COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 11.03.1998 
COM(1998) 140 final 
REPORT FROM THE COMMISSION 
on the implementation of 
Decision No 2496/96/ECSC of 18 December 1996 establishing 
Community rules for aid to the steel industry 
(Steel Aid Code) 
in 1 997 

Report from the Commission on the implementation of 
Decision No 2496/96/ECSC of 18 December 1996 establishing 
Community rules for State aid to the steel industry (Steel Aid Code) 
in 1997. 
1. Introduction 
Article 8 of the Commission's Decision 2496/96/ECSC of 18 December 1996 
establishing Community rules for State aid to the steel industry1 (hereinafter 
referred to as Steel Aid Code or SAC) requires the Commission to draw up 
annual reports on the implementation of the Decision for the Council and, for 
information, for the European Parliament and the Consultative Committee. 
2. General overview 
2.1. This report describes the first cases decided by the Commission under the 
sixth Steel Aid Code. In general, the Commission has been able to use the 
new instrument of controlling State aid in the sensitive sector of ECSC steel in 
a satisfactory way. 
In two cases it made use of the new possibilities given to it by article 6(4) of 
the SAC and it used the enlarged scope of Article 3 of the SAC to allow 
exemptions from CO2 taxation for the ECSC steel industry. 
OJ No L 338, 28.12.1996, p. 42 
1 
The monitoring of the implementation of the Article 95 ECSC cases previously 
decided was continued in 1997. The Commission submitted its seventh2 and 
eight3 monitoring report to the Council, covering in particular the restructuring 
of the companies concerned and the payment of the aid authorized. 
2.2. In 1997 the Commission took 5 final negative decisions and in 2 two cases it 
took final positive decisions. In one case the procedure was closed after a 
withdrawal of the notification by the relevant authorities. In 7 cases the 
Commission did not raise objections without an opening of the procedure, 
including two cases where it came to the conclusion that no State aid was 
involved. For 7 other cases the Commission decided to open the procedure 
pursuant to Article 6(5) of the Steel Aid Code. 
2.3 Chapter 3 of the report gives a description of the individual cases decided by 
the Commission in 1997. Cases notified to the Commission in 1997 but not yet 
decided upon are not presented in the report. Annex I presents all the relevant 
information in a table. 
3. Description of aid cases to the steel industry per Member State 
3.1. Belgium 
3.1.1. Forges de Clabecq / Duferco Clabecq 
The Commission decided that the financial assistance from the Walloon 
Region in favour of Duferco Clabecq, in the form of a capital acquisition of 
BEF 350 million (25% of the capital) and a 10-year loan of BEF 550 million, 
constitutes a genuine provision of risk capital according to usual investment 
practices in a market economy. 
The assistance does therefore not contain any element of State aid. 
SEC (97) 673 final 
SEC (97) 1898 final 
2 
In concluding that no aid is involved the Commission took into consideration, 
as regards the capital participation, that the SWS (Société Wallonne pour la 
Sidérurgie) acquired its minority shareholding of 25% under the same 
conditions and at the same time as a private investor who owns the majority 
of the capital. 
The private partner has a solid financial structure, and the new investment is 
part of its entrepreneurial strategy. Investments are to be undertaken which 
will make it possible to give practical shape to a precise industrial strategy 
and the business plan predicts a positive operating margin from year 2 and 
profits from year 5. 
As regards the loan, it was concluded that no State aid is involved as the 
risk of not recovering the capital is shared by both shareholders in proportion 
to their respective shareholding positions. In addition, the loan generates 
interest on a half yearly basis, irrespective of the firm's performance, at a 
fixed annual rate of 5.55% over ten years. The rate, which is the same as the 
reference rate used by the Commission since 1 August 1997 to determine the 
aid element of government loans in Belgium, may be regarded as the market 
rate applicable to this type of loan and this type of risk. 
3.2. Germany 
3.2.1. Investment programme for the reduction of environmental pollution 
In January 1996 the Commission opened the procedure in respect of a 
German aid scheme aimed at the stimulation of projects demonstrating in what 
way an application of processes and technology can lead to significant 
reductions in air and water pollution as well as waste-disposal and noise 
levels. 
