18 December 2024 – How have EU steel makers really earned their money in recent years? A very interesting question in times of falling crude steel production in the EU and a simultaneous significant rise in CO2 certificate prices. Positive impetus expected from a third interest rate cut by the US Federal Reserve.
Positive impetus expected from third interest rate cut by the US FED
According to expert forecasts, the US Federal Reserve is likely to cut its key interest rate again. As in November, the Fed is expected to reduce it to a range of 4.25 to 4.50 per cent – the third rate cut this year. Under the leadership of Jerome Powell, it is thus continuing the course it began in September to further support the economy. It is particularly interesting to see how closed the monetary authorities see future steps. Regular interest rate forecasts (dot plot) provide additional guidance for markets and investors.
Steel or CO2 certificates – what is more profitable for EU steel makers?
It is no great secret that a well-known US car manufacturer owes a considerable part of its initial success to trading in surplus EU CO2 certificates. However, the fact that other companies in the European Union have also made good money in recent years from the deliberate and abundant distribution of surplus certificates is not so often mentioned.
What do EU steel makers earn with CO2 certificates?
So we had some fun and took a look at the hidden subsidies that European steel makers have received from the sale of these surplus EU CO2 certificates – without the European Union or the member states demanding anything in return.
The calculation is based on the data from the European Union Transaction Log (EUTL) of the EU Emissions Trading System (ETS) and the data for the production of pig iron and steel – in other words, basically the EU crude steel production. This data can be viewed here, for example, in a clear and graphical format. However, some of our calculations are based on assumptions and are speculative, but logically plausible and have been calculated in various scenarios.
EU ETS: 56.4 billion euros in hidden subsidies since 2005
Since the introduction of the EU ETS in 2005, EU steel makers have received free emission allowances totalling around 56.4 billion euros. Of these subsidies, 41.3 billion euros had to be returned as compensation for real emissions. The remaining 15.1 billion euros thus went directly into the steel manufacturers’ coffers.
Excess CO2 certificates for more than 3 billion euros in 2023 alone
Since 2021, EU ETS subsidies have risen massively due to the surplus allowances and drastically increased CO2 prices. Compared to what the EU steel makers earn with their actual product and the sharp fall in crude steel production in 2022 and 2023 on the one hand and the billions in income from the sale of surplus emission allowances on the other, it should be clear why the heads of the steel groups are so dissatisfied with the fade-out of the free allocation of allowances and the introduction of CBAM. After all, they have earned more from NON-produced steel in recent years than from their own product.
EU ETS and CBAM must not be a money-printing machine for steel makers
The vehement criticism of CBAM and the fading out of the free allocation of ETS certificates by EU steel makers forgets that CBAM is not a hidden measure to generate new subsidies for already over-subsidised steel producers, but an environmental protection measure. And the emissions trading system was always intended as a measure to reduce CO2 emissions and not as a money-printing machine for the European steel oligopoly.
If you think there is something fundamentally wrong with this theory, please contact us. Even if some of our calculations are based on speculative assumptions, we can still prove everything on the basis of generally accessible publications and our calculations.
Latest news:
- EU Safeguard Review on steel imports launched on 17 December
- Can the EU Safeguard measure on steel be tightened?
- ECB cuts key interest rates: inflation falls, economic growth to rise
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.
