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COM (85) 774 
 
 
 
Vol. 1985/0 260 
  
 
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COMMISSION OF THE EUROPEAN COMMUNITIES
COM(85) 774 final
Brussels, 18 December 1985
GENERAL OBJECTIVES STEEL 1990
Position of the Spanish and Portuguese Authorities
COM(85) 774 final

Introduction
Before finally adopting the text of the General Objectives Steel 1990, 
the Commission undertook official consultations with the new member 
countries of the Community.
The comments of the Spanish and Portuguese Authorities on the working 
document "General Objectives Steel 1990" (C0M(85)208 final) of 
31 May 1985 will be found below.
The points made in these documents, however, relate only to the two 
countries concerned since they were unable to participate, unlike the 
other Member States, in the drafting of the general objectives, nor were 
they at that time represented in the consultative bodies provided for in 
the ECSC Treaty.

3.
'General Objectives Steel 1990"
Position of Spain
The working document "General Objectives Steel 1990"(1), transmitted by 
Directorate General III of the Commission to the Directorate General for 
the Steel and Shipbuilding Industries of the Ministry of Industry and 
Energy, basically lay down the macro-economic structure in which the 
present Community's Steel Industry will have to draw up its medium-term 
industrial strategy. The document contains several references to the 
current and future situation of the Spanish steel industry;, the working 
hypothesis presented consists in a transposition of the forecasts for 
1986 for apparent consumption, the net foreign trade balance and the 
production of ECSC steel products in Spain to 1990. The forecasts were 
transmitted by the Spanish Delegation to the Commission during the 
Summer of 1984 at which point the negotiations for accession to the 
European Communities were taking place.
Having analysed this document, the Directorate General for Steel and 
Shipbuilding Industries thought it best to communicate to the Commission 
a number of general comments on the medium term prospects for the 
Spanish Steel Industry within the Community and some general forecasts 
for 1990; the latter are of an approximate nature and will have to be 
periodically reviewed as the General Objectives Steel for the Community 
in its enlarged form are themselves revised.
I.  General principles
- The Spanish steel industry is currently in the middle of a 
restructuring plan started much later than those undertaken by the 
Community; this restructuring should be completed by the end of 
1988, as laid down in the Treaty of Accession of Spain to the 
European Communities.
(1) Document C0M(85)208 final, 31 May 1985.

- At the end of this period Spain would hope to have a modern steel 
industry and be in a relatively competitive and profitable 
situation, without the need for public aid and on an equal footing 
with the steel industries in the rest of the Community.
Current situation
- The Spanish economy is still passing through a crisis which is 
both extraordinarily severe and longlasting and which is having a 
particularly significant impact on the level of unemployment.
- This crisis has affected all the economic sectors of the country 
and, in particular, the industrial sectors which are users of 
steel products.
- Since 1974 this has led to a progressive reduction in the consump­
tion of steel, which is now less than 200 kilos per head, very far 
from the current average in the Community, which should not be the 
case in Spain given its nature and the economic and industrial 
potential which exist.
- Consequently, the Spanish steel industry, which represents over 
3 % of the Spanish GDP, currently has a great deal of 
overcapacity. However, once the restructuring process is comple­
ted, the maximum production capacities laid down in the Treaty of 
Accession to the European Communities will be designed to maintain 
the logical expansion of the Spanish processing industry without 
compromising the presence on the world market it has acquired over 
recent years.

5.
III. Future trends
- The recent trend in the Spanish economy and the current situation
of Us industry enable a number of hypotheses to be established
with relation to the future trends in the consumption of steel,
namely :
- The apparent consumption of steel in Spain will start to improve 
progressively and to a greater extent than that in the other 
Community countries, due to Spain's current low figures.
- The apparent consumption of steel in Spain will, naturally, be 
likely to reach, in the long term, a per capita consumption 
which should be similar to the average consumption in the 
Community at present, i.e. around 320 kilos of ECSC products per 
person per annum.
- The trend towards a progressive reduction in the specific 
consumption of steel is a certain fact at world level and is 
more marked in the industrialized countries; however, in the 
case of Spain and for the reasons already mentioned, it should 
be less marked until it reaches more normal levels of 
consumpt i  on.
- For the same reasons, a lower level of economic and techno­
logical development, it is unlikely that there will be any
significant effects as a result of the substitution of steel by 
other materials. This phenomenon will no doubt occur in Spain, 
but to a much lesser extent than in the more industrialized 
countries.
- By the time the Spanish steel industry has completed its
restructuring, technology will not have undergone any notable 
changes and any improvements will come as a result of the
continuing research into cost reduction and better productivity.

