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COMMISSION DECISION No 1018/85/ECSC

of 19 April 1985

amending Decision No 2320/81/ECSC establishing Community rules for aids to the steel industry

THE COMMISSION OF THE EUROPEAN

COMMUNITIES,

Having regard to the Treaty establishing the European Coal and Steel Community, and in particular to the first and second paragraphs of Article 95 thereof,

Having consulted the Consultative Committee and with the unanimous assent of the Council,

Whereas:

In view of the restructuring of the Community steel industry Commission Decision No 2320/81/ECSC of 7 August 1981 (1) established Community rules for aids to the steel industry, and for that purpose Articles 2, 5 and 8 of this Decision have laid down deadlines for notifications, approvals and payments of aids, which deadlines have expired.

The results so far obtained or within sight of being obtained in the restructuring of the Community steel industry indicate that the objectives which the Community set itself in 1981 - to adjust Community production capacity better to demand and to improve the undertakings' structure so that by 1986 with market conditions having been put back on a healthier footing they would be financially viable without aid - will be achieved.

In 1981 the Commission based itself on forecasts of market trends and a macroeconomic outlook which have proved to be too optimistic. Consequently, in line with the general slowing of economic activity, the undertakings' sales in volume terms over the period 1981 to 1984 turned out to be lower than what was then perceived as a realistic estimate of the underlying trend.

From 1981 onwards there was also a sharp deterioration in prices, which often dropped below the level required to cover all production costs, the constant increase in which was only partially offset by the productivity gains resulting from the restructuring then in progress. The situation eventually forced the Commission to lay down minimum prices for hot and cold-rolled flat products and heavy sections (2). However, these minimum prices, even after they were raised for the first time in April 1984 (3), were still considerably below the target prices which the Commission had set in November 1981.

This market situation led to a deterioration in the financial position of undertakings which was the more serious the less competitive their structure.

At the very time when undertakings needed to carry out more radical restructuring than they had planned, sometimes requiring additional investment and imposing additional redundancy costs, such restructuring was slowed down and made more difficult by the general slackening of economic activity, which often prevented the establishment of new industry to offset the cutbacks in the steel industry in the areas most affected.

The plans for physical restructuring that have been submitted to the Commission indicate that, Community-wide, the reduction in capacity for hot-rolled products between 1980 and 1986 will be at least 30 million tonnes. This adjustment of supply to demand should put the restructured Community steel industry on a more viable basis, although a number of undertakings will be obliged by market forces to carry out additional restructuring.

The objective of viability can thus be maintained provided the abovementioned time limits set in Decision No 2320/81/ECSC are amended to allow the payment of aid for continued operation for a further year and the authorization of additional aid needed essentially because of the generally depressed level of economic activity in the Community between 1982 and 1984 and the slump in the steel market and the deterioration in undertakings' financial results which this caused.

The authorization of additional aid by the Commission must be subject to the criteria laid down in Article 2 of Decision No 2320/81/ECSC. Consequently, capacity reductions will be required in particular where they are necessary for ensuring the viability of the aided undertakings or where they do not affect trade patterns. Such reductions must not disturb current restructuring programmes in the course of implementation.

Additional aid may be authorized by the Commission only for carrying out financial restructuring to reduce debt-service charges to the level borne by undertakings that were profitable in 1984 or for covering costs occasioned by capacity reductions,

HAS ADOPTED THIS DECISION:

Article 1

Decision No 2320/81/ECSC is hereby amended as follows:

- in the fifth indent of Article 2 (1), '1 July 1983' is replaced by '1 August 1985',

- in the second indent of Article 5 (1), '31 December 1984' is replaced by '31 December 1985',

- in Article 8 (1), '30 September 1982' is replaced by '31 May 1985'.

Article 2

This Decision shall enter into force on the day of its publication in the Official Journal of the European Communities.

This Decision shall be binding in its entirety and directly applicable in all Member States.

Done in Brussels, 19 April 1985.

For the Commission

Peter SUTHERLAND

Member of the Commission

(1) OJ No L 228, 13. 8. 1981, p. 14.

(2) OJ No L 373, 31. 12. 1983, p. 1.

(3) OJ No L 61, 2. 3. 1984, p. 23.