On Jan. 14, 2021, the EU filed a so-called panel request at the WTO against allegedly “illegal” Indonesian export restrictions on stainless steel raw materials. We take a closer look.
“Today, the EU has requested the establishment of a panel at the World Trade Organization (WTO) to seek the elimination of unlawful export restrictions imposed by Indonesia on raw materials necessary for the production of stainless steel, notably nickel ore and iron ore. The measures the EU is challenging concern an export ban on nickel ore and domestic processing requirements on nickel ore and iron ore. These measures illegally restrict access for EU steel producers to raw materials needed for stainless steel production.”
Source: europa.eu
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Legitimate demand or double standard? A comment
What at first appears to be a legitimate demand, however, reveals a fundamental double standard in the policies of Western nations. If one contrasts the Safeguard (Source) and anti-dumping measures (Source) of, say, the EU or other nations, a discrepancy opens.
“We do not want your equivalent or better, but cheaper products (steel or stainless steel are only a part of it). But your raw materials for production you have to give away without restrictions.”
Has the EU really outgrown the colonial era?
This feels like the “good” old colonial times, when raw materials were snatched from countries such as Indonesia. To fuel Europe’s industrial rise and make it possible in the first place. Europe and its former colonial powers were built on foreign raw materials.
Indonesia: Second largest producer of stainless steel and largest nickel producer
In recent years, Indonesia has become the second largest producer of stainless steel after China. It is understandable that the government in Jakarta wants to protect its strategic raw materials, which make a not insignificant contribution to economic output. That Indonesia has only introduced this export ban on nickel in order to effectively counter the safeguard and anti-dumping measures of other nations is also more than clear.
High personnel costs a major cost driver in the EU
It is also clear for European steel producers that they cannot compete with an average annual income of about 16,000 to 19,000 euros compared to the average Indonesian annual income of 3,600 euros (Source). We have not even talked about the German steelworker yet. On average, he earns 10 to 12 times more than his Indonesian colleague. In addition, the Asians have the most modern plants and are in no way inferior in quality to European (stainless) steel.
EU steel mills have only limited access to nickel
According to statista.com (Source), Indonesia is also the world’s largest nickel producer. With an output of 800k mt per year, followed by the Philippines with 420k mt and Russia with 270k mt. Only in 4th place does a Western country, Canada, appear with 180k mt. It is no wonder that the Europeans sound the alarm when they are denied access to a strategic raw material. The Asians are far away, and the EU have not been good friends with Russia for several years.
EU: Cheap raw materials yes. Cheap products no.
But this is also the point where it becomes problematic. The European Union and its stainless steel manufacturers want the cheap raw materials from Asia. There they gladly accept the low wages and working conditions. Complaints are even filed with the WTO, as is happening now. Because: The nickel must flow. There is no trace of protection of the domestic mining industry. It has been bankrupted for decades.
But the Europeans, led by the steel manufacturers and their lobby organization Eurofer, have massively restricted imports of stainless steel. And they never tire of emphasizing how badly the European steel industry is supposedly doing.
Demanding free trade on the one hand and restricting it on the other is the double standard. Wanting all the advantages but ignoring the disadvantages.
The market always decides in the end
The globalized market ultimately decides where to buy. And one important factor is simply always the price. When it comes to quality, the Asians are now ahead of the Europeans. Which is why, for example, the EU has lost almost its entire electronics and textile industry to Asia.
If you can’t compete on the global market, you go under. The Europeans have failed to position themselves competitively here. Old steel mills, high costs and little to no raw materials of their own. In addition, they are certainly still angry that they sold their technological advantage in steel production plant by plant to Asia in the 1980s and 1990s.
Focus on the wrong lobby
Steel and stainless steel are strategic commodities. Industry worldwide is built on these goods. But the EU only protects its own steel producers. And has completely forgotten the downstream industry.
The industries that are not being saved with billions of euros. The metal processing industry has been dependent on cheap steel imports for years. Simply to be able to compete and survive on the global market and maintain millions of jobs. Because, as already written, in terms of quality, the Europeans are barely ahead of the Asian countries, if at all.
Moreover, it should not be forgotten that all the major steel producers in the EU have long ceased to be national companies. Without exception, they are multinational megacorporations with widely ramified subsidiaries and plants worldwide. And they have no interest in a free and competitive market.
Dramatic situation on the EU steel market
If you look at the European steel market now, it’s easy to see where import restrictions have led us. Prices for steel and stainless steel have been exploding since fall 2020, and delivery times for European mills are already heading for fall 2021. There is hardly any material left to be had.
The competitiveness of the processing industry is suffering. And it is also being held back by safeguards and anti-dumping measures. In spring 2020, Eurofer was still calling for a 75% reduction in import quotas (Source). Besides the Corona pandemic, this would have been the death blow for the European industry. Because then no more stainless steel would have been available.
We at the Gerber Group have been trading in stainless steel worldwide for over 20 years. We are your experts when it comes to purchasing, import, logistics and services. Information is a vital part of this. Because only then can you and we make the right decisions. Do you have any questions? Contact us now.
Disclaimer: Many things here represent our opinion. Others are information from the Internet. We can therefore never claim to be correct or complete. And never base a business decision solely on the news you receive from us.
