ARCHIVES HISTORIQUES 
DE LA COMMISSION 
 
 
 
COLLECTION RELIEE DES 
DOCUMENTS "COM" 
 
 
 
 
COM (83) 239 
 
 
 
Vol. 1983/0 099 
  
 
Disclaimer  
Conformém ent au règlement (CEE, Euratom) n° 354/83 du Conseil du 1er février 1983 
concernant l'ouverture au public des archives historiques de la Communauté économique 
européenne et de la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983, 
p. 1), tel que modifié par le règlement (CE, Euratom) n° 1700/2003 du 22 septembre 2003 
(JO L 243 du 27.9.2003, p. 1), ce dossier est ouvert au public. Le cas échéant, les documents 
classifiés présents dans ce dossier ont été déclassifiés conformément à l'article 5 dudit 
règlem ent. 
In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983 
concerning the opening to the public of the historical archives of the European Econom ic 
Communit y and the European Atom ic Energy Communit y (OJ L 43, 15.2.1983, p. 1), as 
amended by Regulation (EC, Euratom) No 1700/2003 of 22 September 2003 (OJ L 243, 
27.9.2003, p. 1), t his file is open to the public. Where necessary, classified documents in this 
file have been declassified in conformity with Article 5 of the aforementioned regulation.  
In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom  1. 
Februa r 1983 über die Freigabe der historischen Archive der Europäischen  
Wirtschaftsgemeinschaft und der Europäischen Atomgem einschaft (ABI. L 43 vom  15.2.1983,  
S. 1), geändert durch die Verordnung (EG, Euratom) Nr. 1700/2003 vom 22. Septem ber 2003  
(ABI. L 243 v om 27.9.2003, S. 1), ist diese Datei der Öffentlichkeit zugänglich. Soweit  
erforderlich, wurden die Verschlusssachen in dieser Datei in Übereinstimmung mit Artikel 5  
der genannten Verordnung freigegeben.  
COMMISSION  OF THE EUROPEAN  COMMUNITIES 
COM(83)  239 final 
Brussels, 22 april  1983 
GENERAL OBJECTIVES  STEEL 1985 
(Communication from the Commission to the  Council) 
COM(83)  239 final 

COMMISSION 
OF THE Brussels, 
EUROPEAN COMMUNITIES 
GENERAL  OBJECTIVES  STEEL 1985 
SUMMARY 
I. A REALISTIC  AND POSITIVE  POLICY  TO REVITALIZE  THE STEEL INDUSTRY 
1. Realistic  and positive general objectives 
2. An order of priority  commensurate  with requirements 
3. A wider  political  framework 
4. The structural  nature of the  crisis 
5. Measures  to organize  the market:  an essential  transitional  stage to 
give the industry  the resources it  needs for restructuring 
a) Good results  but potential  risks 
b) The criteria  for progressive  development  of the  Community  anti-
crisis measures 
6. Requirements  and criteria  for the restructuring policy 
a) Criteria  for the evaluation  of restructuring plans 
b) Contradictions  to be.  avoided  if the  overall  effort is to  succeed 
c.) An effort  from which no-one  is automatically  excluded 
7. A revival  strategy  in place of a defensive policy 
a) Action  on key  factors 
b) Increasing  the impact of Community  policies I 
1 
1 
2 
5 
6 
7 
7 
8 
9 
9 
10 
12 
13 
13 
14 
II. ECONOMIC TERMS OF  REFERENCE:  A SOMBRE OUTLOOK  
1. A difficult  macro-economic  background 
2. Slower  development  in steel-using sectors 
3. Declining  product  consumption  in the  Community 
4. The world market  and foreign trade:  slower  development  rates 
5. Production 
a) Finished  products 
b) Crude  steel balance 
c) Development  of mini-mills . 16 
16 
17 
20 
22 
28 
28 
29 
32 

- 2 -
6. Raw materials  and scrap 
a) Raw materials 
b) Scrap 
7. Energy . 
a) Energy consumption in the  blast furnace 
b) Blast-furnace  energy  supplies 
c) Energy  conservation 
8. Excessive  imbalance between  supply  and demand 
a) The main causes of the imbalance 
b) Wider adverse  effects 
9. Steel  research  and development 38 
38 
39 
40 
40 
41 
41 
41 
41 
42 
47 
Annex. 

- I 
SUMMARY 
The ECSC Treaty confers  on the  Commission  the task of defining  the General 
Objectives  which  provide  guidance  on the  development  of the  steel industry  in 
the Community.  This guidance  takes account  of the  situation  in the  internal 
market,  the state of the  production  installations,  constraints  imposed  by the 
economic  situation  and the  pressure  of international  competition. 
i 
The excess  of supply over  demand,  pushing  up costs and causing prices 
to plunge  below the break-even  point in many companies,  and the  cut-throat 
competition  on export  markets  have seriously  eroded  the financial  viability 
of the European  steel industry.  As a  result  the Commission  has had to  take 
a number of  measures  designed both  to prevent  the situation  deteriorating 
into a state of anarchy  that could  nullify  the very concept  of a common  market 
(and which is the  reason behind  the measures  taken pursuant  to Article  58 
of the ECSC  Treaty),  and to set in  place the mechanisms  to adapt the structure 
of the industry  to the new  situation. 
The strategy  to be  followed  in this process  of change  will of course have to be 
realistic  but the  current  weakness  of the  industry also  demands a  positive 
orientation. 
It will be based on : 
- an  analysis  of the  foreseeable trends  in demand  from the main user sectors, 
in international  competition  and in  production techniques,  which are of 
vital importance  in this context; 
- examination  of the  factors that  will help restore  economic  efficiency 
and financial  viability  to- the companies  involved. 
The structural  nature  of the  crisis is obvious  from the foreseeable  development 
up to 1985 of the  factors governing  the industry's  activity.  Beyond  1985 
forecasting  becomes more  difficult  as the  macro-economic  factors that  can play 
an important  role are not  sufficiently  well defined  to allow  their impact  on 
the steel  industry  to be  properly assessed;  however,  it already  seems  clear 
that the situation  will not be  fundamentally  different  from that foreseen 
for 1985. 
The foreseeable balance  between  supply  and demand is  still very unsatisfactory; 
despite the rationalization  that has already taken place,  and, also, because  of 
the improvements  made, and needed,  in productivity,  the, surplus capacity already 
evident in 1980  will be even greater  in 1985, if the  present stagnation  in demand 
continues,  if it is not  substantially  reduced  by the  policy of restructuring  and 
the application  of the aid  code. 

- II -
It would amount  to about  29% of crude  steel  production capacity, and  about  33 %  
of finished  product  capacity, figures  which  are obviously  unacceptable  if the 
industry  is to be economically viable and  which  certainly  cannot  be offset by 
measures  to control the  market. 
The combination  of low  economic  development  and the continuing decline in 
specific  steel consumption  means.that  even the most cautious forecasts  made up 
to now have to be corrected  downwards.  In, 1985, foreseeable  consumption  of  
finished  products  in the  Community  is likely  to be around  92 million  tonnes 
For external trade, the positive net  balance  of trade in  ECSC finished  products  
is likely  to remain  close to  12 million  tonnes. 
Whether  expressed  in terms  of quality or price of- the  products  passing  down the 
chain of  industrial  production, or in  terms  of the  i*elative  yield  on the 
capital  invested in plant and production, the persistance of  inefficiency 
in one industrial  sector  will extend  its influence  over other sectors 
hindering  their  ability  to adapt  and thus reducing the  chances  of a general 
recovery. 
A true balance  can be achieved only by taking  parallel  and interdependent 
action on the structures of the industry, in two  ways:  firstly,  modernization and 
rationalization  to increase productivity and increases in the production of higher 
value products, and secondly,  stopping  of marginal plant so as to mobilize 
capital  and eliminate the surplus supply that has repercussions on the  whole 
of the industry. 
Although  definite  progress has  been made in the way of productivity and 
modernization (1),  this cannot  bear its full fruit  unless the closing  down of 
marginal plant is carried farther  than it has  been up to the present, or 
even as planned  in the restructuring and  redevelopment  projects currently 
being drawn  up by the  companies. 
The stimulation of  this effort  is based on the  ways and means  offered by 
the ECSC Treaty to give new  impetus  to an industry that is  vital to the 
(1) Communication  from the Commission  to the Council on the  steel  restructuring 
policies,  COM (81) 67  final  of 25  February  1981. 

- III -
in the cbntex-t'of  an integrated  internal  market. 
Community,/^In  addition  the task assigned  by the EEC  Treaty  calls for tighter 
coordination  between  the steel policies  and the  other common  policies  and 
activities.  The  latter  have focused  more and more on the  need to continue 
the structural  adjustment  to the new  economic  and industrial  context,  as 
re-affirmed  in the  Commission's  proposals  for the  establishment  of an 
industrial  strategy  at a Community  level (1). 
The Commission  must then see that discipline  is maintained  to encourage  a 
sense of common  purpose  directed  not towards  conservation  but towards 
revitalizing  the system. 
To this end,  competiti vi ty is  the main indicator  in evaluating  "the 
most rational  distribution  of production  at the  highest possible  level of 
productivity"  in accordance  with Article  2 of the  ECSC Treaty.  It is by 
concentrating  resources  on production strong points that  the essential 
improvement  in the  average  competitiveness  of the  Community  steel industry 
can be attained. 
This improvement  must be measured  against  realistic  references  in terms of 
costs and prices.  Over and above the Levels,  especially  of prices, 
set in support  of the  restructuring  effort,  it is  necessary  to take 
into account  the reference  levels  established  by the  most efficient  competitors. 
A new policy  must be established  around  .the/fee  economic  references: 
firstly by the  companies  which must have the strength  of purpose  to 
bring about the convergence  of strategies,  towards  an adjustment  to real 
demand; 
by governments,  whose  intervention  must be in  support of the  restructuring 
effort, as they cannot  afford  to pour cash into supporting  a fundamental 
structural  inefficiency; 
_ focussing all  the instruments  of Community  cohesion  (crisis  measures, 
aid code,  financing,  commercial  policy,  regional  and social  measures) 
more closely  on objectives better  adapted  to the  needs  of the  present  situation 
by the governments  and the  Community  to implement  reconversion plans  which 
ai*£ indispensible  for employment  and regional  development. 
In the Commission's  view, it is  under these conditions that  the possible synergies 
between the different  parties involved  can allow a defensive  sectoral  attitude  to 
be trans"fot"mec|  into  a steel strategy  commensurate  with the challanges facing it. 
(1) COM (81) 639 final/2 of 29  October  1981. 

- 1 -
I. A REALISTIC  AND POSITIVE  POLICY  TO REVITALIZE  THE STEEL  INDUSTRY 
1. Realistic  and positive general objectives 
General  objectives for steel  based  on a forecast of  falling  demand  might  well 
be viewed  as pessimistic and negative. 
This impression  must be cpuntered  by emphasizing  the nature  and line of 
approach  of this document,  which  is intended  to be both  realistic  and purposeful. 
To be realistic , any analysis of the current situation and future  prospects 
must take into account: 
- general and  economic  constraints and technical  progress  in the industry, 
which set the  context  for adaptation of the structure of the industry; 
- the  interdependence  of the various  industrial  sectors/which indicates 
the lines to be followed in  fitting  the steel policy into an  industrial 
strategy; 
- the  urgency  of the  problems,  which make an order  of priority  essential; 
- the  scope  of the questions,  which  requires the  range  of action to be 
extended. 
In the turbulent and uncertain  economic  environment  of the  1980s,  it is not 
possible to be  both  realistic  and to  produce  at the  same time highly detailed 
forecasts looking far  ahead,  and valid  for'several years. 
Rather,  experience  suggests  that it is better to  make fundamental  qualitative 
appraisals,  which  are likely  to remain  valid over the years, but  which  themselves 
are based  on quantitative  analyses  which  are progressively  reviewed.  In any 
event, sectoral forecasts obtained in  this way can give no  more than the 
general trend of the  economic  factors. This  will not be  sufficient  and will have 
to be backed  up by a  much more detailed and specific analysis,  which must be 
the responsibility of the  company. 
Against  this background,  the general objectives  will therefore be  realistic  to 
the extent  that,  without  cluttering up the analysis with only  seemingly  useful 
details,  they throw  sufficient  light  on the general  circumstances  that constrain 
the activities  of the various parties  concerned. 
With such  a gloomy  outlook, a policy of voluntary co-operation is  needed  to pul the 
industry  back on a sound  footing, as the solution to its  difficulties  cannot  come fr° n 

- 2 -
outside. This policy  must take effect at several levels in  order  to: 
go beyond  the restructuring effort already  accomplished,  which  is 
obviously  inadequate; 
ensure that this action is consistent with a  Community  spirit,  so that 
any temptation  to restructure at the  expense  of breaking up the  common 
market  is resisted; 
give further stimulus to reconversion projects,  which  are vital  features 
of a positive strategy  towards  a better'allocation of resources. 
2. An order  of priority  commensurate  with requirements 
The realistic  and positive  approach  adopted  here means  that, in  comparison  to 
earlier documents,  the structure and  content  of these  general objectives  must 
be modified in the  light  of the  priorities  identified. 
The intolerable structural  imbalance  must be rectified  in the  near future ... 
The Community's  political  commitment  on restructuring refers to the  year 1985, 
by which time the steel industry  must be viable  under normal  market  conditions. 
Between  1980 and 1985, overall steel  demand  is likely  to decline  somewhat (i) .the .slightL 
higher activity  in the various sectors  being more than offset by a reduction in 
specific  consumption  in the  Community,  while the_positive  balance  of external 
trade will also fluctuate. 
On the supply  side, the  companies  declared projects indicate that production 
capacities  will remain  more or less constant, as the plant closures  announced 
are offset by productivity gains. 
(1) on the  relatively  optimistic  assumption  of a GNP  annual  average  growth  of 
1,9 % 

- 3 -
In 1985 surplus  finished  product capacity  would then be in the re '.on of 5Q  million 
tonnes,  about 33% of  installed  capacity. This  structural  imbalance  is all the more 
indefensible  in that it first made its appearance  in 1975:  its continuation over 
such a long period  has tied up resources  in a dangerous  and costly manner: 
- at  sectoral  level,  because  it has an  adverse  effect  on the  conditions 
under which the steel industry operates, thus impairing competitiveness; 
- at  general  level,  because,  it hampers more or  less directly  adjustments  in 
other industrial  sectors,  in particular  by depriving  them of the  capital 
they need. 
That is why  this analysis  and these proposals  for action give  priority  to the 
correction  of the  structural  imbalance. 
- ... in the  face of international  competition that  will become  fiercer  
throughout  the decade ... 
After 1985 forecasting  becomes  less precise,  but is no  less essential. 
The lack  of long-term references  demonstrates  the difficulty  of economic 
forecasting;  but in  this context,  the best qualified  observers nevertheless 
consider  it reasonable  to project  the underlying trends evident today  for the 
period up to 1990. 
Although  this estimation  cannot  go into the same  degree  of forecasting  detail as for 
1985, it nevertheless indicates  for 1990 a low  growth  in steel demand and an 
increase  in the  pressure  of competition throughout  the world : the  ruling  prices  in 
the European  market  will tend inevitably  to reflect  the decline  in world prices, 
which in term will be based on the  costs of the most  efficient  world producers. 
The standing  and growth  of each steel industry  will therefore  depend  even more on 
its competitiveness. 
In seeking  a structural  balance  between  supply  and demand,  therefore, care  must be 
taken to improve  the competitiveness  of all the factors  involved. 
An analysis  of the key  factors  at operational  and strategic  level can identify  the 
elements  which,  once the surplus supply  is mopped Up,  will determine  the competitive 
position  of the  steel industry  for the  rest of the  decade. 

