Hffi?*: 
S&î^l COMMISSION OF THE EUROPEAN COMMUNITIES 
COM (90) 201 final 
Brussels, 7 May 1990 
GENERAL OBJECTIVES 
i$$$m 
STEEL 19 9 5 
TABLE OF CONTENTS 
NTRODUCTION 
SUMMARY AND CONCLUSIONS 
PART 1 : The key factors for identifying future trends 
Chapter I 
Chapter I I 
Chapter 11 I 
Chapter IV The main factors determining steel consumption in the 
Community 
New trends in the world steel market 
Technological Innovation 
The steel industry and the internal market 
PART 2 The market for steel products In the Community 
forecasts for 1992 and 1995 analysis and 
Chapter V 
Chapter VI 
Chapter VII 
Chapter VI 11 Internal demand forecasts 
External trade 
Supply 
Price trends 
PART 3 Factors of production: the market 
Chapter IX: Factors of production: the market 
Chapter X: Employment: trends and prospects 
INTRODUCTION 
1. "General Objectives Steel 1995" Is being written In a 
radically different economic and political climate from the 
General Objectives for 1985 and 1990. 
Together, the lasting macroeconomic boom coinciding with the 
ending of the measures to combat the crisis in the steel 
industry have restored normal conditions of competition for 
most stee Imakers. 
Henceforth the common steel policy will revert to the normal 
ways and means of the ECSC Treaty: the medium-term 
industrial strategies for the Community's steel Industry 
will be laid down at a time free of the constraints Imposed 
by the crisis measures. 
2. These strategies must take into account the resu its, as 
they now appear, of the crisis per iod, and in particular the 
period during which steel undertakings, while eligible for 
several types of aid (under the Aid Code), were subject to 
very strict regulation of the market (Article 58), price 
controls (Article 60) and capacity-shedding obligations. 
The results can be quantified briefly as follows: 
production capacity (MPP) for hot-rolled products fell 
from 194.5 million tonnes in 1980 to 165 million tonnes 
at the end of 1988 (EUR 12); 
employment fell from 672 000 In 1980 to 409 000 In 1988. 
This trend is all the more remarkable by comparison with 
1975, when the workforce of the steel industries of the 
twelve countries which are now Member States of the ECSC 
exceeded 870 000; 
the State aids authorized between 1980 and 1988 under 
the Aid Code (for EUR 10 and for Spain and Portugal) was 
in the order of ECU 40 000 million. This figure does 
not include the aid recently authorized for the publicly 
owned Italian steel industry; 
Investment in the steel Industry, Including coking 
plants, between 1982 and 1988 amounted to 
ECU 21 200 ml I I Ion (EUR 10) ; 
between 1980 and 1988, MPP (EUR 10) for continuous 
casting rose from 70.9 million tonnes to 134.2 million 
tonnes (151.2 million tonnes In the Community of 
TweIve). 
These figures call for some explanatory comments. At this 
stage, we will simply say that, while the trend in 
capacities and employment and the large sums of public money 
injected into the industry show the scale of the efforts 
2. 
being made by the various 
figures - the overall 
restructuring period and 
production for continuous operators involved, the last two 
investment trend during the 
especially the maximum possible 
casting - show the major role 
played by the "modernization and adaptation of plant 
restructuring policy. In the 
3. Another 
Improvement in s i gnIfI cant 
the fInancI a I 
of 
abov 
the 
Comm 
i mpr 
comp 
the 
depe 
prod 
for 
var I 
the 
the 
st r a 
betw 
on I y 
the Community undertakings, 
ementioned State aids and 
organization and control 
unity steeI pr i ces 
ovements, however, 
Iete. The crisis 
under tak i ngs stee 
nd very 
uct I on. 
fur ther 
ous stages 
inflexibility achievement was the major 
s I tuatI on of the large majority 
This was helped by the 
by the fact that, thanks to 
of the Community market, 
did not fall too low. These definite 
do not mean that restructuring Is now 
has also brought home the fact that 
results (in terms of profit or loss) 
the efficient use of the factors of Iarge1 y on 
This is one aspect of restructuring which calls 
progress to reestablish a balance between the 
in the overall production process. Hitherto, 
imposed by the quota system has, despite 
easing of the rules since 1986, delayed certain 
teglc decisions on industrial and commercial cooperation 
een undertakings. Such decisions began to gather pace 
In 1988, as the quota system was drawing to Its end and 
economic situation became exceptionally favourable. 
Although the results 
i n par t i cu I ar with 
steel undertakings -
i ndust r y , Just I I ke 
market conditions: for 1988 and 1989 are extremely good -
regard to the financial situation of 
It must not be forgotten that the steel 
other basic sectors, faces fluctuating 
relatively smaI I changes In demand • II MI IXWk Xs V I I VI I % I W I I W . I W I wl fc I » V> I / » III M I I MMBllijga III MCIIIBIIVI 
together with a commensurate weakening of prices, can once 
again place certain steel manufacturers in a difficult 
pos i t ion. 
4. This is why the Commission Is proposing to lay down the 
broad lines for a common steel policy. But a policy must be 
based on principles: competitiveness, productivity and 
respect of the competition rules as well as the regular 
supply of the market and improvement in working conditions 
will be the basis for the arguments put forward throughout 
this document. This is precisely the policy line laid down 
in the ECSC Treaty, and it accords entirely with the current 
political and economic environment of the internal market. 
In addition to stating Its essential principles, any 
sectoral policy must be based on an analysis of the economic 
factors which characterize It. 
It is not enough, especially for the steel Industry, to note 
that the macroeconom I c climate is good and is likely to 
remain so: the future of steel, as a raw material, must 
depend on trends in consumption, production costs, 
competition from alternative materials, supply (with 
3. 
particular attention to scrap metal), new production 
techniques likely to be introduced in the short term and, 
finally, workforce skills. 
Both the quantitative and 
factors will be analysed. qualitative aspects of these 
5. In the spirit of Article 46 of the ECSC Treaty, the 
main purpose of "General Objectives Steel 1995" Is to set 
out as accurately as possible the quantitative and 
qualitative medium-term scenario for the steel industry In 
terms not only of the products market but also of the market 
for the factors of production. 
In the light of these analyses and forecasts, the Commission 
will propose the policy guidelines which it intends to apply 
in the years to come, using the Instruments available to 
guide and back up steelmakers' strategies. 
The document is divided into three analytical sections, 
summed up in a concluding chapter. 