The Commission considered that the aid intensity allowed under the scheme, 
i.e. 50%, was too high taken into account that demonstration projects are 
rather close to the market place and it furthermore held that the costs eligible 
for support were not only proper R and D costs but could also entail investment 
costs. 
1 
In October the Commission closed the procedure following the withdrawal of 
the notification by the German Government. The measures have not been put 
into effect. 
3.2.2. Eisen- und Stahlwalzwerke Rôtzel GmbH 
In July the Commission decided to open the procedure pursuant to Article 6(5) 
SAC in respect of guarantees granted by the Land Nordrhein-Westfalen in 
1995 to the company Eisen- und Stahlwalzwerke Rôtzel GmbH. 
The guarantee covered 80% of a bank-credit amounting to DM 15 million for 
investment purposes. 
3.2.3 Grôditzer Stahlwerke and Walzwerk Burg GmbH 
The Commission opened in July the procedure of Article 6(5) SAC in respect 
of the privatisation of these companies and some financial interventions 
undertaken in the years 1993-1996. 
The Commssion had serious doubts whether the privatisation process by 
which the companies were sold to affiliates of Georgsmariënhùtte GmbH did 
not constitute State aid. 
As to the financial interventions, the Commission investigated investment aid 
in the form of interest-free loans amounting to DM 96.9 million and operating 
aid, also in the form of shareholder loans, amounting to DM 166.8 million. It 
has to be noted here that the shareholders at the time were State agencies. 
Furthermore some guarantees and grants are the subject of the procedure. 
In this case the Commission has taken the position that Grôditz GmbH is a 
company that is engaged in production in the steel industry and consequently 
falls under Article 80 of the ECSC Treaty, although the company mainly 
produces non-ECSC products. The fact that it produces also ECSC steel and 
sells parts of its ECSC steel production on the market was considered 
sufficient to label the company as one that falls under Article 80 of the ECSC 
Treaty. 
H 
3.2.4. MCR Gesellschaft fur metallurgisches Recycling mbH 
In December 1994 the Commission took a favourable decision in respect of 
regional investment aid to this company. 
It did so pursuant to Articles 1 and 5 of the previous Steel Aid Code4. 
The Commission decided to open the procedure in December 1997 pursuant 
to Article 6(5) of the SAC concerning two loans totalling at DM 97 million, a 
guarantee and the grant of DM 24 million authorised previously. 
The loans and the guarantee were intended to cover environmental costs but 
the Commission had serious doubts whether all the conditions of the Steel Aid 
Code and the Community guidelines on State aid for environmental 
protection5 were met by the project in question. 
The subsidy of DM 24 million was authorised in December 1994 and had to 
be paid to the company before the end of that year. The Commission received 
information that the subsidy had not been paid in accordance with this 
deadline and consequently it opened the procedure. 
It also took the first step in the decision to come to a suspension of payment 
of the subsidy pursuant to Article 6(4) of the Steel Aid Code. 
3.2.5. GeorgsmarienhUtte 
The Commission initiated, in July, a procedure under the Steel Aid Code to 
examine whether the relief from environmental obligations covering the 
recycling and disposal of industrial dust granted by the German Land 
Niedersachsen to the steel ECSC undertaking GeorgsmarienhUtte GmbH, 
located close to Osnabruck, represents State aid. 
In 1993 the steel companies of the German Klôckner group were financially 
restructured through a composition procedure. The subsidiary Klôckner 
Edelstahl GmbH in GeorgsmarienhUtte was subsequently sold and renamed 
GeorgsmarienhUtte GmbH. During the composition procedure the Land 
Niedersachsen relieved the company from the obligation to dispose or recycle 
industrial dust arising from the steel making process. Subsequently, the Land 
OJ No L 362, 31.12.91, p. 57 
OJNOC72, 10.3.94, p. 3 
h 
charged the public Niedersâchsische Landesentwicklungsgeseilschaft mbH to 
provide for the proper disposal of the dust. This company then charged 
Georgsmarienhutte to recycle the dust and paid 61.64 Mio DM for this 
service. 