- Until the consumption targets provided for have been attained, 
the Spanish steel industry will have to continue its current 
export drive so as to maintain the required level of utilization 
and yield of existing plant.
- With the export limit arrangements signed by Spain with certain 
zones and markets, Spanish exports during the next three to four 
years will be directed to a considerable extent towards other 
non-community countries.
General Objectives Steel - Spain 1990
The consequence of the above is that the General Objectives Steel 
for Spain 1990 can be drawn up in the following terms as a general 
guide :
1) Spain subscribes to and shares the Community aims laid down in 
the Working Document presented by the Commission and represented 
in detail by :
- a very modern steel industry;
- a steel industry with no over-capacity, capacity being at a 
level which conforms to the forecast for future requirements 
of the Spanish economy and its traditional external markets;
- a sufficient level of profitability for Spanish steel compa­
nies once the restructuring process has been completed.
2) Spain considers that it would be as well to establish two 
scenarios, as the Commission has done, for the likely develop­
ment of steel consumption, namely :

- the Low hypothesis :  in this hypothesis it is assumed that the 
forecast for the consumption in Spain of ECSC steel products 
will be at a level of 8.6 million tonnes for 1990, a figure 
which was originally forecast for 1986;
- the high hypothesis :  this forecast predicts a consumption of
9.3 million tonnes.
These forecasts are based on the predictions for trends in the 
GDP and GFCF carried out by the Spanish Government under their 
economic programme for 1985 to 1988; they take account of the 
falling trend for the specific consumption of steel with 
relation to forecasts for the development of activity in the 
consumer sectors. This has been evaluated as an average drop of 
one per cent per annum in the period 1980-1990.
Consequently, two predictions have also been made for the net 
balance from foreign trade in ECSC steel products in 1990 :
- low hypothesis :  the forecast of a net balance on external
trade for 1990 is fixed at 4.9 million tonnes of ECSC 
products, a quantity which is the same as that actually 
attained in 1984;
- high hypothesis :  the forecast is for a total of 5.2 million
tonnes.
With regard to the trade balance in ECSC products with the 
current Community, Spain is maintaining the target which has 
already been communicated to the Commission, namely a zero 
balance for 1986, but considers that this balance should be 
positive for Spain in 1990.

8.
4) Given the above forecasts, an output of the order of
13.5 million tonnes of ECSC steel for 1990 can be assumed in the
low hypothesis and 14.5 million tonnes in the high hypothesis.
5) Spain fully shares the Commissions preoccupations regarding the 
need to provide for specific action to relieve the serious 
social consequences of the restructuring in this sector. 
Current legislation in Spain on this topic has recoursed to 
specific means and instruments (funds for the promotion of 
employment, urgent reindustrialization zones, etc.), which 
should be fully compatible with the financial forecasts carried 
out for the individual Community instruments (ECSC funds, FEDER 
funds, European Social funds, etc.) for the coming years as part 
of the "steel social measures sector".
6) As regards the prospects for the scrap market in the current
Community, Spain agrees with the detailed observations of the
Commission as expressed in the Working Document mentioned above. 
It confirms that its forecasts for scrap import requirements for 
1990 (of the order of 5 million tonnes per annum, i.e. a similar 
level to 1984) should not pose any quantitative problems for the 
supply of scrap to the enlarged Community.

9.
General Objectives Steel 1990 
The position of Portugal
In response to the invitation of the Directorate-General for the 
Internal Market and Industrial Affairs of the Commission, the document 
relating to the General Objectives Steel 1990(1) is examined below in 
brief, an attempt being made to show the aspects which would have an 
effect on the Portuguese steel industry after accession to the ECSC, 
adaptation to which will require considerable effort.
Details of our situation are given with a reference to each chapter. We 
also mention the specific measures which would enable integration into 
the ECSC to be made with a minimum of difficulty.
However, it should not be forgotten that one of the aims is a better 
reciprocal level in trade, the imbalance in which needs to be corrected.
In a difficult economic situation at the European level, which is 
reflected in the prospects for the development of the steel market, the 
Portuguese position is aimed at overcoming such difficulties in order 
for the industrial sector to be in a position to contribute in a 
positive way to the economic and social development necessary in this 
country.
I.  Medium-term development in the steel market
Although we are in agreement with the overall situation as presented 
by the Community, we believe that in the case of the Portuguese 
market at the moment there are prospects for a medium-term increase 
in steel consumption.
(1) Doc. C0M(85)208 final, 31 May 1985.

10.
This increased consumption should be based on the following three 
main factors :
- Stabilization of the market at the 1981 level as a result of the 
required economic recovery.
- Economic development necessary for the country up to 1990 with the 
aim of making up the gap with the other countries of the 
Community; this could be translated by a development in the GDP at 
a rate superior to that of the other European countries.
- The consumption of steel per person which is the lowest in Europe. 
External trade
Despite its small size, the Portuguese market is the only one in the 
ECSC which is a net importer of steel products; this means that it 
is necessary to find solutions for the following problems :
- Increase in the rate of imports connected with the national 
economic recovery, with a possible evolution in the quality of the 
products imported.
- The need to balance the current deficit by establishing a flow of 
exports which will make up for the existing dependence.
Given our situation, a proper balance must be sought. This task 
merits the support of the Community given the economic and social 
efforts which will be necessary to overcome the current 
difficulties.

