2 February 2023 – The EU’s steel producers are worth an extra 325 billion euros over the next ten years alone. At the same time, European steel buyers are being asked to pay for free ETS certificates. And already more demands are coming from EUROFER. Stainless steel surface BA soon scarce in Europe? And what is nickel doing?
Stainless steel surface BA soon in short supply in Europe?
According to reports from market participants, a German stainless steel rolling mill, which has significant capacities for BA surfaces in Europe, will soon reduce its output or even shut it down. If these reports are confirmed, this measure could very quickly lead to a severe shortage of flat-rolled stainless steels with the mirror finish.
Most recently, the European Commission, at the instigation of European stainless steel producers, had significantly restricted imports of stainless steel with higher-quality finishes from Taiwan, even ignoring its own anti-dumping rules. The BA finish is a common starting point for polishing higher quality finishes, such as No. 8 Super Mirror.
What is the nickel doing?
As expected, there was some profit taking in the market before yesterday’s U.S. Fed decision to raise interest rates by 25 basis points. As is often the case, nickel reacted with slight losses, but recovered very quickly.
The relevant nickel values on the LME were quoted at over $ 30,000 a tonne yesterday. At the same time, inventories on the European Commodity Exchange continue to decline and are already below the lows of November 2022.
The Asian markets have also reacted similarly calmly. Analysts there expect spot prices for nickel to continue to rise.
Commodity expectations for 2023 remain high
Last year, analysts at Goldman Sachs had already predicted a golden year for commodities. For aluminium, the investment bankers had recently even raised their expectations significantly, especially in view of the little-changed stocks, which still stand for tight availability.
Nickel increasingly jealously guarded?
Nickel producing countries, such as Indonesia and the Philippines, have focused even more on their dwindling and valuable nickel reserves. Underinvestment in many other countries is causing a massive logjam in necessary mining capacity expansions. And one of the most important nickel producers in Russia continues to consolidate, just managing to stay above 2017 production levels.
EUROFER: How much more, by the way? And who pays for it anyway?
When will those who form the backbone of the European economy actually be subsidised? The small and medium-sized enterprises whose voices are not so easily heard by the European Commission and who are the main actors in processing, production and consumption.
CBM, free ETS certificates, scrap export ban – greed knows no limits
No sooner have EUROFER and EU steel producers received CBAM, ETS certificates and scrap export bans than the EUROFER cry for more subsidies is already echoing through the political halls of the European Union.
325 billion euros as a gift
Yet steelmakers have just received a huge share of the free allocation of EU ETS allowances. 6.5 billion emission certificates with an average value of 50 euros thus account for more than 325 billion euros over a period of just 10 years. And the trend is upwards, as the price of emission allowances has more than tripled since the beginning of 2021. No wonder, then, that steelmakers and their lobbyists from the EUROFER are so eager to keep getting them – and they have succeeded.
And even in previous years, EU industry benefiting from free allocation has received more than €200 billion in free allowances.
EU steelmakers make customers pay for free allowances?
But it doesn’t stop there. For European steelmakers have been passing on the alleged cost of ETS expenses (i.e. those they received for free) since 2008 and, according to current calculations, have taken in between €12 to €16 billion extra. And who has paid for this? Exactly, the European steel buyer.
If you add it all up, the industries benefiting from the free ETS allocation have collected more than 550 billion euros in indirect subsidies. First and foremost the EU steel producers.
Steel emissions not reduced?
At the same time, manufacturers have failed to significantly reduce their emissions. Because they did not have to! In the period from 2014 to 2019, the emissions of the industries benefiting from the free allocation (including steel manufacturers) did not fall. Only in 2020 could a decrease be observed – and probably only because of the pandemic.
Free ETS allowances prevent change
Had the right incentives been in place, emissions in Europe could have been at the now targeted 2040 level as early as 2020. And further, as the recent EUROFER press release on demands for more subsidies as a counter to the US Inflation Reduction Act forcefully shows, EUROFER lobbyists are demanding even more money.
How much more money do they want?
This raises the legitimate question: How much more, Mr. Eggert? Because in the end it is the customers of the EUROFER members who have to pay. And whether they will still be willing to do so in the face of such behaviour remains to be seen. After all, you are making your customers pay double and triple for something that is given to you for free. Not to mention the environmental damage caused.
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