The Commission is of the opinion that the relief by the State from the general 
obligation under public law to dispose or recycle industrial waste, arising from 
the polluter-pays-principle, reduces the production costs of the company 
concerned and may therefore represent operating aid, which would not be 
compatible with the Steel Aid Code. 
3.2.6. Elbe Stahlwerk Feralpi GmbH 
The Commission initiated in November a procedure under the Steel Aid Code 
concerning State aid - 9.4 million DM investment grant and guarantees 
covering 42 million DM - granted by Saxony to the ECSC steel undertaking 
ESF Elbestahlwerk Feralpi GmbH in Riesa. The Commission had received 
information that a certain portion of investment aid that was authorized in 
1993/94 under a special derogation for steel undertakings located in the 
former GDR may have been misused for operating purposes. In addition it 
had received information that supplementary investment aid and operating aid 
was granted in 1995/96 after the expiry of the derogation for the former 
Eastern Germany. This aid was granted without prior notification and 
therefore in breach of the procedural rules of the Steel Aid Code. The 
Commission invited the German Government to submit its comments covering 
an intended order to suspend the disbursement of any further aid in favour of 
ESF Elbestahlwerk Feralpi. 
3.2.7. Stahlwerke Bremen GmbH 
The Commission decided in June that an intended injection of capital by the 
public investment company Hanseatische Industriebeteiligungen GmbH 
(Hibeg), Bremen, to the equity of Stahlwerke Bremen GmbH did not constitute 
State aid. 
Q 
The shareholders of Stahlwerke Bremen are the Belgian steel company 
Sidmar NV (67.6835%) and Hibeg (32.3165%). They intended to inject DM 
150 million to the equity of their company to allow the financing of certain 
investments, which are considered suitable to contribute towards the 
profitability of Stahlwerke Bremen. The shareholders would cover this amount 
in accordance with their percentage of shareholding. The public contribution 
had to be notified to the Commission according to Article 6 (2) of the Steel Aid 
Code. The Commission examined the intended financial measure and 
concluded that the behaviour of Bremen represented normal private market 
investors' behaviour. 
3.3. Greece 
3.3.1. Halyvourgia Thessalias 
In September the Commission authorised regional investment aid to the steel 
company Halyvourgia Thessalias SA pursuant to Article 5 of the Steel Aid 
Code. 
The investment focused on the purchase and installation of a new controlled 
cooling system and a new high-technology shear and the resiting in another 
part of the plant of the cooling bed. 
The aid consisted of two grants of DRA 69.6 million and DRA 26.4 million and 
interest subsidies for bank loans amounting to DRA 114 million. 
The investment did not lead to an increase of the production capacity. 
3.4. Italy 
3.4.1. Acciaieria ISP Cremona. 
In April the Commission declared compatible with the common market by virtue of 
Article 2 of the Steel Aid Code a grant of LIT 25.9 billion to Acciaieria ISP 
Cremona. 
The R&D should identify and define the technical conditions for the industrial 
manufacture on the ISP plant of stainless steels, and for obtaining directly the hot 
2 
manufacture in the austenitic phase of thins gauges of less than 1.5 mn which 
cannot be manufactured with the current rolling plants. 
The R and D was considered to represent industrial research and the aid 
intensity of 36.6% was well below the threshold of 50%. As to the incentive 
effect of the aid, it must be observed that this condition was met considering the 
special risks and costs involved in the projects and the fact that Cremona's R&D 
spending represents some 4.5% of its turnover which is significantly higher than 
the average R&D spending of other steelmaking companies (about 1% -2%). 
3.4.2. Bresciani 
in February the Commission decided to close the open procedure with regard 
to the public interventions for six iron and steel companies within the 
framework of the dismantling of the private steel sector in Italy, it seems 
appropriate to recall that in April 1996, the Commission had initiated the 
procedure with respect to the State aid that the government Italian had planned 
to grant to the following companies: Diano, Lamifer, Demafer, LMV, MAO and 
Sidercamuna. 
Following its analysis of the cases, the Commission noted that, exception made 
for the MAO cases and Diano the aid of which was permitted, in the other cases 
all the conditions provided for in Article 4 of the Steel AID Code were met except 
that referring to the regularity of production. In this respect the Commission 
observed that the criteria provided by the Italian authorities (valid electricity 
contract, investment and handling of the facilities, personnel etc) were not likely 
to show that the companies in question produced in a regular way but, that in 
fact, they were just ready to do so. 