Par t 1 seeks to define the qualitative scenario. In its 
four chapters an attempt is made to identify the factors 
which may be crucial to the development of the steel 
Industry over the next few years. 
par tIcuIar, 
consumpt i on 
product I on. Chapter I examines the relationship between trends I n stee I 
consumption and trends In GDP within the Community. In 
an analysis is made of probable trends In steel 
and its relative share of GDP and industrial 
Another important factor to be studied is the 
trend In specific consumption of steel and substitution. 
Chapter II analyses the possible changes of scenario on the 
wor I d market by studying the quantitative and qualitative 
trends In world supply and demand in order to Identify 
specialization possibilities for the Community steel 
industry, which wilt be increasingly based on the quality of 
its products and the services offered to its customers. 
Chapter III examines the main trends in technological 
progress which will affect the steel industry by 1995 in 
both production processes and products, to which an every 
larger research effort is being devoted. 
Steelmakers can become more competitive only by exploiting 
one of these factors, i.e. either increasing their 
productivity (- cutting costs) or Improving the quality of 
their products or marketing new 
products that make a profit from 
innovation Is a very Important 
improving the competitiveness 
i ndust ry as a who Ie. or highly differentiated 
innovation. Technological 
means of safeguarding or 
of the Community steel 
Chapter IV analyses the Impact on steelmaking of the new 
legal and economic framework which will be created by the 
completion of the internal market. The Impact may be 
economic and financial: increased demand, higher or lower 
costs (of energy, environmental protection, transport, 
financing, customs formalities, etc.), and tougher 
competition will have an influence on commercial strategy. 
But there may also be an Impact in terms of economic 
thinking: a trend towards less interventionist economic 
policies and the development of competition policy on 
mergers, and specialisation and rationalisation agreements. 
Par t 2 deals essentially with the analysis of, and 
quantitative forecasts for, the products market within the 
Community In 1992 and 1995. 
Chapter V examines the outlook for Internal demand using two 
kinds of approach. The first consists of an overall 
statistical model based on the relationship between GDP and 
the apparent consumption of raw steel: the second consists 
of a sectoral model based on trends In steel-using sectors 
and the quantities of steel they consume - i.e. specific 
consumptIon. 
Chapter VI examines the outlook for the Community's external 
trade in steel. Forecasting the medium-term trends in 
Community imports and exports Is particularly difficult 
since they will depend on several factors which can 
sometimes have opposite effects. For Instance, some 
traditional tendencies towards international specialization 
may be curbed or even halted, at least temporarily, by the 
deliberate strategies of individual firms. 
Chapter VII analyses Community supply, its present structure 
and future trends and prospects. From these considerations 
and from the results of Chapters V and VI (regarding 
internal demand and the external trade balance) certain 
conclusions can be drawn as to the necessary conditions for 
achieving an equilibrium between supply and demand. 
Chapter VIII rounds off Part 2 with a brief look at past 
trends in steel prices and presents a few ideas which might 
provide a basis for a future prices policy. 
Part 3 examines the market for the main factors of 
product Ion. A detailed analysis is made of future trends on 
the raw materials markets (Iron ore, scrap and ferro-alloys) 
and in energy Inputs. The kinds of workforce skills and 
Investment that will be required by the steel industry are 
a I so cons Idered. 
With regard to raw materials, Chapter IX looks at the main 
external factor, which Is the supply of iron ore. The scrap 
metal market is also of great Interest, In particular 
because of the fundamental role It plays In the development 
of electric steelmaking. 
5. 
Chapter X examines employment trends and prospects, In terms 
of both numbers and skills. One of the important questions 
studied is the demand for skilled workers. The new 
technologies Increasingly require a highly skilled workforce 
and this means a considerable increase In the costs of 
vocational training to be borne by steelmakers. 
1. 
SUMMARY AND CONCLUSIONS 
INTRODUCTION 
The main purpose of the policy guidelines based on the 
1985 and 1990 "General Objectives for Steel" was to 
ensure the success of the crisis measures taken under 
Articles 58, 61 and 95 of the ECSC Treaty; the goal was 
to restructure, in as orderly and coherent manner as 
possible, the Community's iron and steel sector, which 
had seen the crisis beginning In 1975 worsen after 1980. 
AI I concerned have made a major effort and accepted very 
great sacr i fI ces : 
The national and Community authorities have spared 
neither effort nor resources. Whether directly, by 
applying the Aids Code, or indirectly, by organizing 
and monitoring the internal market, by external trade 
measures or by bearing a great part of the social 
expenditure and the costs of regional readjustment, 
the Member States and the Commission have played 
their par t. 
The I abour force did not go unscathed either. The 
consequences of the crisis hit employment in the 
regions concerned very hard, although the social and 
regional flanking measures went some way towards 
mitigating its effects. 
Steel undertakings, for their part, have transformed 
their financial structures, their industrial and 
sales strategies, and their production methods to 
face the new situation both within and outside the 
Community. All this has been accompanied by major 
change in the business philosophy and management 
style of most managers in the Community steel 
i ndust ry. 
At the time of writing, the economic and political 
environment of the Community steel Industry Is radically 
altered: 
The continuing macroeconomIc boom experienced since 
1987 and, in particular, the combined expansion in 
Investment In capital goods, in demand for certain 
consumer durables (e.g. motor vehicles) and in 
construction have been particularly beneficial for 
the steeI sector. 
2. 
Faster progress towards the full Internai market has 
set economic policy In an environment which Is more 
open to free competition and less susceptible to 
public Intervention, thereby encouraging steelmakers, 
like all industry, to exercise initiative. 
"General Objectives for Steel 1995", drafted by the 
Commission in compliance with Article 46 of the ECSC 
Treaty, attempts, In a climate totally different from 
that conditioning previous ones, to analyse the key 
factors which could determine the sector's development 
until 1995. On the basis of these qualitative analyses 
and quantitative forecasts for 1992 and 1995, which have 
been prepared as objectively as possible and concern 
both the markets for steel products and the main factors 
of production, the Commission proposes the main lines of 
the policy which it Intends to apply, using its powers 
and instruments under the ECSC Treaty, to guide and back 
up steelmakers' strategies in the years to come. 
II. SUMMARY OF THE RESULTS OF ANALYSIS 
4. Part 1 of "General Objectives for Steel 1995" (GOS-95) 
seeks to analyse the factors considered crucial for 
making realistic medium-term forecasts for the Community 
steel sector : 
A. The relationship between the main macroeconomIc 
variables and steel consumption in the I ndustr l ai ized 
countries and the Community in particular 
Despite the acknowledged existence of a statistical 
relationship between the growth rates of GDP and 
apparent steel consumption, the statistical model 
should be used with great caution to allow for the 
effects of such variables as stock changes, which can 
distort and render meaningless forecasts of steel 
consumption based only on the trends In macroeconomic 
var I abI es. 
