The EU’s Carbon Border Adjustment Mechanism (CBAM) was invented as a corrective measure to mill products made overseas at environmental standards below European mills.
But it still leaves the doors of the EU market wide open for fabricated and finished products made from such high-emission steels. Players from different levels of the European steel industry are calling for those doors to be closed. But some big consumers downstream are urging to keep them open.
In mid-June, representatives from steel distributors and processors met with the German Chamber of Commerce and Industry to draw attention to the competitive distortions caused by imported steel-based finished products.
The debate was headed by EUROMETAL president Alexander Julius, who had strongly argued in favour of downstream products being encompassed by CBAM at Kallanish’s Europe Steel Markets conference in Vienna.
With him at the commerce chamber meeting were Michael Waasner of Gebr. Waasner, Domenico Marino of Knauf Interfer, Jan Hobertof Hettich Management Service, and well as representatives of the German economy ministry.
Among the issues discussed were clearer rules on origin and traceability, the examination of “melt and pour” approaches, and stronger consideration of downstream steel products in existing and future trade-policy instruments.
The complex of problems has been emphasised by Eurometal since last year. At its Steel Trade Day in Düsseldorf in December, Markus Fix of German service centre DM-Stahl elaborated how the supply chain downstream must also be supported to ensure EU indigenous manufacturing of steel-containing products. Especially since they can be crucial for defence and energy infrastructure.
A question of safety
“Let’s look at the big transformers we need for electrical grids,” Fix said. “When buying them from China, we also adopt the 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.”
The many fabricators further down the chain are mainly small and medium enterprises (SMEs) which are fragmented, and easily overlooked. This puts them at a disadvantage against the mills, which traditionally have a strong lobby at EU level. But, as EUROMETAL has pointed out repeatedly, protection for mills makes little sense if their domestic customers remain under threat.
Domestic sheet formers, forges, makers of fasteners and springs and other components are increasingly pushed out of competition by pressure from Asia, their federation WSM keeps pointing out.
An expansion of EU measures could therefore motivate manufacturers of big machinery and plants to cooperate more with European fabricators, making the development of components a joint effort, and thereby strengthening domestic value chains.
Fabricators versus plant-manufacturers
However, it is precisely those makers of machinery and plants that have issued a veto against the ambitions of the distributors and fabricators.
Their common voice, Germany’s association for mechanical engineering, VDMA, has warned that an expansion of CBAM would impose extra financial burden on the crisis-ridden machinery builders. “Extending CBAM would drive up costs for industry and increase the pressure on companies that are already under severe strain,” says VDMA executive director Thilo Brodtmann.
The diverging argumentation opens a critical gap between two groups in the value chain that overlap to a large degree, and which traditionally share the same view on economic and trade issues. In the current case, VDMA’s interests appear closer to those of the automotive industry. Carmakers are major beneficiaries of parts made outside the European Union.
The crucial point of VDMA’s argumentation is the definition of products “not made within the European Union”. If certain parts and components are similar to imported parts, machinery builders ought to consider giving preference to a “buy European” approach.
EUROMETAL stages the “European convoy for industrial competitiveness” on 7 September in Brussels
Author: Christian Koehl