Thus, the Commission considered that in these four cases the condition relating 
to the regularity of production is not met and that Italian allegations could not 
modify the first appraisal carried by the Commission at the time of its decisions 
for opening the procedure. 
? 
3.4.3. Ferdofin Sri 
In April, the Commission decided to close by a negative decision the 
procedure open against the public interventions in favour of Ferdofin Sri. 
Having taken note of the decision of the Italian authorities, following the opening 
of the procedure, to withdraw the planned public guarantee envisaged by the 
Italian law n.95/1979, the Commission assessed whether the Italian law as such 
constitutes state aid 
In this respect, it is appropriate to observe that, contrary to the bankruptcy 
procedures envisaged by the Italian law, the procedure in question is not 
reserved for all the companies, but only for the major companies, i.e., the 
companies employing at least 300 persons and who are in situation of 
insolvency. 
Concerning the transfer of official resources, the Commission has noted that 
the extraordinary administration comprises certain economic advantages 
giving concrete expression to the transfer of resources of the state or affecting 
the budget of the state.: 
Therefore, the Commission comes to the conclusion that the law in question 
constitutes state aid. It follows from the file that the public intervention in 
question can aim at neither environmental protection, neither research and 
development nor, finally, closure. 
3.5. Luxembourg 
3.5.1. ARBED S.A AND ARES S.A.. 
Notified aid concerns projects which were undertaken and were carried out in 
1995 and in 1996. The Community framework of the State aid with research-
development6 establishes (point 6.5) that the Commission will attach importance 
particular to the analysis of the incentive effect, in order to ensure that the 
planned aid is under no circumstances operating aid, in the case of research 
projects close to the market and when a significant part of expenditure was 
carried out beforehand at the request of aid. The Commission observes that, in 
the case in point, it appears extremely difficult that one could invoke the 
incentive effect, and that companies would not have carried out these R&D 
projects without government aid, since the notified projects had already been 
carried out and that without any public intervention. 
Similarly, the framework establishes in its point 6.1 that the aid for R&D has to 
provide an incentive for the companies to undertake additional R&D activities, in 
additional to those that they undertake within the framework of their daily 
activities. However, it arises from the file that the Luxembourg authorities did not 
justify why described work does not constitute any normal activity of the 
company, or in which project aid could contribute to increasing the efforts of 
research and of development of the companies in question beyond which they 
usually do. 
Therefore, the Commission decided to initiate the procedure provided for in 
Article 6 (5) of the steel aid code against the aid mentioned. 
6 OJEC No. C 45, 17.2.96, p.5 
3.6. Sweden, Denmark and the Netherlands 
3.6.1. CO2 taxation 
In these three Member States legislation exists that introduces a taxation of 
CO2 output. The taxation itself is not considered to be State aid. However an 
essential element of the legislation is that certain industries are charged at a 
lower rate in comparison with other consumers of energy. Such derogations 
constitute State aid. For the non-ECSC industry they have been approved by 
the Commission under the EC Treaty. 
The ECSC steel industry is an important consumer of energy and contributes 
in a significant way to the production of CO2 gasses. The steel industry in the 
three Member States is likely to be put on disadvantage in comparison with its 
competitors from Member States where there is no such CO2 taxation if it 
were to be fully subjected to the tax. 
It is for this reason that the three Member States concerned have included the 
steel industry on the list of industries charged at a lower level. 
On the basis of Article 3 of the Steel Aid Code and the Community guidelines 
on State aid for environmental protection7 this type of operating aid is 
compatible with the common market and consequently the Commission 
decided not to raise objections. 
Before the adoption of the new Steel Aid Code such a decision would not 
have been possible except by invoking Article 95 of the ECSC Treaty. 