- A -
There are many such features and  they can be  combined  into three categories: 
access to markets; 
management  of resources; 
socio-economic  environment. 
It is essential to step up action at, all three  levels,  as the  Community 
industry is not at the  moment  managing  to attain a  predominant  position in 
any one of  them. 
... the strategic  importance  of Community  cohesion  is bound to increase. 
Levels of competitiveness are not of  course  determined  solely by the  mechanics 
of free competition, since several factors of a  commercial  and even  political 
nature come into play. It is  fair to say that  this will probably  still be 
true for the steel industry in the  1980s, 
As its other great  rivals  close  ranks  and new  producers  take the offensive. 
Community  cohesion  based  on internal  market  becomes  of even greater strategic 
importance  and political  significance. 
The size of the internal  market  remains  a vital comparative  advantage,  while 
the trade negotiations and  industrial  strategies required to restimulate the 
economy  call for a minimum  critical  mass well beyond  the reach  of any individual 
Member State. 
What is more,  the high  degree  of interdependence  of the national steel 
industries  and user sectors in the  Community  is conducive  to the  spread  of 
inefficiency  as much as the benefits of reorganization. 
Consequently  these  general objectives deal with the  Community  as a whole  and 
contain no details for individual  Member  States. 

- 5 -
This is to  avoid drawing  attention  to questions  which,  without  denying  their 
importance  or sensitivity,  are of  minor status  compared  to the  crucial 
problem  of the  structural  crisis in the  common  market-  Until  that is 
rectified,  all producers  and users  will suffer  because  the distorting  factors 
have a snowball  effect, jeopardizing  the ability  to devise  efficient  recovery 
strategies, 
3. A wider  political  framework  , 
In view of the  scope of the  challenge  to be met and  tie vital role that 
Community  cohesion  can play in streamlining  the industry,  it might be useful 
to recall  the foundations  of the Communi .y  policy. 
The institutional  basis for the  steel policy  is of  course  the ECSC  Treaty, 
the basic  approach  of which is surprisingly  up to date considering that 
it was designed  with a view to the  growth of the  industry-  The Treaty provides 
that the Commission  should also react  in times of crisis or impending  crisis. 
Fundamentally  the Treaty advocates  the most rational  distribution  of production  at 
the highest possible  level of productivity  ; and forbids  unilateral  subsidies 
being granted  by member  states:  this might  usefully  be borne in mind at a 
time when the  industry's  difficulties  are giving  rise to over-protective 
and hidebound  attitudes. 
Nor are these attitudes  justified  under the EEC  Treaty,  on the  basis of which 
the Commission  aims to implement  a Community  industrial  strategy  (1) for 
adjustment  to the new  econom-ic  conditions. 
The strengthening  of the  links between  the steel policy  and other industrial 
policies  is necessary  for two  reasons  : 
- to  ensure  that Community  action  in economic  matters  remains  consistent; 
to open up a wider range of action for the  revival  of the  steel industry. 
(1) C0MC81) 639  final/2  of 29  October  1981: 

- 6 -
4u.The structural  nature  of the  crisis 
Although  the recession  coming  on top of structural decline has  caused  difficulties 
for all steel  producers  in the  industrialized  countries, the  Community  industry 
as a whole  has reacted less  effectively  than its rivals  : 
the Japanese  industry,  taken  by surprise by the  1973-1974  crisis i"i  the 
middle of a major expansion  programme,  unhesitatingly  embarked  on a 
cost-cutting  and technical  improvement  campaign  which  allowed it to  expand 
its markets  as a result of increased competitiveness- - Nevertheless at 
the present  time the Japanese  government  has declared its industry to be in 
a state of  crises; 
the American  industry, less  advanced  technologically but with  sound 
financial  backing, started to  shut down plant in order to  keep capacity 
in line with demand,  but without  automatically seeking to  improve 
productivity  at the  moment;  however  its capacity  utilisation  has fallen  to 
40% no*/. 
The Community  steel industry,  which  was older, less well-located and  more 
scattered  than in Japan,  was unable  to adapt  fast enough  to trends in  demand 
in both quantitative and qualitative  terms.  Stagnating steel  output  in the 
Community,  combined  with slack internal  consumption  and an industry not 
competitive  enough  to increase  export  s, would not in  themselves  have brought 
about the structural  imbalance  if at the  same time production capacity had not 
increased substantially since 1974, as a result either of  specific  decisions 
on capacity or  advances  in technical productivity. 
The structural  rigidities  in the  member  7countries  aggravated  the impact  of 
.sur— plus capacity. Their  . slowness  to adapt  led to a competitive lag that 
burdened  profitability  and caused  financial  difficulties. 
The worsening  structural  imbalance  was accompanied  by an uncontrolled 
escalation  of government  aid and triggered off  amongst  other repercussions 
a price war. This has severely  reduced  the revenue  of all  producers,  even the 
most competitive,  thereby  jeopardizing the general prospects for the 
streamlining of the industry. 
Seeing that the  major  part of the industry was incapable of adjusting on its 
own initiative  to the new  market  conditions  without  jeopardizing all that had 
been achieved  by the  Community,  the Commission  had no hesitation in stepping up 
its direct intervention as  soon as the conditions  laid down in the Treaty 
were met : it had no choice in the  matter.  . 
This determinated  policy constantly  bore in mind the need to preserve  a 
Community  sense  of common  purpose  in the  effort  to make the steel industry 
competitive again in the long run. 

- 7 -
5. Measures  to organize  the market:  an essential transitional  stå, to 
give the industry the  resources  it needs  for restructuring 
At the end of  1980 the system  of production  and delivery  quotas  oa the 
internal  market  was added  to the surveillance of voluntary restraint 
agreements,  price guidelines,  verification  of the application of  price-lists 
(extended  to dealers'  price-lists in  1981) and various  measures  concerning 
imports  from non-member  countries,  which  range from the monitoring  of 
imports,  through  the publication of basic prices, tr che conclusion of  bilateral 
arrangements . 
a) Good results but potential risks 
These measures,  taken  to give the industry the  time and resources  it 
needed  for restructuring  while  preserving, the unity of the internal 
market,  provided  relative financial security  even for the least 
efficient  firms by  pushing  up sales prices substantially. 
The price levels  achieved  in the  first  half of  1982 allowed  the average 
firm to recover.on  average  all its  productions  costs,  whereas  earlier 
only marginal  costs had  been co_vered. 
Although  on the  whole  the crisis  measures  may be  regarded  as successful, 
and though  the respect  of the price rules of the  Treaty  must be strictly 
controlled, the end  must not be  confused  with the  means. 
Anticipation of  more balanced  'market  conditions as a result of a voluntary 
policy has imposed  special contraints on the  most competitive  producers  and on 
steel-using firms, i.e. on the two categories that are essential to the 
prosperity of the industry,  because  : 
i) when demand  is sluggish, the  average  competitiveness  of the 
industry can pick up if the  market  shares  of the  most competitive 
producers  are increased; 
ii) strict  control of  production  and artificially  high prices may  cause 
a later contraction in  demand: 
- by adding  to the  difficulties  of the  user sectors, 
- by aggravating  product  substitution effects, 
- by increasing  pressure  from imports. 

- 8 -
. That is why the production  quota scheme  must not become  institutionalized 
or folfh the sole basis of a  structural  policy,nor is it conceivable to 
continue  treating  the adjustment  of capacities over a long period as 
a purely  cyclical  matter; not only  would  this run counter to  economic 
logic but it  would also be contrary to the requirements of the  ECSC treaty. 
Nevertheless,  because  the structural  impact  of the  restrictions 
increases the longer they  last,  the only way of preventing  this from 
acting as a brake  to adjustment  is to introduce  into this compulsory 
system dynamic  factors that  will encourage  restructuring. 
b) The  criteria  for progressive  development  of the  Community  anti-crisis  measures 
Because  it is temporarily taking over  from the mechanisms  of the free  market, 
Community  supervision  must increasingly take its operating  criteria  from them: 
i) the key for production sharing  cannot  ignore the requirements of 
economic  efficiency.  Elements  of elasticity  should be introduced to: 
- integrate the  structural  changes  of markets,  in particular  by 
taking more recent reference periods for  calculation  of the 
abatement  rates; 
- compensate  for the  specific  disadvantages that the  quota system 
may have for certain  producers, and in  particular  those manufacturing 
a single  product as they are uaable to set off losses in one product 
against benefits in another; 
- take account  of restructuring by allowing  companies  to adapt quotas 
in the light  of their  efforts  and results  at the  same time ensuring 
that this does not occur at the  expense  of the  most efficient  firms. 
ii) the restriction  of production  cannot  reverse the underlying 
trend of prices,  which  in this industry are  linked  to cost  movements. 
Over the period  1974-81,  prices in  real terms moved downwards  by 2.2% 
a year; in the period  1982/1985-86,  there  will most probably be a 
downward  trend of  around  2% a year in  real terms,  due to the  fall in 
unit costs. 

- 9 -
Taken as a whole,  measures  to organize  and regulate  the internal  market 
should  facilitate  the restructuring effort within  the company,  financed 
by its own resources. 
This effort  deserves  to be  supported  in preference  to stepping  up government  aid which, 
apart from the possible effect  of distorting competition,  was not, before  the aid  cede 
was applied,  always  based on strictly  economic  and community  criteria, 
6. Requirements  and criteria  for the  restructuring policy 
To ensure  that government  aid to the  steel industry  provides  support  for the 
necessary  restructuring  effort,  the Community  has established specific rules  on 
aid to the  steel industry, alongside  the introduction  of compulsory  market-
discipline.  These  rules also allow  the actions  of the member  states in this 
field to be  coordinated  at Community  level. 
Aid, which must be degressive,  is allowed only  up to 1985, and  must be in 
conjunction with restructuring  programmes  that are consistent with  the 
objectives  of profitability  and reducing capacity. 
Like production  quotas,  government  aid, which must also be oriented  towards 
structural  streamlining, wil] therefore  have to create the conditions  under 
which it becomes  no longer  necessary. 
a) 'Criteria  for the  evaluation  of restructuring  plans 
Obviously  the greatest effort  must be made by  companies  which: 
- use the  most obsolete  and anti-economic  plants; 
- record  the highest losses; 
- benefit  from the highest subsidies; 
- have precarious  markets,  as a result  of the  type of product  they malie cr 
dependence  on exports  to third markets. 
The criteria  for evaluating  the validity  of restructuring  plans stem 
from the overall analysis  made in  these general objectives: 
i) Excess  production capacity  has an  impact on the  overall  viability 
of the Community  industry  more harmful  than any other factor. 
By cutting  back capacity,  it should be possible  to offset foreseeable 

- 10 -
capacity  surpluses for 1985,  which  are of the  order of Z2>%  for :finished 
Droducts, ranging from  25% for  cold rolled  sheet to more than 44% for 
hot rolled  sheet; 
ii) After  the upward  adjustment  in the  first half of 1982, it is  estimated that 
prices  will continue  their downward  trend in  real terras. Any  scheme  to 
restore  profitability  that does not count  on an annual  average  fall of 
at least 2% in  real selling  prices in the  Community  up to 1985 is 
unrealistic;  ' 
iii) As far as costs are  concerned,  the downward  trend brought  about  by 
technical  progress  will be reinforced by the  impact  of the  enormous 
reserves of productivity evident  from the gap  opened  up by the 
Japanese  and, in  some cases, the  most efficient  Community  producers. 
In this respect, the existence of  "normative  costs" (1) allows evaluation 
of the cost  improvement  hypotheses  put forward in  company  plans. Taking 
an average  for the  Community,  it is possible to predict that costs  will 
fall annually by  around  2%, but it is nevertheless  obvious  that in 
respect of costs,  even more than for capacity reduction and prices, 
the analysis and the  criteria  have to be adapted  to the structure 
of each individual  company. 
b) Contradictions to be avoided if the  overall  effort  is to succeed 
As a result  of experience gained in the  first phase  of examining  company 
plans in the  light  of these  fundamental  criteria,  several  contradictions 
that might  well jeopardize the success of the  overall  restructuring  effort 
can already be detected. 
Too many companies  are aiming  first and foremost  to improve  profitability  by 
increasing  the use of  existing  plant, rather than dealing with  the problems caused 
by least  efficient  plant- With  this approach,their  main objective  is to  increase 
sales and take a bigger share  of the  market, which involves several contradictions: 
- companies  are counting  on their  partners  to reduce capacity while refusing 
to do so  themselves; 
- the planned production increased would  not be  possible under  the quota scheme 
and yet they still  wish  this scheme  to continue; 
(1) "Normative costs"  are the  theoretical  costs  of each company  on the  basis of I 
i 
the optimum  use of  its plant  and the  prices  of the  production factors  at' • 
f. 
its disposal.  " i 

- 11 -
- at a time, of sluggish or  even declining  demand,  the relation  between 
selling  prices and sales  volumes  is crucial:  savings in  terms  of unit 
costs from increased production may often be  more than cancelled out 
by the resultant reduction in  selling  prices. 
The companies'  individual restructuring plans  drawn  up under  such 
conditions are irreconcilable  both with each other and with the 
objective for  the'Community  as a whole. 
Taken individually,  these  plans show that the individual  company's 
profitability  will be restored by 1985.  However,  when the capacities 
adopted  in each plan are  added  together,  they show a continuing overall 
imbalance  on the  market,  the adverse  effect of  which  on prices -
could not be neutralized  indefinitely,  and therefore the  assumption  that 
the industry  would become  profitable again  proves  to be  illusory.' 
With the same  historical  downward  trend, the  level  of prices is affected by 
capacity  levels:  they  will be sufficient  to cover  total  costs, maintaining 
the 1982  improvement,  if surplus capacity is abolished, but  they  will only 
cover marginal  costs if the surplus  remains. 
To avoid  this risk,  efforts  must be stepped  up in two directions: 
i) Companies  must no longer regard' prices as a purely  exogenous 
factor since  they,  far more than the Commission,  are in a position 
to control prices  through  their  capacity decisions. y^e 
closing down of plant  must meet their  own needs  not only in  prospect 
of cost reduction but also in respect of price increases.  Going  beyond 
the micro-economic  viewpoint, restoration of  balance  in the sector 
calls for a definite  commitment  on the part of the  companies. 
ii) Strict  vigilance by the  Commission  becomes  crucial  in this respect, 
since the  link between  capacity reduction and stable price levels  will only 
come about  if company  plans are  reviewed  within the overall  framework. 

- 12 -
c) An effort from which no-one  is automatically excluded 
The need for renewed  efforts,  even greater  than called for by the  earlier 
forecasts,  means that no-one  can be automatically ruled out, provided 
that government  aid is granted within the period  1980-85. 
i) The fact that restructuring was carried out before 1980, although 
taken into account  by the Commission,  does not moan that there is 
no need to maintain the  momentum  of this effort.  The mere fact that 
a company  has recourse to  government  aid shows that it  still needs 
to adapt to market  trends after 1980 and that it should contribute to 
redressing the  imbalance  of the world  market; 
ii) It is not possible to  exclude  financial  restructuring  from the 
effort to reduce  capacity and include only  industrial  restructuring 
proper. A  sound investment  policy must at least  succeed  in getting 
back the cost of the  capital  used, whatever  its origin. 
Consequently  financial  problems  are almost always  the outcome  of poor 
industrial  decisions, and therefore  responsibility  must be accepted  by thosi 
concerned; 
iii) Since the  priority  aim is to progress  towards  a balanced  market, 
reductions in  rolled finished  products  are essential and closures 
further up the  line are no substitute.  Rather  such closures should 
be additional since it is at the  iron and steel making stage that the 
impact on costs is greatest. 
iv) Social and regional considerations are  crucial:  to delay restructuring 
will not resolve the  problem  of employment  and risks discouraging -
reqional  development.,  "it is necessary  therefore to plan  specific 
initiatives  in the  field of reconversion. 
The excess  capacity to be eliminated is so great that  even unsubsidized 
producers  cannot  be exempted  from making a contribution,  even if only 
because they benefit  from improved  price Levels resulting  from the crisis 
measures. 
Although  the Commission's  role is less compelling in the  case of 
subsidized  companies,  it is nevertheless far  from negligible.  Specific 
impetus will come from: 
- dynamic  use of production  quotas; 
- Commission's  opinions  on investment; 
- restructuring  and reconversion  loans. 

