The European steel industry is about to enter a long-term period of tax-payer-funded subsidisation, a mechanism that is highly questionable from an economic point of view, says German consultant Andreas Schneider.
Last Thursday, the European Commission gave the green light for German public funding for thyssenkrupp’s “tkH2Steel” project to the tune of €2 billion ($2.2 billion). It is the second such notice, following approval for Salzgitter’s SALCOS earlier this year. Similar applications are pending from ArcelorMittal and the Saarland mills.
In his blog “Stahlmarkt-Consult”, Schneider questions the diversification of funds for different companies and locations. He warns the supporting funds have the primary aim to advance technological progress, and that “it makes little sense to distribute such support parallel to different locations”.
Schneider anticipates European steel will become noticeably more expensive towards the end of the decade. This will hurt steelmakers’ customers, who are already wondering if today’s generous subsidies for mills will benefit buyers in any way. “There is very little discussion about who in the value chain will pay the bill for the transition,” Kallanish hears from Schneider. “Small and medium-sized steel fabricators will be facing increasing prices, which their customers will be hardly willing to pay,” he adds.
He points out that “it is totally unclear yet how the international competitiveness of steel-made products can survive.” This is especially the case since nobody can seriously forecast the availability of hydrogen, or its costs, o energy prices later this decade.
He warns that the cost of the transition will mean an additional push to drive steel-intensive industries to regions with lower costs. “And the subsidies will not help mills, if their customers run away from them,” Schneider concludes.
Christian Koehl, Germany