Nonetheless, having taken such precautions, the 
Commission, in its macroeconomIc forecasts for 1988 
to 1993 (GDP up by 3% p.a., Investment up by 5% 
p.a.), which assume that macroeconomIc policies in 
the developed countries remain stable and there are 
no major crises in the developing countries, expects 
gross steel consumption In 1993 of about 130 million 
tonnes, very slightly up on 1988. 
3. 
B. Changes on the world market and the effect of 
macroeconomIc and sectoral policies on the structures 
and international trade in steel products 
The world steel market has been characterized for 10 
years by rapid growth in production capacity in the 
NI Cs (mirrored by their domestic consumption) and by 
the restructurIng which has followed stagnating 
demand in the OECD countr I es. These structural 
trends are the mainspring for the dynamic exports of 
certain NICs and the declining market share of 
traditional exporters (the Community and Japan). 
The continuation of these trends and the expected 
buoyancy of world demand forecast for 1995 (on a par 
with 1988) should reduce ImbaIances between supply 
and demand at world level (which had until 1987 been 
forcing steel prices down) and lead to a growing 
regiona I izatIon (into large zones) of international 
t rade In steeI. 
The political and economic development of the Eastern 
European countries need to be followed carefully, 
even more so In that, In most of these countries, the 
steel Industry Is a very Important industrial sector 
and the changes which might occur in this sector will 
have an important impact in the world steel 
s i tuat ion. 
World trade in steel has also been 
government Intervention aimed, in i nf I uenced by 
the OECD at 
facilitating restructuring, and in other countries, 
at encouraging expansion of the industry. Renewed 
growth In demand and the consequent reduction in 
global Imbalances between supply and demand will see 
government's role gradually diminish, allowing trade 
to develop in a more orderly fashion. 
Nevertheless, the enduring macroeconomic instability 
foreseeable in some countries or regions of the world 
could lead to fluctuations of greater or lesser 
abruptness, whether 
t rade , part i cu I arI y 
a I ways adhere to 
practi ces In el ther 
exports. or not cyclical, in the steel 
because these countries do not 
fair competition and pricing 
their domestic market or their 
C. The influence of continuous technological innovation 
on re I at Ions between producers and customers 
Despite the- considerable effort made during the 
recent quantitative phase of restructuring (cutting 
capacity, jobs and costs), steel undertakings in the 
industrialized world have for some years been engaged 
In constant and accelerated technological innovation 
aimed at a more qualitative restructuring to meet the 
ever more exacting requirements of their customers. 
As in most sectors of Industry, customers 
demanding higher quality 
concrete reinforcing bars 
steels, and service 
comprehensive and, often, 
Community steelmakers 
investment In Innovation and applied research. 
This must encompass both processes at the dlff 
production stages (Including, Increasingly, proc 
to conform to environmental standards) and prod 
for the latter, close cooperation with user 
improve quality and especially to find 
applications or outlets for steel products has b 
even more essential. are 
f rom 
ec 1 a I 
more throughout the range, 
to coated sheet or sp 
whIch Is faster , 
cheaper. 
must therefore Increase 
er ent 
esses 
UCtS ; 
s to 
new 
ecome 
The Impact of the Internal market 
Although the Single Act makes no direct reference to 
the steel industry, completion of the internal market 
is bound to have an Indirect Impact on two areas In 
particular: production costs and, therefore, the 
conditions of competition. 
Where costs are concerned, current 
the internal energy 
the transport sector, and and future 
market , on 
the cap i ta I policies on 
I i ber a I i zIng 
market will probably lead to Increasing uniformity of 
the unit costs of energy, transport and finance, 
where differences between certain Member States can 
at present be as great as 80% (e.g. in electricity). 
The growing harmonization of economic, fiscal and 
monetary policies will mean a more competitive 
environment which will facilitate certain industrial 
cooperation projects between steel undertakings (even 
outside the national framework) already begun in 
1988, which could make a positive contribution to the 
rationalization efforts still necessary in the 
sector. 
5. Part 2 of "General Objectives", comprises quantitative 
forecasts for the market In steel products In 1992 and 
1995 which take account of this qualitative analysis. 
The i nternaI-demand forecasts are based on the 
foreseeable development of user sectors, on the 
consumption by each of steel products and on trends 
in specific steel consumption 
5 . 
Demand for steel from the construction, civil 
engineering and machine manufacturing sectors, and 
parts of the transport equipment Industry will be 
sustained by investment; car 
exceed the present high level 
sectors such as packaging, 
potential for expansion, it 
expect quantitative demand to 
Furthermore, the downward production should also 
in the medium term. In 
where there Is less 
wouId be reaI I st i c to 
stab I I i ze . 
t rend i n spec I f I c 
consumptI on 
past . should be less significant than in the 
These changes will mean: 
real consumption of ECSC products at 110.7 million 
tonnes In 1992 and 114.7 million in 1995 (compared 
with apparent consumption of 111.7 million tonnes 
in 1988), representing annual growth of 1.4% on 
the reference period (1986-88), a rate of growth 
markedly lower than that of GDP; 
a shift in demand towards more elaborate products, 
e.g. coated and special steels. 
These forecasts therefore indicate a st ructura I t rend 
towards stability over the period until 1995, 
(compared with 1988 levels), although this does not 
rule out normal cyclical fluctuations (such as that 
starting in late 1989), on a scale which will depend 
on variables that are difficult to pin down such as 
stockpiles, the trading behaviour of producers, 
dealers and users, and, finally, any pressure from 
I mpor ts. 
B. The Community's exports and Imports have generally 
been remarkably stable over the last ten years, and 
their structure too has remained relatively stable 
(with the exception of semi-finished products), but 
with considerable geographical concentration in 
certain parts of the world. 
From here to 1995, the most reasonable scenario seems 
to be one of stability. In fact, even if certain 
long-term, albeit theoretical, trends point towards 
greater specialisation by product between 
industrialised countries and those new to production, 
which could lead to a slight deterioration In tonnage 
terms of the commercial balance, the companies' new­
found dynamism and the overall good competitive 
position of the sector may nevertheless 
counterbalance these trends and maintain market 
share, both internally and in export markets. 
6. 