- 13 -
7. A revival  strategy in place of a defensive  policy 
The Community  aim is to stimulate the concentration and consolidation of 
resources at the strong points. Far  from being' a  manoeuvre  to dismantle 
the industry, it is the only  revival  strategy possible  under  existing  and 
foreseeable circumstances.  These  circumstances  forbid  the institutionalization 
of a defensive  policy  that 
- would swallow  up extensive resources at  Community  level; 
- would  increase the temptation to take national  measures  incompatible with 
the common  market; 
- would encourage  a wait-and-see  attitude  and reduce  the industry's incentive 
to adapt; 
- would make wasteful and  unrewarding  use of  human,  technical and  financial 
resources that are ^competitive with those of the  Community's  most dangerous 
competitors. 
Whether  the aim is to  meet internal  demand  under optimum  quality  and price 
conditions,  or to safeguard jobs or  revitalize  regions affected by the  crisis, 
a policy  of supporting  sectoral  inefficiency  can never  be successful in the long 
run. 
a) Action on key factors 
What must be done therefore is to reverse the  tendency  towards  managing  the 
rundown  of the industry so as to tackle  efficiently  the full range  of 
key factors determining the competitiveness of the  Community  steel industry 
in the 1980s: 
i) Demand  must be sustained by a  suitable  combination of  quality  and 
prices and by aggressive marketing  based  on fast and reliable 
deliveries,  before and  after-sales  services and advice for  customers, 
increased  cooperation with  consumers,  and a closer association of 
steel export  policy  with the flows of world trade; 
ii) Production  management  offers  extensive  scope  for improvement  which 
must be used so that factor  yield can offset  the increase in factor 
prices.  Most  of the  Japanese  advantage  (which can provide a yardstick 
for the effort  to be put in) is not due to factor prices but to 
productivity.  The mean difference to be  made up on Japanese  producers 
in terms  of cost per  tonne 

14 
of steel  was at  least 15-20%  in 1981. 
These are the  lines  to be followed in strengthening the investment 
effort,  seeking  internal  and external  rationalization  and making 
company  management  more efficient.  Rationalization  of iron production, 
wider introduction of continuous casting and  improvement  of rolling 
mill productivity  should be  strictly  coordinated so as to bring  down the 
break-even  point and increase the  economic  yield of"the  factors  employed; 
iii) The availability  and cost of the  financial  resources to  back up this 
effort  will be of  vital importance.  Self-financing  should be strengthened 
because  supply conditions outside the  company  will for the  most part 
be governed  by the general conditions on the  market  which seem likely  to 
remain  fairly difficult. 
b) Increasing the impact of  Community  policies 
The Community  can play an important  direct  and indirect  role in improving 
the factors  making  for competitivity  in the  steel  industry: 
i) Support  for reconversion  will be stepped up.  After  the introduction 
in the "non-quota"  section fo the EEC Regional  Development  Fund of a 
specific  Community  project to help  remove  obstacles to the  development 
of new activities  in some steelmaking areas, the  Commission  is, 
amongst  other measures,  to propose  new projects in a  second  set of 
non-quota  regional fund operations. 
The aspects of  most immediate  social  relevance (going further than the 
recently  extended  reconversions loans and  retraining  grants)  will 
later be strengthened so as to  become  a specific  component  of the 
reconversion  policy;  .'. 
ii) The steel  research  activities  will be given a fresh  impetus  so as to 
provide a better  link between  the design  phase  and industrial  application 
and to improve  coordination with research  work in other sectors; 
iii) The ECSC financing  policy  will be rigorously  pursued and  will be an 
important  factor  in channelling investment,  diversifying  supplies and 
giving access to  international  capital  markets  on optimum  terms  or even 
at subsidized  i-ates. 

- 15 -
Since requirements are so vast, it  will be necessary to devise 
and introduce necessary adjustments designed to  strc i0then the. 
att><3ctiVness of  Community  financing, 
iv) The external  commercial  policy  should bring  about  better  integration 
of the promotion of  steel  exportst 
However,  the overall,  prospects of the(  steel sector defend  above  all on the 
success of a  Community  industrial  strategy and a determined  policy  of 
stimulating  investment. The  Commission's  t> inking  on these matters is 
known,  several  practical  proposals  have already  been submitted and others 
are in preparation; it is therefore  vit. 1 to bear in  mind that sectoral 
activities  must be consistent with th .,e general objectives. 
Conelusion 
Community  action can take  many different  and far-reaching forms,  affecting  not 
only companies  but also  their  socio-economic  environment.  The instruments 
must be managed  consistently  and must be regarded as together forming a 
necessary  mechanism  for tackling  all aspects of the  steel  industry's  problems. 
A spoke  in one of its wheels,  even if apparently  justified  by a particular  case, 
may reduce  the cohesion of the  system  and thereby cancel out the.  effects  of 
other measures  whose  individual  efficiency  depends  on their  being integrated 
with all the other elements.  However,  even though  the Community  offers  a 
dynamic framework  to ensure  that national  policies  and company  strategies  are 
consistent^the  recovery of the industry  steel depends  first and foremost on the 
degree of commitment  shown  by the  companies  themselves and on  their  determination 
to initiate  measures  that  will help to streamline it. 

- 16 -
II. ECONOMIC  TERMS OF REFERENCE:  A SOMBRE  OUTLOOK 
1. A difficult  macro-economic background 
At world  level,  radical  changes  have upset the  traditional  monetary,  industrial 
and trade balances over the past ten years and  have reduced  general  economic 
growth everywhere. The  consolidated  indicator  of international  trade  gives 
a quantitative  idea of this malaise by way of a  reduction  in the  volume  of the 
annual growth of world  trade,  which dropped from 8.5% from 1960 to 1973 to 
A.5% from 1973 to 1979, but does not  show how much keener  international  competition 
is becoming as  efforts  are made to shore up  increasingly  difficult  internal 
growth. Looking ahead, it  seems  likely  that all these  factors  will continue u£ · 
to 1985, when the most optimistic  estimates  predict  an average growth in  
extra-Community world  trade of 5% a year. 
The draft  fifth medium-term  economic  policy  plan for the  Community  has painted  an 
economic  picture  based on low and  variable  growth  rates,  and has emphasized 
the importance of the  effort  to restore  a satisfactory  development  mechanism. 
In the Community,  the growth in the gross domestic product, 5% before 1973, has  
fallen to 2.5%  since  the first oil crisis. 
Slower growth,  falling  profits,  pessimism and  uncertainty  about economic 
prospects  have resulted  in a great  decline  in the development of investment. 
Since 1973, investment has  increased  at less than 1% a year whereas an annual  
growth rate of over 5% had  been recorded over the ten previous  years.  Although 
investment  is directed  mainly towards modernization and  rationalization, 
progress  in the adjustment of  industrial  production  structures  has been inadequate, 
either because too  little  capital  has been invested  or because  there has 
been no genuine redevelopment  strategy. 

- 17 -
This development  is unsatisfactory in  comparison  with the  levels  recorded 
by some of our  rivals.  Analyses conducted by the  Commission  o?> the 
competitiveness of  Community  industry reveal signs of  relative  weakness 
compared  to its  international  competitors, and these are all the  more 
dangerous  in that they extend over  numerous  sectors,  including  some high-
growth sectors, and  affect  several key  factors  ranging  from productivity 
to the creation of the surplus and its accumulation. 
Foreseeable trends up to 1985, if current tendencies continue, are  unlikely 
to differ  much overall  from those recorded  from 1^73 to "980. With  some 
progress being  made in the  battle  against  inflation,  budget  deficits  and 
rising unemployment  may well prove major  h;- dicaps to the  picking  up of' 
internal  growth.  Internationally,  against i  financial  background  marked'by 
tension  over exchange  rates and the concentration of indebtedness, the oil 
price trends may  seriously  reduce  demand  from OPKC countries, while  demand 
in industrialized  countries  might  suffer  from a resurgence, of protectionism 
Under these circumstances, with an upturn in 1983, the  growth  of the GDP in 
the Community  could average  up to 1,9 % over the period  1981/1985. 
Investment  could also pick up  slightly  although without exceeding the GDP 
growth  rates.  However,  there  will be little  increase in  employment,  while 
the deficit  on the balance of  payments  could tend to  improve. 
Consequently the world and  Community  background  gives  little  reason for 
excessive optimism: it is in a context of slackened  growth  that sectoral 
adjustments  become  both more  difficult  and more important.  These  sectoral 
adjustments  must also be  carried,  out consistently  in order to prevent  them 
from hindering  each other and to provide  maximum  stimulus for synergies, 
since both are equally possible in  complex  processing  economies. 
2. Slower  development  in steel-using sectors 
In a micro-economic  approach,  the consumption  of intermediate  goods  such 
as steel  products is a  demand  governed  by the  level  of activity  of the 
user sectors. 

- 18 -
After declining  sharply in 1975, the  overall  index of  activity  in the  steel-
using sectors picked up  somewhat  in 1976 to a  level that remained  fairly 
steady up to 1981 (see Table 1). 
INDEX Of ACTIVIT^'lN  USER SECTORS CLASSIFIED  BY NACE 
Production index  1975 = 1 :0 TABLE 1 
SECTORS-YEARS 1970 1971 1972 1973 1974 1975 1976 1977 19-78 1979 1980 1981 1985 
^Preliminary  processing - -101,3 107,5 118,7 122,5, 100 108,9 106,6 110,7 116,6 110,5 ICS, s 115,5c 
Manufacture  of steel tubes - - - - -100 100,5 93,5 103,7 104,7 103,6 1 14,7 1K,1C 
32 Mechanical engineering -95,8 94,5 100,4 105,5 100 100,5 100,9 1C0,9 103,7 105,3 1C2.5 110,57 
3; Electrical  engineering 83,1 86,0 92,4 102>0 106,4 100 106,5 111,5 114,6 116,5 120,7 117,4 123,47 
35 Means of transport -100,2 104,1 111,9 103,3 100 113,7 119,8 122,1 127,0 119,1 113,4 123,60 
Shipyards 89,5 98,1 104,5 100,6 87,1 100 112,0 95,3 76,9 64,9 53,0 -69,7 
31 Manufacture  of metal articles -103,2 101,5 108,0 110,8 100 105,3 106,4 104,3 108,7 108,8 103,4 11C,73 
50 Building and civil engineering 
(excluding  Italy, 107,4 107, 6 112,3 112,1 107,8 100 99,9 99,6 102,5 103,4 102,5 95,6 104,10 
the Netherlands and  Denmark) 
Other users 102,8 99,4 102,6 107,6 107,4 100 104,3 104,9 115,1 - - -118,13 
•OTAL 101,2 104,5 112,0 112,9 100 106,8 106,8 108,9 113,1 109,6 105,6  113,6oJ 
(») Indices of value  added at factor cost, at constant  prices,  except: 
- tube manufacture:  production indices 
-shipyards : compensated  gross registered  tonnage indices, 
-other users: production indices  weighted  by consumption  in 1977 
(1) Weighing : real steel consumption  in 1978 
Since 1976, the production trend for all user sectors has  been weaker  than 
those for  industrial  production and the gross national product;  this movement 
is both compatible with, and  complementary  to, the decline in the  relative 
share of investment in the GDP (see Table  2). 
TABLE 2 
TREND IN APPfiRENTCO'JSUMPTION  OF FINISHED  STEEL PRODUCTS  AND BRANCH ACTIVITIES  IN TIE C3MMLMTY 
Indices: 1975 = 130 
Index of 
activity in steel 
usinq sectors 11·· Apparent  steel con-sumpt)on 
finished products I Index 
of industrial 
production GDP 
1971 101,2 103 * 94,9 90,4 
1972 104,5 109 * 99,1 94,0 
1973 112,0 120 * 106,5 99,5 
1974 112,9 120,0 107,1 101,3 
1975 100 100 100 100 
1976 106,8 113,1 107,4 105,1 
1977 106,8 107,3 109,9 107,5 
1978 108,9 106,4 112,5 110,9 
1979 113,1 114,4 118,1 114,6 
1980 109,6 108,7 117,1 115,9 
1981 105,6 105 * 114,5 115,3 
1985 113,6 106,0 127,2 
(1) Index weighted  by real steel consumption  in the different  stc.ars in  1978 · 
*) estimations 

- 19 -
If the pressure  of international competition continues, it sec  reasonable 
to project  these  trends  up to 1985, taking into  account  the gei ral decline 
in activity  recorded  in 1980 and  assuming  a modest  upturn  in 1982-83,  more 
for technical  reasons  than because  of a structural inversion in the cycle, 
which will probably  not take place  until  the more distant future. 
In shipbuilding, the  level  of activity  can be  expected  to -emain  fairly  poor, 
below the 1970  level,  although  in relative/terms it  will pick up on 1980, 
while all  other sectors  will exceed  the 1975 leve1. The  best results are 
likely to be recorded  by vehicle construction,  about  a qi arter up on 1975, 
followed by  electrical  engineering and preliminary processing.  Compared  to 
1980, mechanical  engineering and the  manuf.-  •. ture of  tubes  could pick up.  somewhat, 
while the  very low growth  in the  manufactui  J of metal  articles  and building is 
unlikely  to change. 
This development  reflects  the still  cyclical  nature  of the  movements  (transport 
equipment),  structural  adjustments  tending to  concern  the development  of 
services and continuing  modernization  of the production  apparatus  (electrical 
engineering), with a  re-equipment  component  in prospect  (preliminary processing 
and mechanical  engineering). 
On the whole.,  therefore, the. foreseeable outlook for the  activity  of the 
steel-using sectors  does not justify  any optimism;  indeed,  it calls for 
additional  caution. 
The figures  showing  the changes  in the indices are so small that the  margins 
of statistical  error  normally  expected  in this type of exercise could 
change  the scale or  even the sign of the variations. 
This also affects the  degree  of reliability  of the  comparative  evaluations 
between  different sectors,  which  stem from general  statistical  classifications 
that are increasingly  inadequate  in the  light  of changes  in actual production. 

- 20 -
That is why  sectoral  details,  together with  macro-economic  information, can 
provide no  more than general guidance for  economic  operators. This guidance 
cannot be sufficient  in itself  but must be combined  with a  much more 
accurate  definition  of the  demand  prospects by category of product  (quality-
price) in relation  to the  customer  and the relevant  market,  which  can be  done 
only at company  level.  % 
3. Declining product  consumption  in the  Community 
To pass from macro-economic  trends and the  activity  of user sectors to the 
consumption  of steel  products, use  must be made of consumption  functions,  whose 
coefficients  are determined by several  factors. 
These coefficients  depend  on two  main components: 
- Structural  component:  growth  in the GDP  beyond  certain  thresholds is 
accompanied  by a reduction in the weight of the sectors with the greatest 
steel consumption,  especially  building; 
'- Technical  component:  technological progress  combined  with the  variation  in 
relative  prices determines the  variation  in the  technical  production 
coefficients  in the  steel industry and in the user  industries,  which  also 
use products that are  alternatives  to steel.  Several  factors  already  identified 
govern the reduction in  specific  steel consumption;  for example,  the value 
of most products at constant prices is increasing  more than their  weight, 
products having a high value per  unit of weight are developing  more rapidly, 
and modifications in product design and production processes are bringing 
about a reduction in scrap and an increase in  steel  yield. 
Taken overall,  the specific  steel consumption  functions therefore tend to 
decline  over a long period:  total  steel consumption  in the  Community  in 1980 
was less than in  1972, despite an increase in the output of the user sectors, 
in industrial  production and in the GDP (see Table  2). 
By 1985,  this tendency  will probably be confirmed,  because  of its consolidated 
nature which  is virtually  indépendant  of any  cyclical  upswing,  thus reducing 
still further the  outlets  for Community  steel products. 

