EU Steel 2021: used by the lobby, not supported by reality
EU Steel 2021: used by the lobby, not supported by reality

On May 5, 2021, the European Commission (EC) published an update to its 2020 New Industrial Strategy. Under the motto: “Building a stronger Single Market for Europe’s recovery”, the Commission wants to lead Europe out of the crisis.

Surprisingly, hidden in the bowels of this strategy update was a Commission Staff Working Document (CSWD) entitled “Towards competitive and clean European steel“. Which, of course, we couldn’t help but take apart for you.

An update, but not for EU steel

With a strategy update, you and we naturally first assume that it is an adjustment to a current situation. Unfortunately, nothing came of it. The CSWD “Towards competitive and clean European Steel” is a complete failure in this respect. The EC is not only using outdated figures from 2019 to fix the future of EU steel producers and steel CONSUMERS. The EC actually uses predictions from lobby groups from 2020, which were already outdated at the time of their appearance, but in no way reflect the reality of 2021.

With whom was the future of EU steel decided?

With whom was the future of EU steel consumers decided, you may ask? Not with the steel consumers. But with the steel producers and the trade union associations in the EU. You, as an entrepreneur or employee in the metalworking industry, were not taken into account when the Commission Staff Working Document “Towards competitive and clean European steel” was drawn up. In our eyes, a bottomless impertinence.

In this series of articles, we will look at various aspects of the CSWD and examine them in detail for you.

2019: Finally a bad year for EU steelmakers

Why do EC and EUROFER always focus on this ominous year 2019? People like to reference it again and again – no matter if it’s the top brass of the EU or steel lobbyists or even steel producers.

Moral justification for condemning global steel overcapacity

In the end, it’s quite simple: 2019 was one of the worst years for EU steel producers in a long time. And to finally have a moral justification for condemning global steel overcapacity, 2019 came just in time for the protectionists.

EU Steel 2010: Production jumps by 34 million tons

After EU steelmakers had seen a whopping jump in production of almost 25% or 34 million tons of crude steel from 2009 to 2010 (from 139 to 173 million tons – Source), little changed in these figures until the end of 2018. It was only in the economically poor year of 2019 that total production by EU steelmakers fell by 6.5% compared with 2012, or by around 11 million tons.

2018: The year of Section 232 Tariffs on steel and aluminum

In its Staff Working Document, the EC thus uses data from 2019 as a basis, which cannot actually be taken as representative of the previous decade. If we take into account that the United States introduced the Section 232 Tariffs on steel and aluminum in 2018, 50% of the decline in European steel producers is already explained. These had previously exported 5 million tons of steel per year from the EU to the United States.

2019: Definitive EU Safeguard Measures

The EU has responded to the United States and, for its part, enacted the definitive EU Safeguard measures in 2019. Which should protect domestic steelmakers.

Without steel imports, there is a shortage of 40 million tons of steel

Now, taking the figures from the CSWD, according to the EC, we have had steel production of 150 million tons in the EU in 2019. In addition, the EC assumes that about 30 million tons have been exported. In addition, we had a real total consumption of steel (according to EUROFER) of 158 million tons in 2019. If we are not mistaken, there are a few million tons of steel missing here that Europeans did not produce themselves or preferred to ship abroad rather than sell it in the European Single Market. According to the EC, this is about 40 million tons of steel that had to be imported in 2019.

The Corona pandemic changed everything

So far, so good. Then came the Corona pandemic and our world totally changed. But not for the European Commission. It still bases its CSWD on figures that either come from 2019 or were predicted by steel associations (these are the political organizations of steel producers!) during 2020.

Why not calculate with real numbers?

It’s May 2021, meanwhile real numbers are available for 2020. And people in the European Commission are still stuck on data from 2019 and speculative predictions for 2020 from EU steel producers?

2019: the perfect doomsday scenario?

Is that laziness or on purpose? Unfortunately, we suspect intent behind it. With these dramatic figures from the bad steel year 2019 and the doomsday scenario that EUROFER had drawn for its member companies in 2020, it is easier to justify, for example, extending the Safeguard measures or pushing through the Carbon Border Adjustment Mechanism. In this context, the economic miracle figures of the domestic downstream industry do not come in very handy – especially since this industry has managed to emerge from the “Armageddon” without the intervention of the European Union.

Downstream industry achieves economic miracle without EU aid

This economic miracle in the metal processing downstream industry is now threatened by the efforts of the EU steel manufacturers and their lobby organization EUROFER to artificially prolong the shortage of steel and stainless steel. Because where is scarcity, prices, margins, and profits rise. And you, as steel consumers, know this as well as we do. And the rising prices for steel and stainless steel are not even the biggest problem. There is simply no more steel to be had.