This scenario of stability, compared with recent 
developments (the reference period being the average 
of the years 86-87-88) would 
overall commercial balance of 
tonnes in 1995, resulting from 
22.5 million tonnes, and an 
9.5 m i I I I on tonnes. therefore mean an 
around 13 m I I I ion 
an export level of 
import level of 
The sensitivity of these assessments to factors such 
as fluctuating exchange rates and the knock-on effect 
on exports of developments In non-Community economies 
which have yet to stabilize nevertheless demands that 
these forecasts be regarded with considerable 
caut i on. 
As far as the process of openinig up to Eastern Bloc 
countries and the prospect of German unification are 
concerned, It seems premature to try to quantify 
their mid-term or long-term Impact on the level of 
trade In steel products; this Impact will most 
probably be influenced by the difference, notably 
from the aspect of quality, between the Community and 
the Eastern European countries in steel consumption 
as well as production. A certain pressure from 
exports of bottom-of-the-range products Into the 
Community may be seen in the short term. 
The above assessments 
output of hot-roI Ied 
117 million tonnes, slightly 
115.4 million tonnes achieved in give rise 
products to estImates for 
in 1995 of around 
above the fIgure of 
1988 (Eurostat) . 
Compar i ng 
(max I mum 
recent I y these production forecasts with the MPP vwiii|^a I IIIVJ III^OQ }S I v/ vi u v» t • w • i iv/iv?v»w»»v<i» n i i n vnw m i 1 
(maximum possible production) of steelworks in 1992, 
— * «-- confirmed by undertakings at the special 
the Commission, the following over a I I request of 
conclusions can be drawn (see table In Annex)* 
The 
dur I 
(77% 
the 
rep I 
cert forecast average capacity utilization rates 
ng the period 1992-95 for coil and strip mills 
) and wire-rod mills (68%),1 are Just within 
accepted norms for financing plant 
acement: but from this overview emerges a 
ain concern about hot-rolled wide strip mills 
par tIcu I ar , where disparities between in 
unde 
are 
fear 
prod 
high r,takings' technical and financial structures 
still great enough for new difficulties to be 
ed should there be even a short-term fall in 
uctlon or prices for this product which is 
ly sensitive to market fluctuations. 
Two thirds of these are in the electric branch of the 
industry and can therefore operate more flexibly. 
The forecast average utilization rates during the 
period 1992-95 for mills producing heavy sheet 
(65%), heavy sections (62%) and even for the most 
flexible mills producing light sections (63%) seem 
unsatisfactory and show that further s IgnIfI cant 
cuts In capacity must be made to ensure the 
medium-term stability of undertakings making these 
products. 
Part 3 of GOS-95 comprises a study of two highly 
sensitive factors of production (alongside those already 
mentioned, i.e. plant and energy) affecting steel 
undertakings' competitiveness: raw materials and labour. 
Metallic raw materials (i ron ore , 
factor in the scrap) are a major 
because the Community depends heavily on fer ro-aI loys and 
sector's economy 
i mpor ts. 
Considerations of quality and low production costs 
dictate that most iron ore Is imported from outside 
the Community, often under long-term contracts or 
through direct participation by our industries in 
mining ventures. Exhaustion of some deposits and, in 
some instances, political Instability mean that 
Community steelmakers, to ensure continuity of supply 
at competitive prices, will have to Increase their 
involvement by stepping up investment, in cooperation 
with those countries outside the Community most 
likely to welcome such projects. 
Most of the constituents of ferro-alloys are also 
Imported from outside the Community; certain 
countries (exporting chrome, for example) enjoy a 
virtually dominant position. 
Finally, the collection in the Community of high-
grade scrap may be insufficient in the short term to 
guarantee adequate supplies for the electric-steel 
industry and the development of new products and 
processes; new sources must be found, either by new 
recycling methods or importing. 
In this respect, future standards for the protection 
of the environment should take account of the 
important economic factor which 
constitutes, and of the fact 
regulations may encourage the 
therefore the final recycling 
Because it is the collection of scrap recyc I i ng 
that these same 
coI lection, and 
of the product. 
a non-poI Iutant 
product, recycled steel may well be a valid 
competitor for other substitution products, whose 
collection and recycling may be less easy given the 
pollution problems which these operations may pose. 
8. 
As can be seen, external trade plays a major part in 
supplying the steel Industry and security of supply 
Is a constant problem In an environment where the 
Community's Industries are in direct competition with 
the other industrialized countries on the world 
market for raw materials. 
Restructuring has transformed the empIoyment 
s I tuatI on ; the steel industry is now much less 
labour-intensive: in 1975 it employed 870 000, in 
1988 only 409 000 (Community of Twelve, Including 
apprentI ces). 
However, the labour force is now much more highly 
skilled and will become even more so as technological 
innovations are Introduced on to production lines. 
The correlation between the increase in the sector's 
capital I ntensiveness, the sophistication of its 
products and the skills skills of Its workforce will 
therefore continue to cause significant change in 
vocational training in the steel industry. 
The Job losses that could st i M be expected up to 
1995, will be spread over the entire period, and will 
not have by any means the same scale as during the 
last decade. 
I I I CONCLUSIONS: FUTURE STRATEGIES AND POLICIES 
7 . The economIc and polit I ca envIronment of the 
Community's steel Industry In the future 
A. The present macroeconomIc situation and the forecasts 
on which GOS-95 is based are quite differeht from 
those underpinning GOS-90. 
The 1985 forecasts for 1990, which in the optimistic 
scenario put hot-rolled sheet production at 
109 million tonnes, were already being exceeded by a 
considerable margin In 1988 (114 million tonnes) 
because of a boom in all major s tee I-consumIng 
sectors . 
The sectoral policy, defined in the GOS-90 was mainly 
aimed at shedding the steel Industry's surplus 
capacity, estimated at almost 30 million tonnes p.a. 
over the period 1986-90, and making the capacity 
retained technically and financially viable. 
In contrast, the quantltive analyses In GOS-95 show, 
an economic climate and prospects which are generally 
stable when production forecasts for 1995 are 
9. 
compared with those of 1988. When these forecasts 
are compared with the MPPs for 1992 announced by 
steelmakers, the theoretical overcapacities revealed 
are much smaller than those forecast In GOS-90, but 
they are static, since they Ignore the fact that 
steelmakers' continuing investment in modernization 
and improving productivity will lead to some increase 
in the capacity of the plants concerned. 
