EU is still the second largest producer of steel in the world, with an output of over 177 million tonnes of steel a year, accounting for 11% of the global output and employing over 360 000 people.

According to the OECD, global steel demand is expected to increase to 2,3 billion tonnes by 2025, mainly from the construction, transport and mechanical engineering sectors, in particular in emerging economies. It is vital that the EU steel industry is fit to take full advantage of this competitive market.

The current situation requires a new political strategy for the steel sector. Therefore the Commission is:

Ensuring the right regulatory framework is put in place: Measures include assessing by end 2013 the overall regulatory burden on the steel industry from different policies and its impact on competitiveness.
Addressing skills needs and easing restructuring: Promoting skills development measures and measures targeting youth employment in the sector to boost the sector’s competitiveness as well as exploring the possibility to use relevant EU funds to help workers to find alternative employment in cases of production site closures. The European Social Fund and the European Globalisation Adjustment Fund will to continue to contribute to this effort. All EU funds will follow the principle of regional smart specialisation, taking into account the durability of the investment in creating and maintaining jobs in a particular region.
Boosting demand for Steel: Measures include implementing targeted action to stimulate demand in the car and sustainable construction sectors.
Improving access to foreign markets and ensuring a level playing field so as to support EU steel exports, fight unfair practices and ensure access to vital raw materials. Scrap markets will be monitored to enhance security of supply for EU steelmakers using scrap as a raw material.
Ensuring affordable energy costs: The completion of the internal energy market and diversification of supply as well as increased energy efficiency will contribute to lower costs. The Commission is willing to provide guidance on long term electricity contracts between suppliers and customers to increase the predictability of such costs. In the short term reduction of energy costs for Energy Intensive Industry will depend on Member States. The Commission is committed to work towards this goal
Climate policy: The EU’s 2030 climate policy framework will be key in ensuring the competitiveness of the industry as will be the negotiations for a binding international agreement on climate change. Manufacturing of certain forged ferrous products will be added to the carbon leakage list and MS are invited to earmark revenue from the ETS auction to R&D projects for Energy Intensive Industry
Boosting innovation: Promotion of environmentally friendly technologies through the development of new types of steel, and stimulation of innovative R&D, particularly for the very expensive pilot and demonstration phases. For 2014-2020, research and innovation is to be funded mainly through the Horizon 2020 programme, which places a strong emphasis on industrial leadership in innovation. The steel sector also benefits from the European Innovation Partnership for Raw materials and for 280 million over the same programming period from the Research Fund for Coal and Steel

The Commission proposes to formally create a High-Level Group, which will oversee the implementation of the plan. The Commission will take stock of the progress made in 12 months.

Background

With a workforce of 360,000 people, turnover of around €170 bn and a presence in the manufacturing value chain of many downstream sectors, the steel industry has a strategic place in the economy.

Steel is closely linked to many other downstream industrial sectors such as automotive, construction, electronics, mechanical and electrical engineering. It has a very significant cross-border dimension: within the EU, 500 production sites are spread around 23 Member States, making it a truly European industry both historically and today. Steel was at the birth of the European project with the European Coal and Steel Community.

Europe needs its basic industries, to help other industries with the re-industrialization process. Materials like steel, chemicals, glass and cement are essential elements of the industrial value chain for greening the economy. Steel is 100% recyclable and is the most basic material in the manufacturing value chain of a product.