While China is already hitting the brakes hard on steel production, the European Union remains deeply divided. On the one hand, you have innovative and prudent corporate leaders like Ola Källenius, CEO of Mercedes Benz, calling for an open Europe. With free trade, innovation and a willingness to face international competition. The exciting podcast with Christian Lindner and Ola Källenius can be found here on Apple Podcast.
On the other side, Europe has the backward protectionists of the domestic steel industry. Who are trying at all costs to close the European and US markets even further ahead of reality.
Planned Chinese market economy: fear or challenge?
Whereas in the past it was fear of the innovative strength and efficiency of the German economy that drove foreign countries around and created the British pipe-cracker “Made in Germany” over a hundred years ago, today it is fear of the planned Chinese market economy.
Or just the willingness to conquer this market, as Mercedes is doing, for example. With sales of more than 700,000 vehicles, it is the most important market for the Stuttgart company, according to Mr. Källenius. Still far ahead of the United States with just under 330,000 vehicles sold per year.
China is putting the brakes on steel on a massive scale
What the Europeans are currently ignoring, but is already being noticed and acknowledged abroad, is the fact that the Chinese are getting serious with their announcement and are cutting back on steel production.
So far, it seems to have primarily hit the steel producers in Inner Mongolia and Tangshan. Smaller, older and dirtier plants are being forced by the Chinese government to comply with the new environmental regulations. If they cannot, or if plants are not wanted, they are simply shut down and decommissioned. We have already reported on this in detail.
Recognition from direct neighbors and competitors
This is even being noticed by direct neighbors and competitors in the steel production sector. E.g. India. Where also immediately the possibilities are seen and likewise the global market situation is recognized. As an example, the trillion-dollar infrastructure project of U.S. President Joe Biden should be mentioned here. The Americans, with a much weaker steel industry than the Europeans, are not in a position to meet the demand for steel for this project on their own. The entire “NAFTA” area with the United States, Mexico and Canada will probably not be able to cover it. And that’s where innovative entrepreneurs see their opportunities.
Pragmatic Americans vs. fearful Europeans
Even without the new $2 trillion stimulus package, U.S. industry, which is running at full speed, is already screaming for steel and not getting it from domestic mills. The Section 232 tariffs are doing the rest to make the situation even worse. Why calls are mounting for an end to Section 232 in the US.
And in the end, Americans are pragmatic. If it really hurts their industry, they will act. Of course, this is disadvantageous for European steel producers. After all, they have lobbied their way into a closed market with the EU Safeguards and the Section 232 tariffs. After all, large parts of the US steel market have long since ceased to be in American hands, but on closer inspection are part of European groups.
Europeans continue to rely on closed markets and subsidies
If one now observes the European steel market in detail, at least according to the opinion of the press and politicians, the domestic steel industry must be on the verge of collapse. The local steel companies themselves do not seem to be in a position to do anything. Apart from Safeguard alone, there are more than 55 measures to protect the market from cheap foreign imports. And the manufacturers are still crying out for more. No measure seems to be enough. No taxpayer Euro sufficient to alleviate the plight of the corporations.
Like in the Dark Ages: Europeans hide behind thick walls
For decades, for example, the European steel industry has been unable to score points with innovation or competitiveness – instead hiding behind a wall on tariffs, anti-dumping measures, the quotas of the EU Safeguards and the latest prank: CBAM. The EU Commission’s Carbon Border Adjustment Mechanism.
Others can be forced. Only not the European industry.
The aim is to force global industry to finally become greener and achieve the ambitious European climate targets by 2050. At the EU’s external borders, levies on climate-damaging products are intended to ward off imports from dirty countries. It is currently not known how this administrative monster will be handled or whether it can be implemented in a WTO-compliant manner. But extensive subsidy measures have already been created for the European steel industry to compensate, if possible, all costs of EU producers. In Germany, for example, with 95% for domestic steel producers.
At the same time, however, initiatives are being launched against foreign industrial subsidies. The classic double standard of the Europeans again.
The EU Commission held hostage by its own steel producers
What they want to force the (Chinese) foreign countries to do in Europe, they are not capable of doing at home. Here, the steel industry, which is rotting away, is wrapped in absorbent cotton with EU subsidies and protected by a steel curtain on the outside.
Because the European steelmaker is not in a position to do this himself – even if he makes over 710% more profit in other countries than in previous years. Or he lets himself be celebrated abroad for his innovations paid for by the European taxpayer – which do not even exist yet and are not even beyond the planning phase. After all, there has been no money from the EU yet.
All of this is being done by the European Union, of course, under the guise of fair and level-playing trade. That no one has the intention to build a wall, one already did not believe the GDR. With what the Europeans are doing, one feels rather reminded of the Chinese wall, which was supposed to keep out the wild Mongolian hordes of horsemen.
China shows how it can be done
The Chinese government is in a position to force its steel producers to comply with environmental regulations. Or to take measures to reduce steel output. In return, they accept that jobs may unfortunately be lost in the process. But these jobs can easily be created elsewhere. All that is needed is a minimum of adaptability and the will to do so.
The European steel industry has not been able to do this for years. According to official OECD data, its nominal steel output has not changed since 2017. And is almost twice as high as that of the United States and still over 60 million tons higher than that of the entire former “NAFTA” or the new “USMCA”. In other words, the cumulative nominal output of the USA, Mexico and Canada together.
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