Although the climate is generally favourable, several 
points of uncertainty emerge from a dynamic analysis; 
steelmakers and the Commission should keep these 
points in mind when formulating strategies and 
policies for the years ahead. The ma I n areas of 
uncer ta I nty or Instability requiring close monitoring 
are : 
the impact of cyclical fluctuations in demand for 
Community steel and the effect of Impor ts on the 
volume and prices of Community steelmakers' 
del Iv e rles; 
the effect, already mentioned, of the investment 
needed to modernize, and improve productivity on 
steelworks' actual capacity, where there remains 
an over a I I surpI us for certain products (for heavy 
sheet and long products in particular, and to a 
degree for hot-rolled wide strip). 
B. The political and legal framework for the Community 
steel industry will by 1995 be characterized by: 
continuing liberalization of economic policies; a 
clearly less interventionist stance on the part of 
the Community and a fully competitive environment 
will give steelmakers the initiative but also the 
responsability for all decisions affecting their 
industrial structures and commercial practices; 
a greater commitment by the Commission to secure 
compliance with the rules of free competition both 
within the Community, by firms (agreements or 
concerted practices) and by Member States (state 
aids), and In International trade-, this has 
already started with the signature of a bilateral 
consensus with the USA; 
genuine jetermInation by the Commission to 
support, if necessary, corporate initiatives using 
the instruments of the ECSC Treaty, which will 
bring stet I closer to the other Industrial sectors 
covered by the EEC Treaty. 
10. 
8. Community steel undertakings and their strategic 
responsIb I I i tI es 
The aim of any industrial undertaking (and therefore of 
every steel company) which wants to maintain a stable 
position on the market In the long term is certainly to 
preserve or if possible to Improve Its competitiveness 
so that It can : 
meet the demand of its present and future 
in terms of volume, quality and price; customers 
generate sufficient cash flow to ensure through its 
own resources the reinvestments needed to guarantee 
an adequate return on capital invested and to 
mitigate the effects of cyclical fluctuations. 
To achieve this objective, the Community's steel 
companies will be faced with Important strategic choices 
on their own responsibility, of which the main elements 
to be considered are the following: 
generally strong prices from 1988 to the end of 1989 
certainly masked the surviving overall excess 
capacity in most steel products and different levels 
of corporate economic performance, especially as 
regards depreciation and financial costs: the 
ability to resist a greater or lesser fall of longer 
or shorter duration in prices will therefore vary 
significantly from one undertaking to another; 
g i ve 
trad 
app I 
d i f f 
join 
mak i 
will 
mana 
comp 
st ru 
cone 
comm 
syst 
c I OS n this sensitivity to cyclical chan 
itional risk limitation strategies are 
i cab le to all 
erent subsectors 
t ventures for 
ng for synerg i es 
depend heav i I y or agreeme 
ex I st I ng pi 
each compan 
(Joint st firms: diversification i 
of steel, the possibility 
new investments 
in the use of 
not only on 
gement traditions and style 
anies, family firms) but also on their industr 
cture (integrated; electric, coastal 
entrated; inland and dispersed) and th 
ercial structure (diversified distribut 
em-, high level of integration with deale 
e ties with major users); ge , 
not 
n t o 
of 
nt s 
ant 
y 's 
ock 
ia I 
and 
e i r 
i on 
r s ; 
the introduction of new technological developments in 
the short term (such as the continuous casting of 
thin slabs) will also force certain Integrated and 
electric steel firms to decide whether or not to 
incorporate them Into their industrial structure, 
depending on their position on the flat products 
market, their supply resources for high-grade scrap, 
etc . 
11 . 
The Immediate implication of these comments is that it 
will be up to each company to determine, depending on 
its industrial and commercial structure and Its economic 
and financial situation, the structural adaptations it 
must still make in order to be prepared for less 
favourable conditions (in volume terms, but especially 
in prices) than those obtaining since 1987-88. 
In any event the undertakings must be aware that the 
persistence of certain overall excess capacities in some 
steel products could disturb the market to an even 
greater extent if investment strategies are not adapted 
to market realities. 
Accordingly, undertakings must understand that the 
Commission will pursue a very strict policy regarding 
state aids and monitoring compliance with Articles 65 
and 66 of the ECSC Treaty. Similarly, they will no 
longer be able to count on an interventionist policy for 
the organization of the Community market (based on 
Article 58), which is not applicable in the event of 
normal cyclical fluctuations in a period of economic 
stability, as Is expected for the steel market over the 
next few years. 
The Commission's main policy lines 
Taking account of the future economic and legal 
framework described In this document, the Commission 
will pursue its efforts to guide and support 
undertakings' initiatives in the following fields. 
A• Continuous review of the internal market 
The Community's steel market will increasingly be the 
fundamental element for most Community steel 
undertakings. The Commission will therefore continue 
to devote special attention to the continuous study 
of market trends In the short and medium term. It 
will use the Instruments available to It under 
Article 46 of the ECSC Treaty. 
These General Objectives for 1995 will be reviewed in 
1992 in order to adjust the forecasts in the light of 
the data available for supply and demand. The 
Commission will supplement these analyses with 
monographs on major questions affecting the future of 
the steel sector, such as the supply of scrap 
(already started), the first-stage processing 
sec tors, etc. 
12 . 
B. Monitoring of International steel trade practices 
* When renewing the arrangement on the exports of steel 
products to the United States, the Community 
undertook with the American Government to abolish all 
similar voluntary export restraint arrangements 
(including the Community external steel trade policy 
system) by 31 March 1992 at the latest. 
In 1990 the Commission proposed to the Council a 
progressive liberalization of this external trade 
system (already started in 1989), to facilitate a 
smooth transition to the post-1992 environment. 
also Immediately seek to 
the current Uruguay Round and But the Commission w 
obtain, if possIbIe In 
In any case before 1992, a multilateral agreement 
imposing strict and effective discipline 
international steel trade as regards 
intervention and tariff and non-tariff 
access to steel markets, as i n 
state 
barriers to 
already agreed In the 
bilateral consensus signed with the USA. 
In the context of the growing liberalization of trade 
in steel products, the Commission w 
unfair practices having a negative 
on the Community market. It will 
possibilities under GATT to improve 
of anti-dumping procedures. II try to prevent 
i mpact on prI ces 
exhaust all the 
the ef feet Iveness 
C. Analysis of structural change 
* In cooperation with the steelmakers, the Commission 
will continue its periodic reviews of changing 
production structures, mainly through steel plant 
census and through the analysis of the production 
capacities (MPP) and the investment projects notified 
by the firms. 