- 21 -
The combination  of a poor economic  situation  and the  continuation  of the  
general  trend towards  a reduction  in specific steel  consumption  makes it  
necessary  to forecast  consumption  of finished  products  in the Community 
at ±92 million  tonnes  (see  table 3) 
TABLE 3 
REAL CONSUMPTION OF  FINISHED  PRODUCTS  IN THE COMMUNITY,  BY SECTOR 
('000 000 tonnes 
1978 Forecast 
1985 Mean annual  variation 
between 1978 and 1985 
«) 
Preliminary  processing ffl, 8 22,2 0,89 
Manufacture  of steel tubes U,1 15,5 1,31 
Mechanical  engineering 7,3 7,5 0,35 
Electrical  engineering 2,5 2,3 -1,00 
Shipyards 1,5 0,9 -6,21 
Vehicle  construction 10,7 9,7 -1,45 
Building  and civil engineering 9,2 8,4 -1,31 
Manufacture  of metal articles 20,0 19,5 -0,40 
Other users 6,6 6,2 -0,77 
TOTAL 92,8 92,2 -0,09 
The impact  of the  reduction  in specific  consumption  is far  from negligible:  the 
average annual  variation  in total consumption  between  1978 and 1985 is  likely 
to be -0.09%  compared  to +0.72%  which would  be attained  if specific  consumption 
remained  constant. 
The trend in demand  will then be'negative  in most  sectors  (electrical  engineering, 
shipyards,  means of  transport  and building); this  will not be  offset by the 
increased  consumption  in preliminary  processing  and the  manufacture  of tubes 
and the sustained  level of mechanical  engineering  and the  manufacture  of metal 
articles. Mean annual  variation 
between 1978 and 1985 
with a constant 
specific  consumption (if) 
0,£2 
1,37 
1,31 
1,07 
-1,38 
•0,17 
0,22 
0,86 
0,37 
0,72 

- 22 -
On the two main conventional  product  groups,  flat products  should continue 
to record greater  growth  than bars and sections  (see Table 4). 
CONSUMPTION OF  FINISHED  PRODUCTS IN THE  COMMUNITY,  Br PRODUCT CATEGORY  TABLE  4 
('000 000 t:rnc" 
1974 1975 1976 1977 1978 1979 I 
i9s: 1981« 1985 1974 1975 1976 
i 1985 
LtqUiCl steel 2,1 2,0 1,8 1,7 1,6 1,6 i.6; 1,1 
Inqots and semis 1 
Tube ingots 2,4 1,5 1,4 1,3 | 1,2 
.Other ingots and semis 7,7 8,8 9,8 8,7 I 8,4 
TOTAL 11,8 10,5 10,2 10,1 10,3 11,2 10,1 9,6 
Finished  rolted  rjroducts 72 <>/i 
17,3 6,8 6,1 4,8 6,8 6,6 5,7 
Merchant bars 20,0 <>/i 
17,3 18,6 17,6 16,3 17,2 17,8 15,3 
Uirc rod 10,7 8,3 9,9 9,6 10,1 
6,1 10,9 10,2 
5,4-10,2 
Hot-rolled  strip 7,7 " '5/- 6,7 ' 6,1 10,1 
6,1 6,4 10,2 
5,4- 4,6 
Plate 3mm ) ) 19,1 17,1 16,4 17,9 17,5 : 17,4 
Sheet < 3mm ) 44,9 >37,5 18,5 18,3 17,8 ' 19,3 17,4 18,7 
Coated sheet ) ) 7,0 6,9 7,2 8,1 8,0 9,4 
TOTAL 90,5 74,4 86,5 81,6 80,7 86,7 83,C 81,2 
GRAND TOTAL 104,4 87,0 98,4 9ZA 9 2,6 99,5 94,6 91,1 92,2 Mean annual  variation 
am BS/J? '-.] <?5> 31 • 
1,59 -2,23 
-3,2 -2,21 
-0,7 -o, eo 
-1,01 -0,99 
2,55 3,12 
-0,91 -2,95 
* 0,12 . -0,05 
-3,36 5,15 
0,79 -0,18 
0,69 • 1,49 
• 3,85 + 3, 14 
i 0,09 -0, 42 
-0,06 -0,.51 » O.J 
Amongst  flat products,  demand  is likely to be  particularly  sustained  for sheet 
(less than 3 mm thick) and coated  sheet;  over the period 1980-85,  annual  growth 
rates could  be around 1,5 and 3,1%  respectively.  Consumption  of heavy plate 
should remain  at the 1980  level, while  strip  could decline  by 3%. 
Amongst  bars and sections,  demand is likely to fall appreciably  for heavy 
sections  (-3,1%)  and merchant  bars (-3,0%),  while wire  rod consumption  should 
remain stable, confirming  the levels  recorded  since 1979. 
In conclusion  it should be stressed that  whatever  criteria  of average  capacity 
(-80  7. or -60 Z) is  used and whatever  view (optimistic  or pessimistic)  is taken, 
it is nevertheless  a fact that surplus structural capacity exists  which is too  
large to affect the lack of competitivity  of the  sector. 
4. The world market  and foreign trade:  slower  development  rates 
Standardized  technology  and products  make the steel industry  a "world" 
industry,  which is regarded  everywhere  as a necessary  basis for industrial 
development. 

- 23 -
The world  steel market  is characterized  by very keen competition against 
a background  of declining  demand and  structural  imbalance. 
The world surplus  in production capacity  is accompanied  by marked  geographical 
differences  in supply and demand  trends.  As a  result  there is an enormous 
marginal supply that aggravates  the fluctuations  in the  steel cycle. 
On the demand  side, the movement of  stocks is of  vital importance  because  of 
the increase  in both its  relative  significance  and its variability.  Alongside 
speculative  buying  encouraged  by the  instability  of exchange  rates,  there is 
the impact  of the  emergence  of new  countries  actively  engaged  in trading 
and the effects  of protectionist  manoeuvring. 
The growth  in world steel demand  slackened  off in the  1970s: in the  second  half 
of the decade it recorded  an annual  average  growth  rate of about 2% compared 
with 5% earlier  (see  Table 5). 
TAi'LE 5 
WORLD STEEL PRODUCTION AND CONSUMPTION ,,n-,n  ,·,·,, ('000 (AH) tonnes) 
(crude Production 
steel equivalent) '/. annual 
average growth Apparent  consumption 
(crude steel equivalent) '/. annual 
average growtn 
1975 1980 1985 19S0 
1975 1985 
1980 1975 19S0 1985 19SH 
Ï975 IV.-".. 
'iVMj 
Western  Europe 
(excluding  FCC) 29,4 33,8 35,0 + 2,8 + 0,7 36,2 34,5 35,0 - 1,0 •0,3 
Eastern Europe 192,7 209,2 220,0 + 1,7 + 1,0 194,7 210,4 220,0 + 1,6 + 0,9 
Africa 7,8 10,7 13,0 + 4,6 + 4,0 13,4 15,9 18,0 + 3,5 +2,5 
Middle East 1,2 2,7 5,5 + 17,9 + 15,3 14,5 17,0 20,5 + 3,2 • 3,8 
Japan 102,3 111,4 110,0 + 1,7 - 0,3 64,8 74,3 80,0 + 2,8 + 1,5 
China/North  Korea 26,8 42,9 50,0 + 9,9 + 3,1 31,4 49,1 54,0 + 9,4 + 1,9 
Rest of Asia 12,5 24,5 32,0 + 14,5 + 5,5 21,4 37,8 46,0 + 12,1 + 4,0 
USA 105,3 101,7 110,0 - 0,7 + 1,6 115,8 114,8 124,0 - 0,2 + 1,6 
Canada 13,0 15,9 17,0 + 4,1 + 1,3 13,3 13,3 13,5 -+0,3 
Latin America 18,6 28,8 34,5 + 9,1 + 3,7 29,6 36,6 37,0 + 4,3 +0,? 
Oceania 8,1 7,8 8,5 - 0,6 + 1,7 6,4 7,0 . 8,0 + 1,8 +2,7 
EEC 125,2 127,7 124,0 + 0,4 - 0,6 98,6 103,8 103,5 + 1,0 -0,1 
TOTAL 643,0 716,1 759,5 + 2,2 + 1,2 640,1 714,5 759,5 + 2,0 • 1,2 
Product definition:  United Nations. 

- 24 -
The factors  governing  the new  trend in the world steel trade since  1974 appear 
likely to continue  their impact in the  years ahead. 
Some structural  components  are already  clear: 
- the increasing importance  in terms of both production  and consumption  of 
the newly industrialized  countries  and the  developing countries; 
- the surplus  capacities  at world level, and more particularly  in the 
industrialized  countries;  / 
- the renewed  restructuring  effort made by  the main producing countries, 
especially  Japan. 
The reference  framework  exhibits  more uncertainties than  optimistic  signs. 
Three types of factors appear  likely to combine in bringing  about a particularly 
difficult  environment: 
- in the period 1980-85 the world economy  may now be  expected to slow down, 
while prospects  beyond 1985 will be governed  by constraints  as yet undetermined; 
- the instability  of exchange  rates has a direct impact on a product 
normally  quoted in dollars on world markets; 
- government  intervention  to provide aid or to protect national  markets 
sometimes  seriously  affects  trade balances. 
In this climate,  for the period 1980-85,  world steel consumption  and 
production  (ECSC and non-ECSC  products)  are likely to record annual  growth 
rates well below the average for the second half of the  1970s, with a fall 
from +2% to  about +1%. 
Steel production  and consumption_forecasts  in the  different  world submarkcts 
can be used to draw up a reference  framework  within which the various 
producers  will probably  have to act (see  Table 5). 
Other Western  European  countries 
Here a small increase  in supply and demand and a balanced  situation  in 1985 can 
be predicted. Although  the current  restructuring  in Spain and Sweden should 
reduce capacity,  some increase  in production  is to be expected 

- 25 '-
in Yugoslavia  (Smederevo)  and in  Turkey (Iskenderum),  while the doubling  of 
capacities  in Portugal  has been postponed  to 1986.  Consumption  may be 
expected to pick up in Spain, where it remains extremely low,  and in  Portugal. 
Eastern Europe 
Some expansion  of capacity  is planned,  especially  in Rumania,  Bulgaria  and 
East Germany.  Even if the objectives  in the  plans are not  fully attained  in 
those countries,  it seems realistic  to predict  overall an increase  of around 
11 million  tonnes for  1985. A  similar  rise in consumption  also appears probable 
as some expansion  of industrial  production,  especially  in the way of  durable 
consumer  goods, is expected  in the USSR. 
Latin America 
It is not so much  production  as internal  consumption  that will suffer from the 
slowing down of  development  and the  serious  difficulties  with the external 
debt. The steel trade deficit in 1985  would thus  be reduced to one  third 
of its level in 1980. 
Africa 
The recession  in the  industrial  i?,ed counlries  and the  external  debt of several 
African countries,  which has reached an alarming  level, are likely to bring about 
some slackening  of the  production  and consumption growth  rate for 1985. 
Japan 
With production  remaining steady,  a small increase  in consumption should 
result from the expected growth  in investment  and consumption  in the  private 
sector. Although  seriously  reduced,  the Japanese  positive  balance  of trade 
would remain  the largest of all. 
China and North Korea 
The annual growth  in consumption for  1980-85 (one third that recorded  between 
1975 and 1980)  should be justified  by the  fact that China,  despite the downward 
revision of the  objectives  for the  1976-85  plan, is still a large expanding 
market and per  capita steel consumption  is still amongst  the lowest in the 
world. 

- 26 -
Rest of Asia 
The forecasts  of higher production  have been greatly  reduced  following  the 
decision by China Steel Corporation  of Taiwan to postpone  indefinitely  phase 3 
of its expansion  programme,  which would have increased its crude  steel 
capacity from 3.2 to 5.7  million  tonnes. Also there  is still great uncertainty 
about the dates on which the steel development  plans in India will be put  into 
effect. 
United States 
Overall crude steel production capacity  in the  United States  is unlikely to 
fall by 1985  since some reduction  in integrated steelmaking  will probably  be 
offset by the  later development  of electric  furnaces.  It seems  reasonable 
to predict  a capacity  utilization  of close to 80% in 1985,  which means 
that production forecasts  are slightly  up. A  similar  annual growth  rate 
for consumption  does not. seem unrealistic  in view of the  prospect  of a cyclical 
take off of the  American  economy in 1983. An  adverse balance  of trade of 
40 million tonnes is close to the. average  recorded over  the past five years. 
Oceania 
As Australia  is an expanding  market it seems  realistic  to predict a slight 
increase in production  and consumption. 
The producing areas having  a structural  surplus  will remain the same in 1985: 
the countries that  are forced to be net  exporters  will still be Japan and the 
Community. 
Against this background  of world production  and consumption  trends,  it seems 
fair to predict some shrinkage  in the  extra-Community  trade surplus'  from 
23.9 million  tonnes in 1980 to 20.5  million  tonnes in 1985,  with a slight 
reduction  in the gap  separating it  from the Japanese  surplus  (see Table 6). 
TABLE 6 
NET STEEL TRADE BALANCES 
('000 000 tonnes) 
1975 1980 1985 
Western Europe (excl.EEC) -6,8 -0,7 0 
Eastern Europe -2,1 -1>2 - 0 
Africa -• 5,5 -5,£ -5,0 
Middle East -13,3 -H,3 -15,0 
Japan • 37,5 • 37,1 + 30,0 
China/North Korea -5,1 -6,2 -4,0 
Rest of Asia -8,9 -13,3 -12,0 
USA -10,5 -13,1 -H,0 
Canada -0,3 • 2,6 • 3'5 
Latin America -11,0 -7,8 -2,5 
Oceania • 1,7 + 0,8 • 0,5 
EEC + 26,6 23,.9 20,5 
Product definition:  United Njtions  - = net importer 
+ = net exporter 

- 27 -
In ECSC products,  though reduced, the balance could remain  around  12 million 
tonnes (see Table 7) . 
THE COMMUNITY'S  NET 3ALANCE OF TRADE WITH NON-Mrwafc-9  COUNTRIES TABLE 7 
CZZC CCu tonnes of  fim'srec crcducts) (1) 
1973 1974 1975 1976 1977 1978 1979 193C 1981 1985 
Ingots and senis -0,4 -0,2 1,4 -0,3 -0,9 -0,9 -C,9 "0,3 
not coils -0,1 0,2 0,6 -C,8 1,3 2,7 2,3 2,1 2,! 
Heavy sections 2,3 3,1 2,6 1,9 2,1 2,5 2,0 1,8 
Light sections 3,0 5,2 3,4 2,2 2,2 3,3 3,5 2,4 1,» 
wire rod 1,3 1,8 1,0 0,3 0,6 1,0 1,1 :,a 0,1 
Strip 0,4 0,4 0,3 C,2 0,4 C,4 0,5 0,5 0,1 
Heavy and light pLate 0,8 1,7 0,8 -C,2 0,6 1,6 1,2 0,9 C,9 
L'ncoated sheet 2,8 3,? J,0 1,y 3,6 4,3 3,4 3,5 2; 
Coated sheet 2,0 2,1 1,6 1,7 2,0 1,9 1,5 ' 2,: 
TOTAL 12,1 18,1 14,7 6,7 11,5 16,9 15,3 13,2 16,9 * 12,1 
CD ECSC  Products 
* Estimation 
An attempt to increase the value of exports, in order to  make up for  their low 
volume, might increase the favourable balance for coated sheet by a  third 
and almost double the  deficit  for ingots and semis. 
In 1985, the  largest  favourable balances should be for coated and uncoated 
sheet and  coils. . 
In the medium term, the  improvement  of the Community's  external trade balance 
will depend  on its  international  competitiveness. It is then necessary 
to stop regarding the world  steel market  as a marginal  outlet mopping  up 
shortfalls  in internal  demand,  and turn  towards  strategies  that explicitly 
include  it, not only in the  light of export prospects but also as the  main 
yardstick  for the  price and efficiency  levels on which the adjustment of 
the whole Community  steel industry should be  based. 

