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EU steel producers shy away from entrepreneurial risk
EU steel producers shy away from entrepreneurial risk

18 July 2022 – EU steel producers are reluctant to take entrepreneurial risks if the many regulations and obstacles to the expansion of renewable energies within the EU are not immediately removed. Have the biggest CO2 emitters suddenly gone green? Asian base metals with gains and China recovering from lockdowns.

Asian base metals with gains

Asian base metals on the SHFE started the week on a positive note today, Monday. Nickel futures are up as much as 3.12%. Aluminium is up by up to 3.25%.
But tin (+5.45%), zinc (+4.06%), lead (+3.58%) and copper (+3.28%) are also up strongly. Iron ore, HRC futures and coking coal also rise significantly, by 2.18 – 3.34%.

China: Recovery from the Lockdowns

In the last quarterly month, Chinese industrial production recorded a 3.9% year-on-year growth spurt, which was particularly pronounced for carmakers and electronic equipment manufacturers as supply chain problems eased.

The surprisingly strong recovery in retail sales, which grew by 3.1 per cent, is also encouraging. With the unemployment rate falling to 5.5 per cent and 6.54 million new jobs in the first half of the year, Beijing is on track to meet its employment targets for 2022.

For the second half of the year, Deutsche Bank analysts expect a gradual recovery in production and demand, accompanied by further targeted fiscal stimulus, which should also have a positive impact on the valuations of Chinese equity companies.

EU steel producers shy away from entrepreneurial risk

For years, European steelmakers have shown no willingness to take entrepreneurial risk and are more concerned with the goodwill of their shareholders and investors. Even the green transformation before the outbreak of the Ukraine war was more a lukewarm conservation of existing production processes, fuelled by natural gas and paid for by the taxpayer.

Steel producers without natural gas

According to the will of the manufacturers, outdated German blast furnaces, for example, were to be converted with 8 billion euros of taxpayers‘ money by 2030 to a technology that actually had no significant benefit at the time of commissioning. Because these plants were to be fired with cheap natural gas from Russia – hydrogen, let alone green hydrogen, would never have been available in sufficient quantities by 2030 at the planned rate of expansion of the EU steel manufacturers.

In view of the natural gas crisis and the presumably destroyed relations with Russia for decades to come, the old natural gas plan has become obsolete. Also, with the upcoming CBAM regulation, the EU parliamentarians have made the import of dirty hydrogen and other energy sources much more expensive than originally lobbied by the steel associations.

Suddenly too many regulations and uncertainties

But now, in the face of rising natural gas costs and the plummeting share prices of EU steel producers, suddenly everything has to change. All of a sudden there are far too many regulations and pitfalls for the ailing steel mills.

How can it be that the construction of wind turbines takes up to seven years? Why do you have to fill out so many documents? Why are there so many uncertainties in planning and implementation? And why are EU citizens allowed to have a say in such matters? And why do we (the manufacturers) have to take entrepreneurial risks here? Sentences that used to be heard only from environmental NGOs and green political parties.

“Overly restrictive requirements, the absence of clear guarantees on the availability of renewable electricity and relevant dedicated infrastructure have the opposite effect of curtailing investments in production capacity and imposing administrative burdens. The signatories therefore propose the following changes to the draft acts, which are necessary to enable the market ramp-up and fast decarbonisation.”

Source: Joint statement of the EU industry: Pragmatic regulatory framework necessary for hydrogen market

Can’t do it all?

An indignant firework that EUROFER issued in its latest joint statement together with the biggest CO2 emitters and producers of fuels and energy sources in the EU.

Now, all of a sudden, everything that has been prevented (by the producers) in the last few years with millions of lobbying money or where nothing has been done is wrong. Everything is terribly over-regulated and the investments are not secured. Welcome to the reality of entrepreneurial activity.

And all of a sudden, the EU manufacturers can’t manage it all in the right time.

Why not earlier? There was natural gas after all!

Before the Russia crisis, the sun was shining brightly (except perhaps at ETS certificates and CBAM) and the plan was on track – natural gas was the fuel – but now the green transformation can’t happen fast enough. But only if it is ensured that everything is properly regulated and safe in the end. Because there is one thing that shareholders and investors hate even more than too small dividends: Uncertainty.

For it is precisely this kind of attitude that shows that board members are only trimmed to share prices. Shareholders have no desire to see real corporate development with highs and lows.

But this really has nothing to do with green transformation.

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