* As regards the MPP, the Commission will ensure that 
the criteria for defining them are correctly applied 
and that their evaluation takes account of every 
possible productivity improvement obtained, where 
appropriate, from investment, new management 
techniques or verifiable changes in the product mix 
or in the normal operation of the plant. 
The Commission will deliver opinions under 
Article 54 ECSC on investment projects and on 
multiannual investment programmes at the request of 
companies, mainly with a view to obtaining a loan 
later on. The analysis of these projects and 
programmes must show these investments fixed in the 
overall strategy of the company and of the centres of 
dec i s I on. 
13. 
* Through Its opinions the Commission will consider as 
a positive element the Introduction of more efficient 
new technologies. It will also Inform investors of 
the updated forecasts for the markets in the steel 
products in question and If necessary will remind 
them of their responsibility for any market imbalance 
which their investment could cause. 
At the company's request, a loan may be granted to 
finance the investment if, on examination of the 
preceding conditions, the impact on the balance of 
the market is Insignificant, or if the impact results 
from innovative technological elements in the 
i nvestment . 
The Commission leaves the Initiative and 
responsibility for investment decisions to the firms, 
while considering that the possibilities for 
Industrial and technological cooperation between 
Community firms which can mitigate the negative 
impact on the market of an investment causing a 
significant increase in production capacities, and 
also help to rationalize Community steel supply. 
* As regards industrial structures, the Commission will 
in any case ensure that the present developing trends 
towards industrial concentration does not Impede 
effective competition on the markets. 
Nevertheless there Is still a number of steel firms 
(or rather groups) In the Community where certain 
possibilities of complementary operation can be 
studied. The imminent prospect of a single market 
from 1993, and especially of a single capital market 
open to all Community economic operators, should 
facilitate the still necessary 
readjustments and the sector dynamics. i ndust rial 
In this spirit the Commission will be in favour of 
complementary operations between Community steel 
firms, where such operations pursue the objective of 
facilitating the rationalization decisions and 
Improving the industrial, commercial and financial 
structures of the firms concerned in the face of 
market conditions that could be less favourable than 
they are at present. 
General policy iines with financial consequences 
The ECSC has a financing capacity which it uses to 
meet the needs of the steel and coal Industries as 
defined by the Imperatives of the sectoral strategies 
defined at Community level and as budgetary 
possibilities and constraints allow. For steel, 
14 
since 1980 the emphasis has been on the necessities 
dictated by restructuring and In particular the 
flanking social measures. 
In the context of a dynamic steel policy, the 
financial operations of the ECSC should be steadily 
shifted towards objectives more directly linked with 
production structures and improving productivity, 
especially towards research and certain types of 
investment, and therefore social measures should be 
completed, following the guidelines described 
hereafter, and in the limits of the available 
resources. 
The criteria for these operations should therefore be 
reviewed; the Commission considers that projects 
which could be submitted by undertakings, whether for 
research or for investment, should be individually 
larger than in the past and of greater significance 
for the whole structure of the undertaking concerned. 
This reasoning will of course apply to all fields 
covered by the ECSC Treaty, the iron and steel 
Industry proper as well as supply (iron ore, scrap, 
certain ferro-alloys), as policy for the sector must 
be planned on the basis of an overall strategy 
covering the entire Industrial cycle. 
ECSC research: the Community policy which has been 
pursued since 1955 will be continued; a larger 
contribution will be made to the technological 
development of the sector on the basis of the 
following considerations: 
- the unremitting need for 
reductions and productivity fur t her cost 
mprovement s, price 
continued promotion of steel 
with substitute materials, in its compe t i t i on 
the growing pressure of environmental protection 
measures to reduce harmful emissions and to 
recycle waste and industrial effluent, 
the 1993 single market, which necessitates 
research and adaptation studies for establishing 
rules and standards for manufacturing and 
const ructI on ; 
To maxamize the contribution of ECSC research to the 
development of the steel industry, action is needed 
on the following fronts: 
15 
Developing cross-border and interdisciplinary 
coopérât I on in order to reinforce the advantages 
of Joint research and to forge genuine European 
I inks. 
To this end the Commission intends to promote 
projects, quality being equal, which involve the 
greatest possible degree of cooperation. 
Promoting long-term high-risk Community projects 
in areas of strategic interest for the Community 
steel Industry, such as new steel production 
technologies like reduction casting and continuous 
casting of thin products, or their advanced 
applications - coated steel, stainless steel, etc. 
Encouraging complementarity with other national 
and/or Community programmes: launching large-scale 
programmes, of the sort already run by our direct 
competitors, the USA and Japan, will demand 
considerably larger budgetary resources than are 
available for ECSC steel research at present. 
Bringing the research effort in all European 
producer countries up to the level of Intensity of 
the most eff I cIent, and encouraging each country 
to play Its part in the common effort. The aim 
would be to reduce the disparities between 
countries and companies, facilitating better 
distribution of the efforts In this field. The 
result would also be a substantial Increase in 
resources devoted to research. A target of ECU 5 
per tonne of steel would be realistic, and would 
still represent only about 40% of Japan's 
expend i ture. 
The Commission could encourage this trend by 
promoting projects involving the participation of 
producers, firms, universities and users with 
smaller capacities and resources. 
With regard to Article 54 ECSC loans, the Commission 
is planning, in order to expand Its financial 
intervention, to bring back a system of Interest 
rebates with a view to channelling investments 
towards priority fields In line with Community 
objectives and corresponding criteria. At the outset 
It could concentrate on loans for environmental 
protection measures. 
For alongside their efforts to Improve 
competitiveness, firms are required by Community and 
national environmental protection measures to incur 
non-productive investment expenditure whose relative 
importance, which is still low at present, will 
16. 
continue to rise: the estimate for 1989 is 4% of 
total Investment expenditure. The Commission has 
launched a preliminary study to determine the scale, 
in financial and cost terms, of the environment 
protection obligations. This study will give the 
Commission the specific background for 
sector which must be taken into account In 
In the criteria for granting aid for 
control purposes (after the present 
expires). In this context, particular attention will 
be paid to the polluter-pays principle, without, 
however, losing sight of the financial significance 
of the problem which Is characteristic of this basic 
industry, and of the fact that steel Is one of the 
most recyclable of industrial products. the steel 
any change 
poI Iut I on 
A i ds Code 
In this respect, a particular effort will be made as 
far as regulations are concerned, so that there will 
be as few obstacles as possible to scrap collection, 
which in itself already constitutes a measure of 
respect for the environment. It is therefore 
appropriate that means be found within the framework 
of Community law for this type of operation to be 
encouraged. 