«
HI. Balance between supply and demand
As m entioned above th e re  is  an im balance in  P o rtu g a l between s u p p ly 
and demand, which w i l l  have a fa v o u ra b le  e f f e c t  in  th e  Community 
m a rk e t.
W ith re s p e c t to  t h is  u n fa v o u ra b le  s it u a t io n  f o r  P o r tu g a l, the 
su p p o rt o f th e  Community w i l l  have to  be o b ta in e d  f o r  th e  m od erni­
z a tio n  o f th e  P ortuguese s te e l in d u s try  w ith  th e  aim o f m aking i t  
c o m p e titiv e  in  th e  European c o n te x t.
To t h is  end, th e  P ortuguese Government w i l l  approve a m o d e rn iz a tio n  
p r o je c t fo r  th e  S id e ru rg ia  N a c io n a l which sh ou ld  be com pleted soon 
and w hich w i l l  be s u b m itte d  to  th e  Community a u t h o r it ie s  in  
September n e x t.
IV . Research and developm ent
I t  is  c o n s id e re d  th a t th e  p re o c c u p a tio n s  o f th e  ECSC in  t h is  f i e l d  
a re  f u l l y  j u s t i f i e d ,  g iv e n  th e  c o m p e titio n  w hich e x is t s  in  th e  m etal 
p ro d u c ts  f i e l d .
However, g iv e n  th e  s ta te  o f developm ent o f our s te e l in d u s t r y ,  these 
q u e s tio n s  have n o t re c e iv e d  s u f f i c i e n t  a t t e n t io n ;  th u s , fo r  the 
moment, we can o n ly  u n d e r lin e  c e r ta in  a sp e cts w hich we c o n s id e r to  
be im p o r ta n t, more p r e c is e ly  th e  a d a p ta tio n  o f n a tio n a l raw m ate­
r i a l s  to  th e  m e t a llu r g ic a l pro cesse s em ployed.
In  a d d it io n ,  w ith  re s p e c t to  th e  s e le c tio n  and improvement o f 
p ro c e s s e s , i t  w ould be o f some in t e r e s t  to  c o n s id e r th e  developm ent 
o f th e  a p p lic a t io n  o f com puters to  th e  i n d u s t r i a l  management o f 
s m a ll s te e l e n te r p r is e s .

1 2.
V. P ric e s  and c o n d itio n s  o f sa le
The analysis made by the Community of prices and conditions of sale 
relates to the situation which existed in the recent past and 
disregards the industrial policy which will have to be applied in 
the near future.
In Portugal, the system of protection will have to be changed and in 
the short term the trade policy measures which exist in the 
Community will have to be adopted.
The development of monetary parities, especially in relation to the 
dollar, is of great importance to the Portuguese steel industry, 
since our imports are paid in dollars; this has caused difficulties 
for the Siderurgia Nacional over recent years and it is, therefore, 
desirable to achieve greater stability in this area.
Strengthening the position of the Portuguese industry will be based 
on greater attention being paid to the following aspect :
- Attacking the problems relating to production costs, which 
determine competitiveness.
- Improving product quality if the European market is to be 
penetrated.
It is also considered that it would be very much to the point for 
steel companies to adopt the most up-to-date marketing strategies.
VI.  Emp loyment
Altough the Portuguese industry has so far not had the problem of 
retraining its workforce, it is quite possible that this situation 
will change as from 1986.

13.
The need to increase competitiveness in the enterprises will make it 
necessary to improve productivity, which will have the effect of 
reducing staff.
Problems can, therefore be expected on the following fronts :
- Unemployment on levels which are impossible to predict at the 
moment given the fact that the conditions for modernizing plant 
are not yet decided.
- The need to retrain existing staff so as to improve them from a 
professional point of view.
Thus, ways of finding solutions to these problems will have to be 
found; we must base ouselves on ECSC experiences in this field and 
we would emphasize above all the need for financial support.
VII.  Supplies
No difficulties with supplies of raw materials have so far been 
evident in the Portuguese steel industry, although it will be 
necessary to prevent them from arising in the future.
We should emphasize our dependence on the following factors :  
energy, scrap and hot-rolled coils for rerolling.
Electrical energy is only available in limited quantities, and that 
at tariffs which are apparently higher than those practised in the 
EEC.
As regards scrap, we need to import approximately 100.000 tonnes per 
annum to cover the deficit and to be able to use the installed 
electric arc furnace capacity. We should like to point out our 
anxieties with regard to the development of this situation of which 
we are losing control.

14.
As regards hot-rolled coils, it is clear that the price will have an 
effect on the competitiveness of derived products :  cold-rolled 
sheet, tinplate and galvanized sheet.