- 28 -
To conclude,  it is  interesting  to compare  steel  trends of the  Community,  Japan and 
the U.S. with export trends  of the  principal  products using  steel as a basic material 
by the same  three  entities. 
Strategy  thus becomes  clear which seems to privilege  exports  of high value  added 
products  more than the crude product. 
TABL£ A 
EXPORT TRENDS OF PIG IRON. AND STEEL (value millions of ECU) 
Destination 
Ids'" 
tope 10 
lapan World (1) Europe 10 USA Japan D.C. (2) Latin America Class 3 (3) 
(a) (b) (a) (b) (a) <b> (a) (b) (a) (b) (a) <t>) (a) tb) 
1975 9.939 100 998 100 9 100 3.199 100 791 100 2.911 100 
1976 8.467 85 945 95 20 222 2.470 77 371 47 2.637 91 
1977 9.544 96 1.822 183 11 122 2.674 84 464 59 2.355 81 
1978 7.995 80 1.857 186 21 233 3.696 116 735 93 2.925 100 
1979 12.007 121 1.662 167 28 311 3.797 119 635 80 3.276 113 
1930 11.826 119 1.256 126 24 267 4.261 133 768 97 2.546 87 
1981 
1975 2.000 100 152 100 11 100 1.219 100 467 100 25 100 
1976 1.724 86 188 124 28 255 784 64 397 85 52 208 
1977 1 .'.81 74 128 84 18 164 659 54 326 70 27 108 
1978 1.376 69 142 93 31 282 759 62 382 82 16 64 
1979 1. 736 87 165 109 38 34 5 893 74 500 107 127 508 
19S0 2.266 113 305 201 38 345 1.372 113 843 181 43 172 
1981 2.640 132 230 151 39 355 1.527 125 9J3 200 7 28 
1975 .=..192 mo 524 100 1.500 100 4.147 100 852 100 1.252 100 
1976 9. '.73 114 527 101 1.860 124 4.121 99 719 84 1.348 148 
1977 9.218 113 409 78 2.035 136 4.421 107 829 97 1.544 123 
1978 9. 303 114 26* 51 1.879 125. 4.627 112 708 83 1.V85 159 
1979 10.297 126 '.5 7 68 2.P'!9 134 5.275 12 7 819 9t, 2. >91 167 
1980 11.099 135 395 75 1.983 132 6.232 150 949 111 1.114 145 
1981 K. 530 182 225 43 3.580 239 7.915 191 i 1.212 142 2.171 173 
. . . • . . . — - - . — 
Extra E.C. 
Development countries 
State economic countries (a) millions of ECU 
(b) index 1975 = 100 
TABLE B 
EXPORT TRENDS OF MACHINERY  AND TRANSPORT  MATERIAL 
(value millions of ECU) 
Oestinat ion 
Origin 
Europe 10 
U.S.A. 
Japan World (1) Europe 10 U.S • A. Japan D.C. (2) Latin America Class 3 (3) 
(a) (b) (a) (b) (a) (b) (a) (b) (a) (b) (a) (b) (a) (b) 
1975 52.285 100 5.816 100 681 100 21.892 100 4.008 100 5.567 100 
1976 61.430 117 v. 6.570 112 769 112 26.722 122 4.307 107 5.917 106 
1977 69.837 133 7.968 137 955 140 31.117 142 4.819 120 5.969 107 
1978 71.740 137 9.334 160 1.111 163 31.968 146 4.635 115 5.973 107 
1979 76.115 145 10.461 179 1.296 190 32.329 147 5.344 133 6.237 112 
1980 86.890 166 11.722 201 1.346 197 37.707 172 6.214 155 6.082 10V 
1975 37.186 100 6.382 100 1.479 100 13.511 100 5.741 100 743 100 
1976 44.752 120 7.499 11 7 1.576 106 17.307 128 6.716 116 745 100 
1977. 45.241 121 7.915 124 1.504 101 17.189 127 6.684 116 535 72 
1978 4 7.832 128 9. V36 146 1.906 128 17.529 129 7.427 129 544 73 
1979 53. (VI 142 11.224 175 2.600 175 19.747 146 8.658 150 6 30 84 
1980 62.593 168 14.455 226 2.999-202 24.388 180 11.121 193 654 88 
1981 88.581 233 18.557 290 4.347 293 35.186 260 16.370 2S5 624 83 
1975 22.087 100 2.524 100 4.813 100 • 10.659 100 1.97*6 ICO 1.492 100 
1976 32.124 145 4.188 1 165 8.221 170 14.435 135 2.577 130 1.324 88 
1977 39.204 177 5.350 211 10.347 214 17.766 166 3.248 164 1 .504 100 
1978 4 3.560 197 5.719* . 226 12.335 I 256 ' 19.469 182 3.174 140 1.382 126 
1979 40.316 182 5.557 • 220 12.233 . 254 | 16.942 158 2.533 128 1.798 120 
1980 51. "37 231 6.632 262 14.730  1 306 j 21.728 203 3.633 183 2.558 171 
1981 77.3 36 350 9.649 382 21.553 447 j 33.465 313 5.892 298 3.595 240 
(1) extra E.C. 
(2) Development  countries 
(3) State economic  countries (a) millions of ECU 
(b) index 1975 = 100 

- 29 -
TABLE c 
EXPORT TRENDS OF NON-ELECTRICAL  MACHINES 
(value millions  of ECU) 
Destination 
Origin 
Europe 10 
U.S.A. 
Japan World C1> Europe 10 U.S.A. Japan D.C. (2) Latin America Class 3 (3) 
1 (a) (b) (a) (b) (a) (b) (a) (b) (a) (b) (a) (bl (a) (b) 
1975 25.'.01 100 2.305 100 448 100 10.059 100 2.345 100 3.796 100 1976 28.972 114 2.577 112 482 108 12.045 120 2.300 9*1 4.297 11J 1977 32.5 V. 128 3.081 134 578 129 14.189 141 2.648 115 4.324 114 
1978 '.'..259 135 3.885 169 617 138 14.655 146 2.599 111 4.450 117 1979 .55.568 140 4.448 193 694 155 14.174 141 2.698 115 4.510 119 
1980 40.503 159 4.996 217 726 162 16.329 162 3.529 150 4.075 107 1981 107 
1975 16.997 100 3.458 100 666 100 6.312 100 2.865 100 602 100 1976 19.857 117 4.029 117 791 119 7.584 120 3.303 115 611 101 1977 19.695 116 4.298 124 756 114 7.454 118 3.240 113 379 63 
1978 20.908 123 4.802 139 830 125 8.021 127 3.667 128 392 65 
1979 23.656 139 5.682 164 1.029 155 9.071 144 4.306 153 427 71 
1980 29.424 173 7.272 210 1.296 195 11.710 186 5.495 192 , 321 53 
1981 41.643 245 9.628 278 1.889 284 17.051 270 8.051' 281 362 60 
1975 5.424 100 613 ICO 772 100 2.781 100 550 100 770 100 1976 6.948 128 800 131 1.139 148 3.532 127 654 119 818 106 
1977 8.S94 164 836 136 1.568 203 4.829 174 852 155 972 126 
1978 11.188 206 969-158 2.126 275 6.104 219 757 138 1.167 152 
1979 T i.9 08 201 1.158 186 2.206 286 5.750 207 S48 154 976 127 
1980 13.062 241 1.475 241 2.444 317 6.382 229 935 170 1.453 189 
1991 20.287 374 1.921 313 3.906 506 10.202 367 1.419 258 2.215 287 
(1 ) Extra E.C. 
(2) Development  countries 
(3) State economic  countries (a) millions of ECU 
(b) index 1975 = 100 
TABLE o 
EXPORT TRENDS OF ELECTRICAL  MACHINES 
(value millions of ECU) 
Destination 
Origin _ 
Europe 10 
U.S.A. 
Japan World (1) 
- I (a) (b) . ^—, 
1975 9.X34 mo 
1976 12.280 125 
1977 14.403 146 
1978 15.429 157 
1979 16.059 163 
1980 17.857 182 
1975 6.264 100 
1976 X.507 136 
1977 9.200 147 
1978 9.483 151 
1979 10.581 169 
1980 12.438 199 
1981 17.470 279 
1975 4.947 100 
1976 8.595 174 
1977 9.806 198 
1978 10.845 219 
1979 10.644 215 
1980 13.341 270 
1981 20.086 406 Europe 10 j U.S.A. Japan D.C. (2) _atin America i class 3 (3) 
(a) (b) (a) (b) (a) (b) (a) (b) (a) (b) (a) (b 
• • - - •-• 6?.4 ion '"105"'' 100 4.088 100 676 100 779 100 
884 129 150 143 5.564 136 830 123 840 108 
• 948 139 195 186 6.924 169 989 146 943 121 
954 139 222 211 7.898 193 955 141 993 128 
1.-157 169 246 234 7.73n 189 1.062 157 .062 136 
1.337 195 259 24 7 8.553 209 1.284 190 998 128 
1.4 25 100 335 100 2.678 100 1.111 100 98 100 
1.791 126 417 124 4.021 150 1.480 133 78 80 
1.991 140 418 125 4.489 168 1.559 140 89 91 
2.382 167 536 160 4.159 155 1.623 146 93 95 
2.853 200 754 225 4.459 167 1.920 173 112 11* 
3.517 24 7 770 230 5.180 193 2.381 214 123 1?(> 4.387 308 1.122 335 7.661 286 3.469 312 132 135 
680 100 1.393 100 1.976 100 324 100 224 100 
1.091 160 3.007 216 3.130 158 531 164 223 IPO 
1.339 197 3.023 217 4.084 207 638 197 2J9 107 
1.588 234 3.020 217 4.919 249 695 215 125 1'5 
1.596 235 2.546 183 5.184 262 738 228 381 V° 
2.033 299 2.885 207 6.59.1 334 1.054 525 586 
2.774 408 4.913 353 9.626 487 1.600 494 J 868 368 
(1) Extra E.C. 
(2) Development  countries 
(3) State economic  countries (a) millions  of ECU 
(b) index 1975 = 100 

- 30 -
TABLE E 
EXPORT TRENDS OF TRANSPORT  MATERIAL 
(Value Billions of ECU) 
' Destination World (1) Europe 10 U.S.A. Japan 1 D.C. (2) Latin Anerica Class 3 (3) 
Iris'" .• (a) (to (a) (b) 
t (a) (b) (a) (b) (a) (b) (a) (b) (a) (b) 
Europe 10 1975" 17.050 100 2.826 100 128 100 7.746 . 100 986 100 992 100 
1976 20.178 118 3.109 110 137 j 107 9.112 ! 118 1.177 119 830 84 
1977 22.893 134 3.938 139 182 142 10.003 129 1.182 120 703 71 
1978 22.052 129 4.496 159 272 213 9.416 122 1.081 110 525 53 
1979 2'..437 144 4.856 172 355 277 10.425 135 1.584 161 665 67 
1980 28.487 167 5.443 193 , 365 235 12.302 159 1.468 149 635 64 
U.S.A. 1975 13.927 100 1 .499 100 397 100 4.521 100 1.765 100 43 100 
1976 16.389 118 1.679 112 368 93 5.702 126 1.933 no 56 130 
1977 16.347 117 1.626 108 330 83 5.246 116 1.886 107 68 158 
1978 17.491 126 2.152 144 540 136 5.350 118 2.137 121 58 135 
1979 18.784 135 2.690 179 817 206 6.217 138 2.432 138 91 212 
1980 20.736 149 3.667 245 933 235 7.498 166 3.245 184 210 488 
1981 29.468 212 4.542 303 1.336 336 10.473 232 4.851 275 130 302 
apan 1975 11.715 100 1.231 100 2.648 100 5.902 100 1.102* 100 480 100 
1976 16.532 142 2.297 186 4.076 154 7.774 132 1.391 126' 283 59 
1977 20.505 175 3.176 258 5.756 217 8.853 150 1.757 159 292 61 
1978 21.528 184 3.162 257 7.189 271 8.447 143 1.722 156 390 81 
1979 18.763 160 2.822 229 7.481 283 6.009 102 j 946 ' 86 440 92 
1980 24.684 211 3.124 254 9.401 355 8.749 148 ,1.644 149 518 108 
1981 36.963 316 4.953 402 12.735 481 13.637 231 [2.872 261 514 (107 
(1) Extra E.C. 
(2) Development  countries 
13) State economic  countries (a) millions  of ECU 
(b) index 1975 = 100 
5. Production 
a) Finished  products 
On the basis of internal  consumption  and external trade forecasts,  the output 
of finished  products  in terms of weight is likely to fall by -3,6 % in 1985 
compared to 1980. . * 
For finished  rolled  product's,  this fall would be limited  to -1,8 % as a  slightly 
higher output of flat products  should almost make up for the  reductions  in 
heavy and light sections  (see also explanatory table  in the  Annex). 
PRODUCTION  1974 —- 1980 8 1985 TABLE 8 
LIQUID STEEL FOR CASTING,  INGOTS AND SEMIS FOR SALE, FINISHED  ROLLED PRODUCTS  
('000 000  tonnes) 
PRODUCTS 1974 1975 1976 1977 1978 1979 1980 1981 1985 
STEEL FOR CASTING (1) 2,1 2,0 1,8 1,6 1,6 1,6 1,6 1,4 1,4 
INGOTS AND SEMIS FOR  SALE (2) 10,5 11,0 9,7 9,1 11,3 11,5 11,1 12,0 9,1 
FINISHED ROLLED PRODUCTS 
Coils (finished  products) 8,4 7,2 8,6 10,0 12,0 12,6 11,9 14,1 12,9 
Heavy sections 10,5 8,9 9,0 8,7 9,3 8,8 8,4 8,5 7,2 
Light sections 25,5 19,8 20,6 19,0 19,4 21,1 19,6 17,0 17,2 
of which concrete reinforcing rounds (9,9) (7,9) (8,6) (7,7) (7,7) C8,8) (8,7) (7,4) (7,i) 
Wire rod 12,8 9,2 10,4 10,2 11,1 12,1 10,8 10,5 11,0 
Strip/tube  strip 8,2 5,5 7,1 6,4 6,6 7,1 6,0 5,2 4,9 
Heavy and niettiumplate . 17,6 14,5 12,5 12,3 12,6 13,0 12,5 12,8 12,J 
Sheet 29,3 21,7 26,8 27,4 28,0 29,2 26,3 26,1 2d,3 
TOTAL 112,4 86,9 95,0 94,0 99,0 104,0 95,5 94,2 93,8 
GRAND TOTAL 124,9 100,0 106,5 104,7 1-11,9 117,0 108,2 107,7 10 4,3 
(1) Including production  of independent  steel foundries. 
(2) Excluding  those for rolling or re-rolling  in the Connunity,  but including ingots  and semis for tubes. 

i>) liinde •••. c t'.I balance 
The rapid growth in continuous  casting makes it particularly  difficult  to 
compare crude steel output from one year to another  because of the savings 
in ingot steel. Over a long period, trends in crude  steel production 
underestimate the  real increase in  finished products. 
In the crude  steel balance, continuous  casting production  potential  for 1985 
is based on the  company returns corrected  by the historical  trend. One 
aim of the  Community  steel industry must be to obtain as  soon as possible 
a maximum continuous  casting output amounting to  some 85-90% of the 
necessary crude  steel production  potential,  well above the figure of 69 %  that 
can now be  predicted  for 1985. 
CRUDE STEEL BALANCE TABLE 9 CICj :C3 tonnes) 
~- 1974 1975 1976 1977 1978 1979 1980 1981 1985 
I. INGOT EQUIVALENT 
Consu-Dtion (1) 131,2 111,4 124,2 117,8 118,1 126,0 120,7 117,4 118,5 
:ariat ion in stocks (2) * 1.0 - i,1 • 5,7 - 1,1 - 0,7 ••1,5 - 0,7 - 3,6 -Exports  (]) 34,3 2t,8 21.5 27,7 33,2 32,1 2a,3 29,91 15,6 Imports 7,4 7,8 12,4 12,5 11,1 11,6 11,6 8,1/ Scrap consumption  in < roU ing mills 0,2 0,2' 0,2 0,2 0,2 0,2 0,2 0,2 
Production in ingot 158,9 129,2 138,8 136,5 equivalent 158,9 129,2 138,8 131,7 139,3 147,8 136,5 135,3 134,1 
II. CORRESPONDING  CRUDE STEEL PRODUCTION 
Continuous casting (3) 22,9 33,4 42,6 48,8 54,9 58,7 70,9 81,5 110 
production potential (3) 48,8 
Continuous casting 19,0 20,7 27,2 32^1 38,6 43,7 50,0 56,6 82,5 product ion (4) 32^1 
Continuous casting (5) 3,3 3,6 4,8 5,6 6,7 7,6 8,8 9,9 14,4 
correct ion (5) 7,6 
Crude steel production (6) 155,5 125,6 134,0 126,1 132,6 140,2 127,7 125,4 119,7 
(1) For the  forecasting  year , conversion  coefficient  equals 1.290. 
(2) Stocks held by producers and merchants. 
(3) Figure for 1985 is  estinated 
(4) Assumed rate of utilization  of production  potential 75 X in 1985. 
(5) Savings in  ingots obtained by continuous  casting production:  continuous  casting output x 0.175. 
(6) Ingot production - continuous  casting correction. 