* Finally, with regard to the investments to promote 
the consumpt i on of Commun i ty steel the 
will continue to facilitate the 
investments pursuant to two 
communication of 31 October 1987: Comm i ss i on 
f i nanc i ng of t hese 
sect I ons In the 
industrial projects leading to an increase in 
consumption of Community steel or at least 
preventing Its decline; 
major infrastructure projects of European 
interest; this aspect has already aroused 
considerable interest In the national Industries 
and a number of projects have already been 
approved by the Commission and the Council. This 
suggests that increased use will be made of the 
financial assistance available under this 
instrument in the very short term. 
Soc I a I measures : in framing Its policy the Commission 
is faced with two fundamental problems. First, given 
the restructuring operations still to be completed 
and the effects of incorporating new techniques to 
improve competitiveness, more redundancies must be 
expected by 1995, though at a lower rate than in the 
1980s; secondly, both the innovations in production 
technology and the development of computerized 
systems have transformed the Jobs of steel workers 
and created major requirements in vocational training 
and work organization. 
17 
Faced with these two Issues, the ECSC has several 
ways of supporting the strategies launched by the 
undertakings and underpinned In many ways by the 
Member States as regards the management of human 
resources. 
The ECSC can facilitate the analysis and study of 
adequate solutions by means of research on Industrial 
health and safety and through the work of the Joint 
Committee for the Improvement of working conditions. 
One example Is the very detailed survey of vocational 
training requirements In the sector carried out among 
several firms In the Community and presented to steel 
experts at a briefing in Luxembourg last October. 
This survey will be supplemented by an initiative to 
incorporate the views of employees and their 
representative organizations Into the conclusions to 
be drawn. 
Secondly, under Article 56 of the Treaty the ECSC 
runs a compensation scheme for making up the Income 
lost by workers redeployed within the firm or 
elsewhere, Including those taking early retirement, 
and to cover the cost of their retraining. As much as 
two thirds of the ECSC annual budget has been used 
for these measures over the last 10 years. However, 
this compensation scheme Is restricted by the 
application criteria of Article 56: in line with the 
restructuring policies defined In the General 
Objectives for 1990, it applies only to workers 
affected by capacity closures or permanent cuts in 
activity; a second limitation stems from the high 
cost of this type of operation compared with the 
budget resources available. 
In the light of the new economic 
outlined in the present document, 
study, as in fact it has already 
stages throughout the existence 
possibility to adjust the scope 
emphasizing more the actions 
objective of improving skills 
necessary by the adaptations and 
involved in the current restruct 
steel industry. Given the fores 
the rate of Job losses and the c 
in funding needed for the a 
measures, the time Is right 
priorities. and soc i a I contex t 
t he Comm i ssI on will 
done at successive 
of the ECSC, the 
of Article 56 by 
i n favour of t he 
adjustments made 
changes in activity 
ur i ng phase in the 
eeable slowdown in 
onsequent reduction 
ccompanying social 
for a change in 
18 
Regional policy measures: the RESIDER assistance 
programme runs until 31 December 1992. Under the 1989 
reform of the structural Funds, Member States may 
continue and step up regional aids in steeI-producIng 
areas that are eligible for objectives 1 and 2. 
The operational rules for granting conversion loans 
under Article 56(2)(a) of the ECSC Treaty have been 
amended so that they can be Incorporated Into the 
Community support frameworks in the steeI-producIng 
areas covered by objective 2. 
The Commission must fix the budgetary priorities 
annually, at the time when it takes its decisions on 
the draft budgets for the following financial year. 
It will therefore determine how far the new political 
orientations sketched out above, will be put into 
operation on financial and budgetary levels. 
10. Conclusion: encouraging prospects and responsibilities 
for under tak I ngs 
The general economic background to the Commission's 
decisions for the General Objectives for steel 1995 is 
encouraging, both in the macroeconomIc growth rate and 
in the resulting stability for steel, and the 
fluctuations will probably be no more than are normal In 
a cyclical market like steel. 
offer a good opportunity to 
structures and secure their 
The clear trend away from 
States and the Commission, 
created by the Single Market, 
gives them a greater capacity for initiative, and also a 
greater responsibility, given the influence that their 
investment strategies and commercial practices could 
have on the stability expected for the medium term. These economic prospects 
firms to finalize their 
position on the market, 
intervention by Member 
fostered by the momentum 
The Commission will continue to monitor market trends 
and steel industry structures, and will give particular 
attention to comp 
on the Interna I 
S i m I I i ar I y , us Ing 
under the ECSC 
initiât! ves that iance with the competition rules, both 
market and In international trade, 
whatever financial instruments it can 
Treaty, it will support corporate 
are compatible with the alms of 
improving competitiveness and adapting structures to the 
quant i tIve and qualitative changes on the market. 
PPfnrrrifN CAPATTTV AND PRnxnricw OF STEFJ. 1992-95 
(Million tonnes) 
1. «nu m 
II. HTT-ROrj,?!) ,STRRI, 
Wide and narrow strip 
Reversing-mi 11 plate 
Total: hot-rolled flat 
products 
Heavy sections 
Light sections 
Wire rod 
Total: long products 
Total: hot-rolled proudcts 
TTT OTHFR FTNTSHFD PROITTS 
Cold-rolled sheet 
Coated sheet MPP 
1992-95 
186.0 
79.0 
13.9 
92.9 
14.5 
35.2 
19.8 
69.5 
162.4 
47.3 
21.5 Production 
1992 
138.6 
60.2 
9.0 
69.2 
9.0 
22.0 
13.2 
44.2 
113.4 
32.6 
16.4 Utiliza­
tion 
rate 
% 
74.5 
76.2 
64.7 
74.5 
62.1 
62.5 
66.7 
63.6 
69.8 
68.9 
76.3 Production 
1995 
143.0 
62.9 
9.1 
72.0 
9.1 
22.3 
13.8 
45.2 
117.2 
34.3 
17.6 Utiliza­
tion 
rate 
% 
76.9 
79.6 
65.5 
77.5 
62.8 
63.4 
69.7 
65.0 
72.2 
72.5 
81.9 

PART 
THE KEY FACTORS FOR IDENTIFYING 
FUTURE TRENDS 

1/1. 
