Europe's steel lobby issues threat with global implications

Europe's steel lobby issues threat with global implications

15th January 2008

As already foreshadowed on MAC in our special coverage of the global steel industry last year, European steelmakers are dead set against any attempt to legislate reduction of their contribution to global greenhouse gas emissions (GGE) - which comprises up to 6% of the total burden.

Now, with a draft European Commission scheme to "cap and trade" carbon emissions the European steel federation, Eurofer, is claiming that new rules would see the industry forced to relocate overseas.

The prospect is not limited to steel: it will impact the cement industry (the second biggest single industrial contributor to GGE) and aluminium production. Already, as we noted last week, Rio Tinto has attacked the scheme. See :

<http://www.minesandcommunities.org/Action/press1813.htm>

If steel manufacturers were to shift from Europe, India would be an obvious "haven. Pressures applied against rural communities to surrender their land for new iron ore mines and steel plants would vastly increase - presaging further bloody scenarios, as already demonstrated at Kalingangar and Singur in India during 2006, and likely to follow Tata's penetration of Bangladesh. See:

<http://www.minesandcommunities.org/Action/press1810.htm>

Where will the European unions stand, or fall, on this issue? According to Eurofer, "some 370,000 jobs are under threat, many in areas of high unemployment such as southern Italy and former communist countries." The real threat derives from the bosses' abject failure to take measures to reduce its emissions across the board (or even in some cases to properly monitor them).

But will workers see it that way?

[Comment by Nostromo Research.]

Steel industry attacks Brussels plans

By Andrew Bounds in Brussels

Financial Times

13th January 2008

A steel and iron industry lobby group has accused bureaucrats of a "vindictive" campaign to chase the sector out of Europe to meet European Union climate change goals.

In a mounting war of words, Eurofer claimed that Jos Delbeke, who runs the EU scheme to cap and trade carbon emissions, admitted that the booming sector would have relocated offshore within a decade of a new law cutting greenhouse gas emissions coming into effect in 2013. Mr Delbeke denied he made the remark.

The clash comes as the EU's heavy industries mount a last-ditch lobbying offensive against a draft law that they claim would force many of them to leave the bloc.

"The effect would be catastrophic," said Gordon Moffat, secretary-general of Eurofer. "The way this is framed would give us no option but to leave. If we move elsewhere that does nothing to combat global warming." The industry favours benchmarks agreed globally.

Mr Moffat claims Mr Delbeke made the comments on the sidelines of a business event on climate change in Brussels in September. He has several witnesses, but there is no minute or recording of the conversation.

Nevertheless, the allegation highlights how high the stakes are for industries such as aluminium, chemicals, cement and paper.

On Friday, 13 business associations wrote to José Manuel Barroso, European Commission president, to ask him to amend the legislation, to be adopted on January 23.

They say that refusing free permits to pollute would increase costs that could not be passed on to customers. According to Commission research, prices would have to rise between 5 and 48 per cent. Aluminium production would leave Europe within a decade.

The influential groups have also been badgering national governments to force Brussels' hand.

Meanwhile, Indian steel magnate Lakshmi Mittal, Philippe Varin, chief executive of Corus, the Anglo-Dutch company, and Ekkehard Schulz, of Germany's ThyssenKrupp, have asked for a meeting with Mr Barroso next week.

A spokeswoman for Stavros Dimas, the environment commissioner drawing up the trading reform, said the industries were scaremongering.

"We are not destroying industries. It is about innovation and moving forward. Industries will have to adapt in the light of climate change and global competition," she said.

However, Mr Moffat countered: "This is not innovative - it is vindictive." He said the cut of 21 per cent in emission allocations on 2005 levels between 2013 and 2020 was a big enough restriction.

The European steel industry is the most efficient in the world. It uses half as much energy as China to produce a tonne of steel.

However, an expected carbon price of ?30 a tonne from 2013 would add ?55, or about 10 per cent, to steel prices, before the cost of higher power bills. Some 370,000 jobs are under threat, many in areas of high unemployment such as southern Italy and former communist countries.

The EU produced 210,000 tonnes last year of world output of about 1.3bn tonnes.Copyright The Financial Times Limited 2008