- 32 -
c) Development  of mini-mills 
In the context of production structures,  the role of mini-mills  in the  current 
stage of development  of the European  steel industry should  be more carefully 
examined.  This type of works seems  likely to develop  and to complement  the inte­
grated works. 
1 • §£2D2H,.liL.§.§B££J-.§ 
The need to restructure  the European  steel industry inevitably  means that the 
role of mini-mills  in this new structure  has to be  defined. 
The fact that mini-mills  have obtained  more satisfactory  economic  results  than 
integrated  works,  indicates that  in the  future they could  handle the  production 
of all the  products  in the range  that they  are already producing successfully 
today. The integrated  works would then of course have to be  restructured 
accordingly. 
Mini-mills  have the edge  over integrated steelworks  in a number of factors 
such as : 
- very low investment  cost 
- simple administration 
- inexpensive sales organization. 
Then there is also the enormous  technical progress  made in electric  steelmaking 
over the past few years : 
reduction  in electrode  and electricity  consumption  (around  30%) and  increase 
in productivity  (up to 100%). 
Nevertheless  the most important factor  in this favourable situation  is the 
price of scrap. 
For the molten  steel cost  to be  the same in the  blast furnace  - oxygen  plant 
system as in the  mini-mills,  the price of scrap would have  to be as  follows 
(without consideration  of quality) : 
P 
(scrap) = 0.85 X P (pig) + C "02 - C 
el 
0.8 X 1.05 
Where 
P (scrap) is the price of scrap 
P (pig) is the price of pig iron 
G 02 is the production cost  in an oxygen  plant 
c 
el is the production cost  in an electric  furnace 

- 33 -
The average scrap price  is about 40 ECU  below  this break-even price. 
Obviously  this advantage  varies within  a fairly  wide range depending  on 
individual  geographical, technical  and economic  situations. 
The advantage  and competitiveness that mini-mills  have over integrated  works 
quickly  fall if scrap price  rise.  Experience  shows,  however,  that these  rises 
occur solely  in conjunction with corresponding increases  in steel prices, 
which means  that a satisfactory  profit  margin  is maintained. 
2. Qualitative and quantitative aspects 
This makes it  clear that  the question  of r  ni-mills  is closely linked  to the 
problem of scrap.  In the  case of Europe, here  is no  need to delve into  the 
question  of sponge  iron that could  be used in mini-mills  as an  alternative 
raw material since, quite apart from  the question  of its  availability  in suf­
ficient  quantities,  this product could  not be  sold below 130 ECU a  tonne, wich 
is about double  the current average scrap price. 
The problem  of scrap may be  examined  from three aspects  : 
- quality 
- general  availability  and changes  in the  requirements  of different  user 
sectors 
- regional  availability 
Quality 
Here the quality  of scrap is of  interest only insofar  as it  restricts  the 
range of products produced  by mini-mills.  In general these  works  confine 
themselves  to producing three  major  categories  : 
- concrete reinforcing  rounds 
- other  light  sections 
- wire rod. 

- 34 -
There is no doubt that the quality of the scrap would  allow 100% of the 
concrete reinforcing  rounds to be  produced  in mini-mills. 
As for the  production  of other light  sections  and wire rod, there are no 
precise  statistics  on quality  but numerous  expert findings indicate that  at 
least 60% of  this production could also  be turned out by mini-mills. 
If these are taken as reference figures  for 1985, it  would be theoretically 
possible  for the  mini-steelworks  to produce the following  : 
- concrete reinforcing  rounds 7.5  million  tonnes 
- other light  sections  9.7 x 0.6 5.8  million  tonnes 
- wire rod 11.0 x 0.6 6.b  million  tonnes' 
19.9 million  tonnes 
Assuming a capacity  utilization  rate of 85% and a  metal yield of 90%, a 
capacity of 26.0  million  tonnes  would be needed for this output. 
A survey of capacities gives  a figure of only 20.1 million  tonnes for 1981. 
On the basis of this figure  it seems that some additional  development  of 
mini-mills  would be possible. Nevertheless,  it should be borne in mind that 
capacity returns  are very conservative. 
Unfortunately  the works do not generally correct their capacity figures  when 
they increase productivity  and it is precisely  in this sector that,  as men­
tioned above,  productivity  has been substantially  improved. 
In the light of what has been said above,  it would be very risky  to encourage 
the construction  of new  mini-mills  from the point of view of overall capacity. 
This does not mean  that capacity revision  at regional level  would be desirable. 
However,  before tackling this  problem  it is  necessary  to investigate  whether 
there would be sufficient scrap available  for this expansion. 
General availability  and chanqes in the reauirements of  different  user sertoi 
AvailabiIity 
For the present  purposes,  trends in marketed  scrap only  will be considered. 
In 1974, the  volume of scrap sold  reached  a maximum at approximately  37 million 
tonnes.  Extrapolation  of that figure  would give approximately  47 million  tonnes 
for 1985. 

- 35 -
Since steel  consumption  within the  Community  has not  reached  ine expected 
level, this figure has to be revised to approximately 42 million  tonnes. 
Even this revised figure  appears  highly optimistic in  comparison  with the 
actual figure for 1982 of  about  33 million  tonnes. 
Obviously this figure  does not reflect real  availabilities  since it is 
distorted  both by low demand  and by a price level that discourages recovery. 
This means  that the level of 42 million  tonnes  could possibly be  reached  but 
that it  would be extremely  dangerous  to take a higher f  gure as a basis. 
-Trend in the  requirements  of the various  i,;,er sectors 
Scrap is used by the following sectors : 
- blast furnaces 
- oxygen  steel plant 
- electric furnaces 
- mini-mi  lis 
- special steels 
- tube manufacturers 
- steel foundries 
- iron foundries 
- exports. 
In blast furnaces,  consumption  has already fallen to a very low level and 
may be regarded as negligible for the future. 
Scrap consumption  in oxygen  steel plant is very  fluid,  varying  between  80 
and 300 kg scrap per  tonne  of steel. 
The reduction of process scrap with the introduction of  continuous  casting 
could therefore be offset by a reduction in specific input.  However,  it must 
be borne  in mind that a specific input of  between  200 and 300 kg of scrap can 
be converted into steel  almost  without  cost. At least  from the energy  viewpoint, 
it would  be uneconomic  to reduce  the specific scrap input in  oxygen  steel plant. 
Assuming  that the current input is  maintained,  these steelworks  would become 
net scrap purchasers and  under those conditions  about  10 million  tonnes  of scrap 
would have to be earmarked  for that  purpose. 

- 36 -
With regard to  special  steels,  the proportion  produced  in oxygen  steel plant 
is likely  to increase,  especially  with the introduction of ladle-metallurgy, 
and consequently  scrap requirements  in this sector may decline  slightly. 
Consumption  is likely to remain more or less steady in  electrical  melting 
shops producing  semis for tube manufacture. 
The same is true of  steel foundries. ; 
Activity  in iron foundries is  declining.  Nevertheless, the  price difference 
between  new foundry pig  iron and scrap is  sufficient  to encourage  foundries 
to make maximum  use of scrap. Consequently they  must be expected to use the 
same quantity of scrap as today  even if their activity  does not continue to 
decline. 
Up to 1977 the  European  Community  was a net  scrap importer.  Since then the 
situation  has changed  and in 1972 net  exports  amounted  to about 2 million 
tonnes. 
On the basis of the  above considerations, we  have adopted  three hypotheses 
for scrap requirements  other than in mini-mills in  order to ascertain the 
quantity that  will remain  available for  mini-works. 
Pessimistic  Mean  hypothesis  Optimistic  hypothesis 
hypothesis for min.i-mills for mini-mills 
for mini-mills 
Million tonnes  Million  tonnes  Million  tonnes 
Total scrap 
available 42,0 42,0 42,0 
Blast furnace • 
consumpt  ion 0,6 0 0 
Oxygen converter 
consumpt  ion 10,0 6,0 3,0 
Electric  melting 16,8 16,8 16,8 
shops and foundries 
excluding  mini-works 
(60% utilization  of 
existing  capacity; 
Iron foundries 4,0 3,5 • 3,0 
Net exports 2,0 1,0 0 
Available  for 
mini-mi I Is 8,6 14,7 19,2 

- 37 -
Even under the best possible conditions, the scrap available w.ll obviously 
not be sufficient  for the  total output  of the  products  for wich the mini-mills 
are best suited technologically.  Consequently  some reinforcing  rounds,  light 
sections and  wire rod would  still have to be produced  in integrated  works. 

- 38 -
6. Raw materials  and scrap 
a) Raw materials 
By 1985 and 1990, world iron ore output could develop as follows: 
TABLE 10 
IRON ORE PRODUCTION 
('000 000 tonnes) 
1980 1985 1990 
European Community 35,2 28,2 27,0 
Sweden 28,5 26,0 25,0 
Rest of Europe 18,6 20,9 21,9 
USA 77,8 73,0 68,0 
Canada 51,2 50,0 50,0 
Brazi I 91,5 102,0 140,0 
Mexico and rest of South America 40,3 43,4 46,2 
Africa 64,6 71,8 92,6 
Indi a 40,0 47,0 50,0 
Rest of Asia 2,0 2,1 2,8 
Australia  and New  Zealand 106,0 ' • 106,0 112,0 
China and North Korea 81,0 86,0 90,0 
USSR 249,0 260,0 270,0 
Other State-trading  companies 11,7 14,6 14,5 
TOTAL ROUNDED OFF . 895 930 1010 
With a safety margin of 10%, the supply and demand balance should  move 
towards equilibrium  point after .the enormous  supply  surplus of 1980. 
TABLE 11 
BALANCE OF SUPPLY AND DEMAND FOR  IRON ORE 
('000 000 tonnes) 
Supp ly Demand 
19S0 895 805 
1985 930 910 - 950 
1990 1010 1.000 - 1.050 
In the community, the  foreseeable  trend in steel output should  in 1985 result 
in an ore demand  of 130  million tonnes compared  with a 
consumption  of 146.8 Million  tonnes in 1980. 

. 39 -
Assuming  that internal  ore production  falls to 28.2  million  tonnes,  the balance 
to be covered  would be at 101, 8'  million  tonnes compared  with 
actual imports of 115  million  tonnes  in 1980. 
The Community  steel industry is now  participating directly  in five mining 
projects  in non-member  countries;  however,  most of its supplies are  guaranteed 
by long-term supply contracts.  There seems likely to be few  changes  in this 
situation  in the immediate  future, but in the  medium term the Community's 
financial  contribution to projects in  non-member  countries could be an 
additional  factor helping to  stabilize  its supply. 
b) Scrap 
To cover  their scrap requirements,  companies  mainly use  their own circulating 
scrap. Until quite recently  this source accounted  for 1^0% of the  total 
Community  supply. 
This proportion  will, however,  change considerably with the spread of 
continuous casting,  which reduces  own scrap  arisings.  The installation  of 
continuous casting in a  typical  integrated  works on average  increases the 
need for bought scrap (+ 115 kg per  tonne of finished  product), while 
the. combination of continuous casting with an  electric  melting  shop reduces 
the need for bought scrap (-40 kg per  tonne of finished  products). 
Assuming  a specific  scrap consumption  of 240 kg in LD converters, a  total 
continuous casting  weight of 70% (81% for  electrical  melting  shops and 
66% for oxygen  steel plant) and  supposing  that 26% of  total production  comes 
from electric  melting  shops, bought scrap requirements  would amount  to 
42.0 Million  tonnes  in 1985. 
TAHI.E 12 
('000 000 tonnes) BOUGHT SCRAP RfCiUIREMFNTS  IN 1985 
Proccs s Crude steel production Products 
for sale Bought scrap 
required per 
tonne of product bought 
scrap 
fc"lectric 
Oxygen 
Steel foundries 
Blast furnaces 0 , . u (25,0  continuous  casting 31,8 of uhi ch ( . 3 ( i,8 in ingots 
a, r , ... (57,5  continuous  casting 87,5 of which >-,n ., . J (.50,0 in ingots 
1,4 1,4 2?,7 
«,s 
'52,4 
23,5 (1.069) 
(1.109) 
( 180) 
( 65) 
( 830) 24,3 
5,0 
9,4 
1,5" 
1,2 
0,6 
TOTAL H'), 7 110,7 103,9 4?,0 j 

_ 40 1 
Total scrap resources  available  for the  steel industry  in the Community  should 
amount to 41.6  million  tonnes in 1985; by  then, supply  and demand  should be 
more or  less in balance. 
SCRAP REQUIREMENTS  AND RESOURCES  TABLE  13 
('000 000  tonnes) 
Crude steel production  (Iiq.st.excI.) 
Scrap consumption 
Own circulating  scrap 1974 1975 1976 1977 1978 1985 
Crude steel production  (Iiq.st.excI.) 
Scrap consumption 
Own circulating  scrap 153,5 
64,7 
31,0 123,5 
54,1 
26,1 132,2 -
57,7 
25,9 124,4 
55,0 
24,9 131,0 
59,1 
24,3 118,3 
53,3 
13,1 
Bought scrap requirements in  steel plant 
Consumption  in foundries 
Consumption  in blast furnaces 33,7 
1,6 
2,2 28,0 
1,6 
1,8 31,8 
1,5 
1,7 30,1 
1,4 
1,6 34,8 
1,3 
1,4 40,2 
1,2. 
0,6 
Total requirements 37,5 31,4 35,0 33,1 37,5 42,0 
New process scrap 
Capital scrap 15,2 
21,2 13,9 
17,o 13,f 
27, r. 
Total internal  resources 36,4 30,9 41 ,6 
Requirements  not covered by 
internal resources 1,1 0,5 0,4 
7. Energy 
In terms of quantity,  no energy supply  difficulties  are expected  up to 1985. 
The more complicated  and relatively  more important case  of blast furnaces 
calls for more detailed  comment. 
a) Energy consumption  in the  bla-st furnace 
Energy consumption  in the  blast furnace  (including  ore preparation)  fell from 
23.7 gigajoules  per tonne of pig  iron in 1974 to 22.9  gigajoules  in 1980, a 
reduction  of about 12%. For the  period 1981-85,  a slow but steady reduction 
in specific  energy consumption  may again be expected;  it should  fall by 
approximately  a further 10% to a  level of around 19 gigajoules.  However, gas 
and electricity  requirements  will rise from 2.24 gigajoules  in 1980 to 
2.4 gigajoules  in 1985 and  therefore  solid and liquid fuel requirements 
should amount to 16.6  gigajoules  per tonne of pig  iron in 1985. 
./. 

. 41 
b) Blast-furnace  energy supplies 
If the injection  of liquid and gaseous  fuels is abandoned,  ai'ound 42  million 
tonnes of coke will be required to cover pig  iron production requirements 
in 1985. Coke-oven  operators estimate that the  Community's  coking capacity 
should be 73  million  tonnes  a year by 1985, with an output of up to 
65 million  tonnes adequate  to meet demand from the steel and other  industries 
and for exports. 
c) Energy conservation (1) 
Energy accounts for  about 30% of  steel production costs in integrated steelworks 
and 20% in  electrical  melting  shops. Its ultimate impact  depends  on energy 
prices but can be reduced by  rational  utilization;  the energy savings obtainable 
in 1985 may be estimated at at  least 7-8% (5~6  million  tonnes  a year) of 1979 
consumption.  This will be. achieved by: 
- using raw materials that are  optimum  from the energy viewpoint; 
- more efficient  energy management,  e.g. heat recovery; 
- returning to  energy recovery techniques such as the recovery of  blast 
furnace gas  from high top pressure operation and of converter gas. 
8. Excessive imbalance  between  supply and  demand 
Stagnating  steel output in the  Community  combined  with slack  internal 
consumption  and an industry not competitive,  enough to increase its exports 
would not in themselves  have brought  about the structural  imbalance if 
at the same time production capacity had not increased  substantially  since 
1974, leading to a serious and persistent gap  between  supply and  demand. 
a) The main causes of the imbalance 
The capacity arose  from a combination of  specific  capacity decisions taken 
just before the  crisis hit and gains in  productivity  from restructuring  and 
rationalization  measures  taken as  soon as the  structural  nature of the 
crisis became  evident. 
i) The selling  prices during the  1973-74  boom had encouraged  many 
producers to  keep in production or  even to restart  marginal and 
inefficient  plants. 
ii) During the  same period, extensive investment  programmes  to increase 
capacity  had been decided on since  demand was expected to continue 
growing; it is estimated that these  programmes  led to a net capacity 
increase  of about 15% over 1973. 
(1) The Community  steel industry accounts for  about 8% of total primary  energy 
consumption  in the Community  and 20% of  consumption  by industry. 