3.7. Spain 
3.7.1. Law 43/1995 
In July the Commission decided to investigate steel corporations tax credits 
granted connection with the realization of export related activities companies 
located in Spain are entitled to receive tax credits of up to 25% of their 
investments as long as these investments are related to: 
7 See footnote 5 
// 
the creation of branches or permanent establishments abroad as well as the 
acquisition of shares in foreign corporations or setting up subsidiaries directly 
related to exporting goods and services; 
the advertising and publicity undertaken abroad for the international launching of 
products, market penetration and foreign market surveys; 
trade fairs, expositions and other analogue public events, in this case including 
those events taking place in Spain of an international nature. 
It is worth noting that the Spanish corporate tax law 43/1995 consolidates 
legislation which has been in force since 1978, id est before Spain joining the 
Communities. Nevertheless, it must be observed that, unlike the rules under the 
EC Treaty, the notion of existing aid does not exist under the ECSC Treaty. 
Thus, the scope of the decision is the assessment of the measures at issue only 
under the ECSC rules. 
The above mentioned tax credit scheme appears to have the nature of state aid 
and to be contrary to the provisions laid down in article 4 (c) of the ECSC Treaty 
whilst the application of one of the exemptions provided for by the Steel Aid Code 
is doubtful. 
IL 
MEMBER 
STATE 
B 
D 
D 
D 
D 
D 
D 
D 
Dk 
E 
G 
I 
I 
I 
L 
NL 
SE AID 
NUMBER 
N 680/97 
N 361/97 
C2/96 
N 301/97 
N 344/97 
NN 85/97 
NN 86/97 
NN 108/97 
N 759/96 
NN 116/96 
N 154/97 
C8/96 
N 119/97 
C 54/95 
N 668/96 
N 72/97 
N 73/97 
N 20/97 
N 742/96 COM 
PANY 
Duferco 
Clabecq 
Groditzer 
Stahlwerke 
reduction 
pollution 
MCR 
Stahlwerke 
Bremen 
Rotzel 
Georgs-
marienhutte 
Feralpi 
C02 tax 
Law 43/1995 
Haly-
vourgia 
Thessalias 
Ferdofin Sri 
Acciaieria 
ISP 
Bresciani 
Arbed group 
C02 tax 
C02 tax MEA 
SURE 
capital 
acquisition/ 
loan 
privatisation/ 
various aid 
randd/ 
investment 
aid 
environ 
mental/ 
investment 
aid 
capital 
injection 
guarantee 
relief from 
environment 
al obligations 
investment/ 
operating aid 
derogation 
tax credits 
regional 
investment 
aid 
guarantee 
r and d aid 
closure aid 
r and d aid 
derogation 
derogation DECI 
SION 
no aid 
involved 
opening 
procedure 
closure 
procedure/ 
withdrawal 
notification 
opening 
procedure/ 
suspension 
order 
no aid 
involved 
opening 
procedure 
opening 
procedure 
opening 
procedure/ 
suspension 
order 
approval 
opening 
procedure 
approval 
final 
negative 
decision 
approval 
2 final 
positive 
decisions/ 
4 final 
negative 
decisions 
opening 
procedure 
approval 
approval DATE 
5/11/97 
15/7/97 
21/10/97 
16/12/97 
18/6/97 
30/7/97 
15/7/97 
18/11/97 
5/2/97 
30/7/97 
16/9/97 
30/4/97 
2/4/97 
26/2/97 
21/5/97 
30/7/97 
26/2/97 PUBLICA 
TION 
OJ C 20, 
22.1.98 
OJ C 395, 
31.12.97 
OJ C 377, 
12.12.97 
not yet 
published 
OJC 1. 
3.1.98 
OJ C 328, 
30.10.97 
OJ C 323, 
24.10.97 
not yet 
published 
OJC 197, 
27.6.97 
OJ C 329. 
31.10.97 
not yet 
published 
OJ L 306, 
11.11.97 
not yet 
published 
OJL 139, 
30.5.97 
OJ C 250. 
15.8.97 
not yet 
published 
OJC 197, 
27.6.97 
/3 
ISSN 0254-1475 
COM(98) 140 final 
DOCUMENTS 
EN 08 10 06 11 
Catalogue number : CB-CO-98-174-EN-C 
ISBN 92-78-32320-9 
Office for Official Publications of the European Communities 
L-2985 Luxembourg 
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