The supply chain downstream from steel products must also be supported to ensure EU indigenous manufacturing of steel-containing products critical not only for defence but also energy infrastructure.
As extensively as some EU distributors have invested into efficiency, meanwhile, costly energy and distorted economic conditions mean they cannot compete. Measures are therefore needed to ensure a level playing field for imports in Europe.
So said German service centre DM-Stahl managing director Marcus Fix at last week’s EUROMETAL Steel Trade Day in Düsseldorf attended by Kallanish.
Using the example of a German automotive parts manufacturer that uses domestic grain-oriented steel as feedstock, Fix said the final product price would be 15% cheaper if the input material is sourced from China and produced in Germany. It would be 30% cheaper if the final product was bought in China. If the parts are bought from China and assembled in a free trade zone in Serbia, it would be 1.3% cheaper still than importing the final product from China.
“Let’s look at the big transformers we need for electrical grids,” Fix said. “Is it our pure will that we will buy these transformers in the future from China, knowing that they are not only transforming the power, but that there is always IT infrastructure behind that? How big is the risk at that moment that somebody shuts off our electricity with a push on the button? It’s not only defence. It’s about infrastructure, critical infrastructure, and the resilience of our whole economy.”
Like mils, distributors have invested into improvements and downsized their workforces but costly energy makes competition difficult. Environmental and trade regulations have also drastically increased the bureaucratic burden on small firms that do not have the resources to keep up.
Market visibility is very unreliable, given the unpredictable US presidency, uncertain CBAM costs and a big question mark over how EU steel suppliers will remain competitive in export markets under CBAM. Therefore, although Fix is a fan of open trade, “we need to shut the door to create a level playing field”, he argued. Thanks to efficiency investments, “we have the fittest mode over the last decade, and we enter the ring and the opponent stands up, takes a Magnum 45 and shoots us. That’s the situation,” he added bluntly.
Fix said he understands mills’ complaints about unfair imports and competition but that distributors are also under pressure from customers who can – as things stand – still buy cheaper steel derivatives from abroad. “We are in an industrial death spiral,” he exclaimed. “If you lose the steel processors, we will not need steel production in Europe.”
He also criticised some mills for complaining about imports as mill-related steel service centres and distributors are sill importing considerable tonnages. “I think all the mills who are currently asking for help in the European Commission should be more consequent and more consistent in their behaviour in that respect,” he noted.
Another potential issue is that EU mills have previously been unwilling to sell commercial grade steel such as S235 as they have branded themselves premium, high-value-added suppliers. With imports about to become more restricted, “we will be facing very interesting discussions regarding the portfolio that we can buy”, he concluded.