_ 42 _ 
iii) The restructuring and  rationalization  measures  taken since 1975  have 
produced  a leap forward  in plant productivity.  Between  1972 and 1980 
tonnage  yield increased by an  average  of 47% for blast furnaces, 
oxygen converters and arc furnaces, 69% for  continuous  casting and 
105% for  strip mills. With production  remaining  steady,  this 
improvement  in productivity released capacity surpluses that  alone 
more than cancelled out plant closures. 
Since 1974, therefore,  enormous  imbalances  have been created between  supply 
and demand  in all the  main product  categories. On  average  installed 
production capacity has  exceeded  by 23% for  crude steel and 27% for finished 
products  the theoretical capacity required to  meet production  requirements 
at utilization  rates of 85% and 80% respectively. In 1980 and 1981,  these 
structural  surpluses  worsened  (see Table 14). 
TABLE 14 
TRENDS IN SURPLUS PRODUCTION  CAPACITY 
('000 000  tonnes  and X) 
Year 1974 1975 1976 1977 1978 1979 1980 1981 
Products t % t X t X t X t X t • X t X t X 
I CRUDE STEEL -4,0 "2,2 42,0 22,1 39,9 20,2 52,3 26,1 46,1 22,8 37,9 18,6 52,1 25,7 50,3 25,4 
II FINISHED PRODUCTS 
Light and heavy sections 
(+ tube semis) 0,4 0,8 11,7 23,0 11,8 22,9 13,2 26,3 12,6 24,9 9,6 19,6 12,1 24,7 15,9 31,6 
Wire rod -0,6 -3,9 5,0 30,7 3,7 22,2 4,8 27,3 4,8 24,3 3,1 16,4 4,8 25,1 6,0 30,8 
Strip and tube strip 0,6 5,5 4,1 37,3 3,0 25,2 4,0 33,3 4,1 33,1 3,2 26,2 4,0 34,8 4,4 4U,4 
Hot-rolled sheet 8 plate 0,3 1,3 5,7 23,7 9,2 36,7 10,8 40,9 11,3 41,2 9,9 35,5 10,2 37,1 9,6 34,8 
Cold-rolled  sheet & plate 1,8 4,8 13,5 33,4 8,0 19,4 8,8 20,6 8,2 19,1 7,5 17,1 11,6 26,1 11,4 25,9 
2,3 1,7 39,8 27,9 35,6 24,3 42,0 28,2 41,0 27,0 33,6 22,1 42,8 28,3 47,3 3U 
III COILS "1,5 "2,7 18,5 30,2 9,6 15,2 12,0 17,9 9,3 13,7 7,9 11,3 16,0 21,9 14,9 20,3 
N.B. The assumed  utilization  rate is 85X for  crude "steel and 80X for  finished  products. 
Consequently  the Community  steel industry has  been unable to adapt its 
structures to a  market no longer exhibiting high and  lasting  growth,  but 
showing more and more signs of  instability. 
b) Wider adverse  effects 
It is not so  much sluggish  demand  as investment  decisions  (which have not 
been corrected or  compensated  by shutting  down marginal  plant) and 
improved  productivity (substantial but  insufficient  to restore  real 
competitiveness) that  must be blamed  for creating  this vicious  circle, 
the harmful  impact  of which is intolerable for several  reasons: 

- A3 -
i) Utilization  rates have declined substantially  in the Community.  For 
crude steel, they have dropped  from 87% in 1974 to an  average of 65% 
since that  date, and there was a further  fall in 1980-81.  Compared  to 
a theoretical  utilization  of 100%, the  specific  impact of these rates 
may be estimated  to add  around 22% to  operating costs (excluding  financial 
costs and taxes), a burden equivalent  to the  cost difference  between 
the lowest  effective  utilization  rate (55%) and the  highest (95%). 
Over that period, therefore,  the Cormiu'inity industry  was at a  great 
disadvantage  in comparison  to the US  industry,  which succeeded  in 
maintaining  a capacity  utilization  of between 85 and 90%.  Although 
the Japanese  industry  experienced  a similar  fall to the  Community,  it 
managed to reduce the impact substantially  by achieving  major impro­
vements in performance  for the  other prime cost components;  at present, 
the break-even  point in Japan is close to a capacity  utilization  of 60%. 
ii) Tlie average  technical quality  of the  plant has suffered  because  obsolete 
plant has been kept in service,  and as a  result plant  replacement  and 
modernization  is lagging behind the Japanese  industry,  which has shut 
down much  obsolete capacity  and replaced it with  modern  plant (the figures 
for 1977 to  mid-1979,  for example,  were -23.2 and +22.6  million  tonnes 
respectively).  The percentage  of plant classified  as technically 
obsolete by international  standards  is much  higher in the  Community 
than in Japan, while the reverse situation  is found for technically 
excellent  plant (1).  In terms of operating costs,  the difference 
between  excellent  and obsolete plant  is on average  around 25%: 
together with  the capacity  utilization  rate, this has the  greatest 
unit impact.  Even though the ECSC  industry  has got  rid of its basic 
THOMAS converters  and almos't all of its open-heart  furnaces,  light 
plate and sheet mills, there are large gaps between the average 
technical  levels in the Community  and Japan for the main phases 
of the steel production  process  (Table 15). 
(1) The plant in 62 steel companies  accounting for  88% of Community  ordinary 
steel output in 19/9-80 have been compared  with that  of Japanese  companies 
accounting for  a similar  percentage  of Japanese  output. For each stage in 
the production cycle,  specific  evaluation  criteria  (age, dimension,  special 
characteristics  affecting plant  efficiency),  weighted  according  to their 
impact on competitiveness,  have been used to classify  plant at five levels 
of technical  performance  ranging  from excellent  to poor. 
./. 

- 44 _ 
TABLE IS 
TECHNICAL LEVEL OF STEEL PLANT IN THE COMMUNITY  AND IN JAPAN IN 198U (*) 
Type of  plant Total capacities X of capacity classified  as: 
Type of  plant examined 
(mi11ion tonnes) 1 + 
(excellent ) 1-(average) 2 3 
(poor) 
BLAST FURNACES EEC 132,8 20 13 12 22 32 
JAPAN 156,1 58 15 12 7 8 
OXYGEN CONVERTERS E E C 53,6 36 37 23 5 0 
JAPAN 64,6 51 35 10 4 0 
WIDE HOT STRIP MILLS EEC 70 23 16 32 24 
5 I 
JAPAN 53,/. ' 42 31 9 12 5 
PLATE HILLS EEC 15,2 20 8 24 35 13 
JAPAN 21,2 82 10 8 0 0 
E E C 34,2 8 26 29 27 10 
COLD ROLLING MILLS JAPAN 23,2 44 23 10 17 COLD ROLLING MILLS JAPAN 23,2 44 23 10 17 6 
(«) In some cases the most  recent  data available  on mills date from 1977. 
The gap is  particularly  large for blast furnaces,  which account  for 
around 60% of  production costs (excluding depreciation  and financial 
costs) at the  semis stage; in the Community  their average  productivity 
is only one-third that  in Japan, mainly  because  of their smaller  dimensions 
and lower energy  yield. 
In continuous  casting  too, the Community is  lagging well  behind at only 39% 
production  compared  with 71% in  Japan. Because  of its more recent 
introduction  and the  scattered  installations,  continuous  casting  in the 
Community is  also at a cost disadvantage  compared to  Japan,  estimated 
at about 12% for a  sample  representing  65% of  total continuous  casting 
capacity. 
The only Community  installations  that are technically  more efficient 
than in Japan are electric  furnaces. Overall,  the percentage  of 
obsolete plant  in the Community's  total production capacity  is 
approximately  equivalent  to the  capacity surplus,  so that the degree 
of modernization  of the  plant sufficient  to meet demand,  provided  the 
most efficient  plant is selected,  is remarkably  close to that of the 
Japanese  and well above that of the  North American  steelmakers, 
iii) Although  the incidence  of surplus capacity  on costs varies according 
to the structure  of the company  concerned  and although  it can be 
offset at microeconomic  level by savings  on other costs factors,  its 
adverse  effect on selling  prices  is widespread  and persistent. 

_ 45 _ 
Because  of the narrow  gross margins  in the industry, any  change  in the  relation 
between  prices and costs has a  major impact  on company  results.  This is  what 
happened  in the Community  up to mid-1981:  the companies'  efforts  to increase 
sales so as to  share fixed costs caused  them to base prices on marginal 
rather than total costs. The  widening  gap between  total costs and those 
selling prices was  reflected  in the  final disastrous  results. 
In the Community,  the combination of  adverse  factors  more or less  directly 
linked to surplus capacity is therefore  intolerable:  from the cost aspect 
alone, the cumulative disadvantage in  terms of operating costs  from the 
combination of obsolete plant and rock  bottom  utilization  rates (55%), 
compared  to the combination of excellent plant and a  peak effective  utilization 
rate (95%), is on  average  about 47% and may go up to 60%. 
To have an idea of the  relative  importance  of these two factors it is 
sufficient  to compare  them with other variables: the gap  between  European 
and Japanese  average  hourly labour costs  adds an average  of 7% to operating 
costs, while the. difference  between  energy  costs for  Community  producers 
(including  subsidies) and for  American  producers  amounts  to an insignificant 
disadvantage of 1%. 
To judge from the 1981  investment  survey in the  Community  and the production 
needed to meet foreseeable  demand,  the overall  imbalances  between  demand 
and supply  will continue. In 1985 they could  amount  to 29% for  crude steel 
and 33% for  finished  products, ranging  from 44% for hot-rolled 
sheet to 23% for  cold-rolled  sheet (Tables 16 and 17, sec  page 38). 
It is true that these figures do not take  into account  closures already 
planned under the regulations orv aid to the  steel industry, but so far 
these closures are  insufficient  to modify  the results  significantly.  Any 
overestimate in the declared capacity so as to  have higher quotas  under 
the crisis scheme  would not be of a  sufficient  volume  to reduce  the gravity 
of the situation. 

_ 46 -
TABLE  16 
BALANCE  DETUEEN SUPPLY  AND  DEMAND  - 1985  - EUR  9 
C 000  000  tonre 
Products Product; Prod. 
potent. Prod. Prjd. 
potent. Est imated 
Prod. Necessar> 
Prod.pot. Prod.pot 
annouced Rate of utilization Surplus capacity 
1QRS 
19BO 1980 1981 1981 1985 
(1) 19BO 1980 1981 1981 1985 1985 
(1) 1935 1980 1981 1985 Tonnage 
I. CRUDE  STEEL 127,7 20 2,5 125,1 197,7 119,7 140,8 197,0 63  r1 63,3 0,8 5«, 2 28,5 
II. FINISHED  PRODUCTS -/ 
Heavy  sections 8,4 15,7 8,5 16,0 7,2 9,0 15.« 53,5 53,2 46,2 6,6 42,3 
Light sections 10,9 18,1 9,5 18,3 9.7 12,1 19.4 60,1 S1,9 50,0 7,3 3?,é 
Concrete reinforcing 
rounds 
Wire rod 8.7 
10,8 12.2 
19,1 7,4 
10,5 13,0 
19,5 7.5 
u.o 9.4 
13, 8 12,4 
19.7 71,2 
56,6 57,0 
54,0 £0,5 
55.8 3.0 
5,» 24,2 
29,9 
Strip 6,0 ".5 5,2 10,9 4.9 6,1 10,7 52,2 47,6 «5.8 4,6 43,0 
of uhich  EX  SPEC.M.U. (4,3) (7,9) (3,4) (7,1) (2,5) (3,1) (6,5) (54,8) (48,0) (38,5) (1,4) (52.3) 
Hot rolled sheet  & plate 
(2), 
of which  EX  SPEC.hiLL 12,6 27,6 13,0 27,6 12.S 15,6 27,9 45,7 47,1 44,8 ' 12,3 4V Hot rolled sheet  & plate 
(2), 
of which  EX  SPEC.hiLL (9,7) (19.2) (10,4) (19,0) (7.5) (9,4) (19,0) (50,7) (54,7) (38,5) (9,6) ! :C,5  ) 
Cold  roUed sheet  &  pLat ; 26,2 44,4 26,0 44,0 28,1 35,1 45,5 59,1 59,0 61,8 10,4 22,9 
TOTAL  (3) 83,6 148,5 80,1 U9,2 80,9 101..1 151,3 56,3 53,7 53,5 50,2 ;:,2 
III. WIDE  STRIP 45,3 72,9 46,5 73,4 51,5 64, 4 76.5 62,1 63,4 67,3 12,1 15, e 
of which CoiLs  nu-  Pr\;il 11,9) (17,2) (14,1) <18,6) (12,9) ( 1 6, 1) (19,5> (69,4) (76,2) (66,2) ( 3,4) 
! 
(1) Assuming  a rate  of  utilization  of U5 X for  crude Steel  and  80 X for  finished roUed products 
(?) Including strip  and  hot  sheet from  coiIs 
(3) Not  including coils p-.n  • frVl. 
T-3L.E  17 
5A1 6\'*F  3=T»=?fj  : po_¥ 2«m  :=*A^D  F:R  C^Li -:t ion c •~ o O f c 
X o -* 
L. ••- iB 
X n •— c ro-« il -r- % I 
•jrp L-5 caea:ity 
PRODUCTS  k PRODUCTS  k 
Prodi 
from »• > 
&t c 
s ° •0 —' 
E i- — i, O O 
OH-  U ti U b 
u O *-• ii c O 2 CL  C o "o i 
CO« 
C L- O 
<c o. o. 1* —' 
t *-• X 
Coils  as  finished products 12,V 1,00 12,9 16,1 19,5 66,2 17,4 
Strip CD 2,5 1,05 2/6 3,3 
Hot-rolled  sheet  (2) * """5," 1,07 5,4 6,8 
Cold-rolled sheet 28^1 1,09 30^6 38^3 
TOTAL 48,5 -- 51,5 64,4 76,5 67,3 12,1 15,« 
(1> 50 X of  total  strip production. 
(2) 40 X of  total  hot-rolled sheet production. 