EC: Why so obsessed with 2019?

But back to why the EC and EUROFER are so keen to point to 2019. For that, however, let’s first take a look at the figures for 2020, which EU officials and lobbyists are just about to give a wide berth to, or are chopping them up to the point where they are almost impossible to interpret.

We therefore did a little research (about 1 hour – the EC could have done that too) and then had the current data for 2020 at hand for you.

EU steel producers export even in crisis year 2020

In 2020, due to the Corona pandemic, EU steel mills produced only about 132 million tons of steel. Of that, 26 million tons went directly into exports. And 136 million tons were also consumed by industry. This means that once again there is a shortfall of 30 million tons of steel which in the end had to be imported. Strictly speaking, if you take the EUROFER figures as a basis and do not question the 18% drop compared to 2019, it was around 32.8 million tons that were imported into the EU.

Why not use figures from 2010 to 2018?

You are surely asking yourself now why the figures from 2019 are always referred to and one does not use figures from 2010 to 2018. We had already alluded to this above. It was not until 2019 that the European Commission was able to successfully claim a “success”, at least in terms of reducing the actual production volume of steel. For in 2018, after all, one was still 11 million tons higher than in 2012 and had only made a leap of 24% to 173 million tons per year in 2009. And here again, the figures from 2020 are not representative, because they simply happened to everyone (except the Chinese). We know and love it: The European double standard. Or we calculate the world as we like it.

Europeans build up steel capacities

And if you look at the OECD’s figures on nominal steel production capacity alone, the Europeans were still building nominal capacity in the period from 2000 to 2010 and have been stagnating at a high level in terms of reduction since 2017. It was not until 2020 that the EU managed to reduce just under 3 million tons after three years of standstill. Which had actually already been shut down by ArcelorMittal since 2018 – but what are we boring you with details. Of course, you can now add out the 12 million tons of nominal production capacity for steel in the United Kingdom. But please, the Brexit was not a real capacity reduction for steel.

Have the Europeans reduced excess capacity?

The EC writes itself into the description of the actual situation in Europe that the EU would have massively reduced capacities since the 1970s and strictly regulated by law. This is simply not true when broken down to the data. It is possible that the nominal production volume was higher before 2000. But even in the 1980s to 1990s, the countries of the EU at that time, plus the new member states, were still operating at the level of 2009.

Perhaps someone can give us a counter-calculation?

The EC works in the past and ignores the present

A current situation is not evident in the CSWD “Towards competitive and clean European steel”. It does not depict the reality that the European Union and its steel consumers will face in 2021. The second year in the pandemic. Where steel prices have skyrocketed globally since 2020 and have already increased by more than 130% in the EU. Not to mention the United States. Steel prices there have risen by over 260%.

China massively rebuilds its steel capacity

A year in which the world’s largest steel producer, China, is retreating into its own market and surprisingly eliminating its export rebates (and incidentally simply shutting down millions of tons of nominal production capacity). And now has even gone further and issued a decree that up to 30% of production capacity must be cut. In addition, new taxes and duties on imports and exports for steel products are being planned.

EU steel producers unable or unwilling to meet demand

Where EU steelmakers no longer even serve the spot market and focus only on their major customers – because they can’t or don’t want to keep up with production. And where the EU’s external borders have been closed with quotas and tariffs.

Steel producers post healthy profits

A year in which, despite rapidly rising raw material prices, the margins of EU steel producers have increased by 300%. And this with an iron ore price of well over $200 per ton and steel scrap prices approaching the $500 per ton mark.

EU Downstream industry is ignored

A year in which the desperate European downstream industry turns to the European Commission for help and is not listened to. Where the EC has the courage to publish a document that seems to come from an ivory tower. Because this CSWD has nothing to do with reality anymore.

Is the European Commission working with the wrong people?

It is nice that the EC has found a year between 1970 and 2020 in which its own steel producers apparently really did produce less steel – but that is not reality. The EC could have avoided this embarrassment in the introduction to the Commission Staff Working Document if it had talked to the metalworking downstream industry.

But the EC did conduct a social dialogue – unfortunately only with the steel producers and the unions themselves. Therefore, it is no longer surprising that more than 50% of the sources on the first pages of the CSWD refer to associations of steel producers or the steel producers themselves. It is a shame that the efforts of the EU economy to extricate itself from the Corona crisis are being trampled underfoot in such a way.

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