- 47 -
•Steel research  anc development. 
Technological progress, arising  from the successful exploitation  of 
research  and development  effort,  has made a  major  contribution  to the 
advancement  and to the  growth of the  steel industry  worldwide  over 
the past  two to  three decades.  The economies  of scale obtained  from 
large-volume  blast furnaces,  the introduction  of basic oxygen  steelmaking 
with its high productivity,  the replacement  of conventional ingot 
casting by continuous  citing  and the  automation  of production 
processes using  computers  are all outstanding  examples  of the way in 
which new technology  has lead to major economic  benefits  and improve­
ments in the  quality  of steel plant products. 
However,  the r-xtent to which productive efficiency  in the  industry 
has benefited  from these advances  has varied considerably with  Japanese 
steel manufacturers  surpassing their  major  competitors  in Europe and 
North America  in many key  aspects  of production  and processing  as well 
as in product  development. 
The impressive progress  made in  Japan has been due, in  large part,  to 
the increasingly significant innovative contributions that  have been 
mode by its industry  to steelmaking since  the late 1960's.  Undoubtedly, 
some of the  factors responsible  for this surge in technological progress 
were the economic  aims and policies  o* government  and management,  the 
stimulus  of extremely rapid expansion  in production  (22 million  tonnes 
in 1960 to 117 million  tonnes in 1974) to meet growing  demand  along with 
an ability  to adapt quickly  to changing  world conditions. 
More recently  the fortunes  of the  steel industry  worldwide  have been 
changed  markedly  by the  economic  recession that followed  the 1973-1974 

- 48 -
oil crisis  and which  still  persists.  The consequences  have been 
particularly  harsh in the  Community  highlighting  structural  weak­
nesses and reduced international competitiveness. 
It is evident that the  steel  industry in  Europe  as well as in other 
advanced  countries is in a new period in its  development.  Thus,  in 
attempting to forecast trends in research and technological progress 
it is necessary to recognise  this changing  situation  in which  most 
of the early factors underlying the period of rapid progress  seen 
over the past  thirty  years no longer apply e.g. strong  economic 
growth and low energy costs. Therefore, there is  ample  reason to 
expect that the  improvement  of existing  and the  development  of 
new technologies  will remain an extremely active and competitive 
area whereby  all major  steel  producing countries  will strive  to 
strengthen  their  competitiveness. 
Within the forseeable future no dramatic  change  in iron and steel­
making technology is envisaged and progress, for the  most part, 
will be gradual and incremental. Consequently, it is  realistic  to 
expect that the industry  will remain  dependent  on the  traditional 
blast furnace - basic  oxygen  furnace production  method  (and thus on 
loklmi  r.o.il)  <is the m.Hn  mo.ins  of r.teel mnnuf  <ic turr, alorw) with thr 
scrap-electric  arc furnace route. While  industrial'  research  will be 
concerned primarily with improving these  existing  production routes 
through optimization and better control, longer-term  effort  will include 
more speculative projects on the technical and  economic  feasibility 
of radically  new processes for  iron and steel  production. 
In contributing to improved competitiveness and to the modernisation 
and rcstructing  of steelmaking in the  Community,  research and develop­
ment will have the following important objectives: 

- 49 -
- reduce costs and  enhance  productivity 
- up-grade  product  quality 
- minimise  capital  costs and  capital  expenditure 
- improve the performance of products and  expend  the range of  steel 
utilisation. 
Some of the areas  where  research  will be active over the  medium-term  are outlined 
below. 
The problems related -  directly  or indirectly-  to energy  will have a major  impact 
on the technological  needs of the  steel  industry influencing production  methods, 
{he markets for  steel products and the types of  steel  that  will be required 
to satisfy  these markets. Indeed, the  fact that energy accounts for  some 30X 
of the cost of steelmaking  itself  makes  this a profitable  area for process research 
and development  work. 
In production, the two  major  issues  will continue to be energy  economy  and 
increased  flexibility  in the use of  different  energy types. In connection with 
the latter,  a major  effort  will be directed at  shifting  steel  plant energy 
requirements from oil and natural gas to higher coal percentages and at reducing 
the consumption of  more costly  coking coals.? 
Coal injection  systems provide an  attractive  means  of replacing  heavy  fuel oil 
as an injectant in the  blast  furnace and  their  wider adoption  will call  for further 
research.  Coal injection  in basic  'oxygen  steelmaking  will also be investigated 
aimed at increasing allowable scrap rates and thereby take advantage of  market 
fluctuations  in scrap  prices.  Reduced  coke rates can be expected from the 
improved operation and control of^the  blast  furnace  resulting  from a better under­
standing  of such aspects as the cohesive  zone while the search for  methods  to 
produce high-quality  coke from low-grade coals  will continue. 
Interesting  prospects are offered by the adoption of  plasma  gas heaters in  iron and 
steel production ; while  this technology is in the  initial  stages of  development 
research  to-date indicates that the application of  plasma  heating in the  blast 

- 50 -
furnace  will reduce  significantly  coke requirements as  well as raise  producti­
vity. 
In the area of energy conservation there are a  number  of technical  approaches 
to the problem which include the recovery of the  latent  and sensible heat of 
basic oxygen  converter*exhaust gases, the sensible heat of converter slags and 
the more effective  utilisation  of by-product gases within the  steel  plant. In 
rolling  and finishing,  energy saving may be achieved by adopting  direct-rolling 
and hot charging but the extension of these practices  will depend  on the 
development of on-line hot Inspection and  repair  systems to  meet stringent 
surface  quality  requirements. Furthermore, the preheating of  electric  arc furnace 
,scrap charges using the sensible heat of waste furnace gases with or without 
supplementary  fuel combustion provides a valuable  means  to economise on  electrical 
energy and to improve plant  productivity. 
It should be noted that in  this area, many of the necessary technologies are 
available  so that  further  research  work  will be largely  preoccupied with  their 
improvement  and extension. 
The adoption of continuous casting is another established  means of achieving 
major energy  economies  and it is envisaged that production  potential  in the 
Community  will reach  110 million  tonnes'by  1985 i.e.  59% of total  steel  production 
potential.  Research in  this area  will be dominated by increasing product  quality 
requirements as  well as the  need to raise  plant  productivity.  Horizontal continuous 
casting  with its lower investment costs  will remain an  active  area of development. 
Progress in automation, mechanisation and robotics  have been quite  startling  in 
various  industrial  sectors in recent years e.g. automobile industry, and 
increasing  emphasis  must be devoted to  their  exploitation  in steelmaking. 
Priority  will need to be given, for  example,  to the wider  application  of 
automation and to the development of  more technically  advanced  computer  control 
systems  directed  at improved  equipment  utilisation,  enhanced  and more consistent 
product  quality,  decreased manufacturing costs and improved interconnection 
between  different  production stages e.g. continuous casting  machine  and 
rolling  mill.  Overall progress here  will be linked  to improvements  in instrument­
ation for monitoring and inspection as  well as for  measurement  and control. 

- 51 -
In addition  to the  references already  made to coke another aspect  of raw 
materials  concerns scrap which  Is particularly  valuable  because  of the  great 
differences  in energy requirements  for melting scrap  as compared  with the 
reduction  of iron ore. It is  apparent that  most short-to-medium  term techno­
logical  changes  will tend to increas.*?  the use of  scrap; these  changes  include 
the growing  use of  electric  arc furnaces  and continuous casting  as well as the 
modification  of basic oxygen  furnaces  to increase  the proportion  of scrap charged. 
In addition,  demand for  high-performance specialty steels i~ growing which 
incorporate  higher proportions  of alloy and other materials thot  make scrap 
recovery  difficult.  These  developments  have important implications  for the 
future demand and  availability  of scrap and tnus its price. 
Future options that  might be used to overcome  possible scrap supply  problems 
include  expanding  the use of  sponge  iron produced  by direct  reduction. This 
should serve  as a stimulus  to further research  and pilot scale demonstration 
aimed at the  development  of more  economically  attractive  as well as environmrntnlly 
acceptable processes  for sponge  iron production  in the Community ;  these would 
need to be  based on the  direct  utilisation  of coal or the  combination  of direct 
reduction  and coal gasification  rather than  on costly natural  gas as the  reductant. 
An increasingly important requirement  in steelmaking  is for  plant and equipment 
to have greater  flexibility  to meet a  broader  range  of product  specifications. 
Engineering  has a  vital contribution  to make in  this respect  to enable 
installations  to handle frequent  changes  in production schedules while,  at 
the same time, being capable  of achieving  minimum  production costs.  An additiorml 
challenge  to development  work in  this field will  be the  need to upgrade  existing 
installations  for better productivity, less  maintenance  and, again,  more 
flexibility. 
In steel  product technology  the progress  will again be incremental rather than 
dramatic  and some of the  factors that  will influence future  developments  are : 
- need to meet  increasingly stringent user requirements with regard  to 
durability,  reliability,  uniformity  and costs ; 
- need to make  products that  are better adapted  to specific  applications  and to 
produce  more sophisticated higher value  added  products  particularly  for the 
needs of export  markets  ; 

- 52 -
- need to acknowledge  and to  respond  to changes  both In steelmaking 
technology^nd  in the  pattern  of steel consumption  where,  in domestic 
markets,  it appears  that there  will be a sustained  or even modest 
growth for sheet products while  demand for  long products  will  fall 
(see Section  II.3) ; 
- need to meet  growing  competition  from alternative materials  such as 
aluminium  alloys  and plastics particularly  in such key user sectors 
as the automobile industry  ; 
- need for even closer collaboration  between  steel  producer  and steel user 
in order to establish  a more  offensive strategy  in the  promotion  and 
development  of new and  existing  markets. 
In view of the  wide diversity  of steel products  it is  difficult  to single  out, 
priorities  but it is  thought  that a major  factor affecting  developments  in this 
area is the  energy  shortage. Steel products play  an important role  in energy 
resource exploitation  and transport (offshore structures, transmission linepipe) 
and in energy  production  (electricity  generation)  and the  growing  needs of the 
energy sector  will place greater  demands on  steel.  Also, high strength steel 
grades  will provide  means of  energy  savingin  the automotive  and transport 
sectors since decreasing vehicle  weight  leads to fuel savings.  The need to 
extend the useful  life of components  and products,  which  is another  aspect 
of energy  conservation,  will require  improvements  in corrosion resistance 
and protection (coatings) of-products  as well as in  their mechanical properties. 
In parollel  with specific product  development,  there  will be further  more basic 
work undertaken  in such areas as strength  and fracture characteristics, fabrica­
tion techniques (particularly welding  and weldability), formability, high 
temperature  behaviour  and the  structural  performance  of steels.  The better 
scientific  understanding  of properties derived  from this research  will indicate 
how improvements  may be  achieved  in addition  to providing  background  data that 
will aid in  engineering design  and in  establishing international  codes, 
regulations  and specifications. 

- 53 -
Whltr the future trends In research outlined  above  may well  find broad 
acceptance, there remains the important question of how  will the continuing 
difficult  financial  situation  in the industry influence research funding 
and the rate at which technological progress is  made. 
Firstly,  due to the  limited  availability  of capital,  it Is  logical  to expect 
that preference  will  be given to investment in new t<- ..nology  where the cost-benefit is  most 
favourable and lead times are  relatively  short. This  approam  will clearly 
influence  priorities  In research planning and e.  ouraye  projects aimrd Jt 
devising  capital  saving technologies e.g.  lesr :ostly  plant and  equipment. 
Secondly, the prevailing  financial  climate is having repercussions on the 
industry's  ability  to support an  adequate  level  of research and  development 
activity.  Estimates of funding for  steel  research  show that expenditure in 
the Community  is, on average, 2.2  ECU/tonne  of steel  output  compared  with 
2.7 ECU/tonne  in the USA and 4.0  ECU/tonne  in Japan. Furthermore, the  effecti­
veness of this lower  level  of support in  Europe  is diminished by the duplication 
of effort  that takes place in research at the national  level. 
Against  this background,  there is the  danger  that the rate of technological 
advance  and thus the technological competitiveness of steelmaking in the 
Community  will  fall behind in the years  ahead  or it  will become 
increasingly  dependent  on licences and  know-how  purchased from foreign sources. 
There is a need,  therefore, for the  Community's  steel 
Industry to  examine  the scope  that exists for greater collaboration on 
research in areas  where  questions of competition and commercially sensitive 
issues are not of  immediate  concern. At present the  most extensive cooperation 
occurs within the  ECSC funded  programme  which represents  some  P,'/. of the  total  effort 
on steel  research in the  Community. 
The opportunities for  Improved  coordination and closer collaboration In the 
steel sector are believed to  exist  in more fundamental and longer term 
research as well-as in production and processing ; Indeed the potential 
benefits  in this latter  area could be substantial in view of the high costs 
frequently  involved. The  realisation  of this goal must be one of the  major 
challenges facing those  engaged  in the technical  affairs  of the  Community's 
steel industry over the  medium  to long term. 

- 54 -
In meeting the  common  technological  needs of the  Industry continued 
support  will be given by the Commission to  research  and development 
while a new  initiative  on pilot scale projects  will provide  a valuable 
and necessary  stimulus  to the  transfer  of research  to large scale  demon-
stration  and ultimate  commercial  exploitation. 
PE/fc 
26.11.1982 

ANNEX 
A..GENERAL  METHODOLOGY FOR THE  PREPARATION  OF FORECASTS 
1. The following  have been prepared for  the Community  on the  basis of studies 
conducted  in each country  on consumption  in the  user branches between  1970 
and 1978. 
a) A table of steel consumption  by products  and sector  Cor 1978, taken  as the 
reference  year for  forecasting  (ordinary  ste 1 and  special  steels). 
b) Sectoral  tables  showing  the trend in spec ^.c consumption between  1970 and 
1977 for each type  of product 
steel consumption  kg  steel 
CS = - . 
production  tonne  of product 
For the total (EUR 9), the specific  consumption  of each country  has been 
weighted  by sectoral  production  each year between  1970 and 1977. 
c) Series of activity  indices,  by user sector,  using a statistical  data base 
recorded in the  form of time scries and managed by the CRONOS  system. These 
indices based on 1975 = 100 are  indices of value added  at factor costs and 
constant  prices.  For three sectors,  these  activity  indices  were calculated 
as follows: 
+ "other consumers":  production  indices  weighted  by consumption  in 1977 
+ "shipyards":  compensated gross  registered  tonnage indexes  (1 000) 
+ "manufacture  of tubes":  production  indices. 
2. The figures  given for 1985'represent  the trend level established  as follows: 
a) Forecasts  for the development  of activity  in the  sectors are based on 
the relations  between  this activity and the evolution  expected for  the 
period 1980-85 of the main macro-economic  variables: 
1. GDP 
2. Private and public consumption 
3. Gross  fixed capital  formation 
4. Industrial  production; 
These macro-economic trends  were established  in the  fifth medium-term 
economic  policy programme  drafted by the Commission in  cooperation  with the 
Member States; 

Annex 
b) Forecasts  of consumption  by products  are made by applying to the  activity 
of the user sectors  specific  steel consumption  coefficients obtained  from 
the historical  trend, where necessary  corrected  in accordance  with the 
i latest  developments. 
I B. EXPLANATORY TABLE  OF PRODUCTION  FORECASTS 
The following points  concerning  the product  categories  in Table 8 should be noted: 
a) There has been no independent  forecast  for coils as finished products. 
Production  for 1985 is established  by assuming  that the breakdown  of 1981 
demand amongst  heavy and light plate,  sheet and coils will remain unchanged. 
In the light of past trends, it is  probable  that this will slightly 
underestimate  production  but the  effect  will not be significant.  In that 
case, hot-rolled  wide strip production  will be slightly  overestimated  because 
of the increased  demand for  sheet or light and heavy plate owing'to  the 
fact that more material  is lost in the  working of these products  than in the 
case of coils as finished products. 
b) Similarly,  the forecast  for concrete reinforcing  round production  is based 
•on a more or less constant  share of this product  within the light section 
category. 
c) The heavy andlight plate  and sheet categories include  hot and cold-rolled 
products . The following table  shows the  breakdown  between  hot and cold-rolled 
sheet and plate, once again assuming  that the structure  will remain unchanged 
from the previous period. Since  the quantities involved  are very small,  this 
distinction  is only of interest  for the  accurate calculation  of cold-rolled 
plate and sheet demand. 
(Annene) 
PRODUCTION  OF PLATE  AND SHEET  1974  TO 1981  ANC 1985 
('000 000 tonnes) 
MIOOUCTS 1974 1975 1976 1977 1978 1979 19oü 1981 1985 
HEAVY AND LIGHT  PLATE 17,575 14,494 12,526 12,262 12,6dl 13,005 12,461 12,839 12,3 
• hot-rolled 17,450 14,382 12,366 12,097 12,-1- ^2,i22 i:,265 12,626 '2,1 
•cold-rolled 0,125 0,112 C,16J 0,165 0,167 0,183 C,196 0,213 0,2 
SHEET 29,269 21,731 26,766 27,374 28,032 29,248 2s,332 26,102 28,3 
•hot-rolled 0,559 3,291 C , 32G 0,J9û 0, 454 0,451 0,335 0,340 
• told-rolled 28,710 21,440 26,446 26,984 27,578 28,797 25,997 
1 25,/o2 
TOTAL COLD-ROLLED  PLATE  AND SHEET  25,975 28,1 
tOTAL HOT-ROLLED  PLATE  AND SHEET  . 12,966 12,5