CHAPTER I 
THE MAIN FACTORS DETERMINING STEEL CONSUMPTION 
IN THE COMMUNITY 
1 . THE RELATIONSHIP BETWEEN GDP AND APPARENT STEEL 
CONSUMPTION1 
The first oil shock in 1973 brought about far-reaching 
changes In Industry in general and the steel Industry In 
particular. These began to manifest themselves in 1975 (see 
Graph 1.1) when there was a sharp break in the trend in 
crude steel consumption, which until then had grown steadily 
since the early 1950s. 
Graph 1.2 shows that crude steel consumption in -tire 
Community of Twelve followed the same pattern as in the 
other western industrialized countries (OECD). It can be 
seen that: 
(a) there was a dramatic slump in 1975 and a less marked 
decline in 1982/83, in each case some time after the 
preceding oil shock; 
(b) there has been a general downward trend since 1974 which 
flattened out in the early 1980s; afterwards, 
consumption remained virtually constant until 1987. 
Consumption fell by over 20 million tonnes (15.8%) between 
the first five years of the reporting period and the five 
years around 1981. However, between 1981 and 1987 
consumption in the Community of Twelve fluctuated within a 
5% band either side of 104 million tonnes per year (see 
Tab le 1.1). 
In the United States demand followed a similar pattern to 
that in Europe until 1976, since when it has fluctuated 
widely but always In a very sharp downward direction, with a 
35% drop from the average in 1977-81 to that In 1982-86. 
Apparent consumption covers production plus imports 
less exports, and is expressed here in terms of crude 
steel. Real consumption, i.e. consumption which takes 
account of variations in stocks, or even real final 
consumption, which takes into account not only 
variations in stocks but also the balance of what is 
known as "indirect steel trade", would be more 
relevant here than apparent consumption. We shall, 
however, be using apparent consumption in our analyses 
for purely statistical reasons. 
1/2 
In Japan, however, there was no sign of any structural 
downward trend in apparent consumption. Demand In Japan has 
followed a fairly cyclical pattern since 1970 with regular 
peaks In 1973, 1979/80, 1984 and 1988. 
This trend Is attributable to: 
(a) a general slowing down in growth in the industrialized 
countries since the end of the 1960s which became 
particularly marked when oil prices rose. One 
phenomenon which is not often mentioned but is very 
relevant to an explanation of the behaviour of steel 
demand from 1974 to 1984, is the cutback in investment 
in capacity expansion; this is a regular feature of 
periods of recession and particularly of the recent 
s I ump; 
(b) a general trend towards conservation of energy and raw 
materials which has been reflected In the steel sector 
by more efficient use of steel. Where the level of use 
remains constant, the savings achieved permit a sharp 
cut in crude steel consumption. This phenomenon has 
been accompanied by the impact of technological 
innovation: steel has been replaced by other materials 
plastic In numerous industrial 
extent that these alternative 
advantage (costs including not 
cost of intermediate products but also that of 
production plants and processes), the 
will such as aluminium or 
applications. To the 
materials have a cost 
only the 
adapt Ing 
possibilities opened up by technological innovation 
be exploited and steel will continue to be replaced. 
The computer revolution has brought about dramatic 
changes in the product mixes of sectors using steel. 
New electrical household and electromechanical products 
are making greater use of software and by-products of 
R&D, and less use of hardware and materials. 
As a result of the efficiency gains achieved in steel 
plants by technical improvements in the liquid 
(continuous casting) and rolling phases, it is now 
possible to produce the same tonnage of final products 
using less liquid steel. This explains why the apparent 
consumption of rolled finished products has followed a 
healthier trend than crude steel. 
It Is also thanks to Innovation in steel technology that 
lighter and better quality products can be made, with 
smaller average volumes of steel needed to meet a 
par tIcuIar demand ; 
(c) the accelerating growth of the tertiary sector of the 
economy, resulting In a faster decline In the relative 
importance of steel-user sectors in GDP. Steel products 
are used for the most part as inputs in a small number 
of industrial sectors, ladle steelmaking, mechanical 
1/3. 
engineering, transport equipment, electrical engineering 
and the building sector. The relative size of these 
sectors In a country's productive structure will partly 
determine the ratio of steel consumption to GDP. Since 
the 1960s there has been a steady relative decline In 
steel-user sectors and a concomitant expansion of the 
tertiary sector in highly developed economies. 
This trend towards a more sparing use of steel was seen: 
(a) in the steel companies themselves where wastage has been 
reduced In the conversion of crude steel into rolled 
products ;1 
(b) In companies which process steel products Into 
components. Savings have been achieved In this sector 
as a result of the introduction of new techno Iogies -to 
reduce the number of rejects and Improve cutting 
processes, thus reducing waste; 
(c) among users, who use less steel for the same purpose by 
reducing the thickness of components. This has been 
made possible by the use of products with improved 
properties in terms of average and spread2. 
This trend towards a more sparing use of steel was more 
marked during the reporting period by an order of magnitude 
than the trend towards the substitution of steel by other 
materials (car Industry) or that of other materials by steel 
(building). The overall impact of such substitution is very 
difficult to quantify. 
The following Table showing scrap production in the 
Community steel Industry (as a percentage of crude steel 
produced) will Illustrate this trend. 
1972 1981 1983 1989 
Commun i ty (10) 21 
Spa i n 21 16 
17 15 
16 13 
14 
Source : Europe 
The following Table shows the trend in the thickness of 
tin cans and thf) number of cans which can be made from 
one tonne of cut hot-dipped tin. 
Example of a milk tin - diameter: 63 mm height 62 mm 
Th I ckness 
body (mm) Th i ckness 
I i d bot torn (mm) No 
per of cans 
tonne t i n 
1973 
1990 0.15 
0.12 0. 17 
0.15 32 800 
39 000 
1/4. 
The effect of these trends has been a steady reduction in 
the steel Intensity of GDP which, as we have seen, depends 
on the sectoral structure of the economy as well as on 
technological factors. Structural factors have reduced 
production by steel-user sectors In overall production, 
whereas technological factors (with an obvious m IcroeconomIc 
component) have reduced the average tonnage of crude steel 
needed to meet user sectors' demand, I.e. they have reduced 
specific consumption. 
The steel Intensity of GDP has declined in the three major 
areas of the industrialized world, although the decline has 
been slower since the beginning of the last cycle (1984). 
in the case of the Community, Table I 1.2 would even suggest 
a reversal of this trend. It is probably a sign of recovery 
rather than reversal, which Is normal In phases of cyclical 
upturn and in this case Is even more significant in view -of 
the deep recession which followed the oil shocks. In other 
words, the downward trend In the steel intensity of GDP, 
especially if expressed In terms of crude steel, will 
continue but will be slower than In the period from 1974 to 
1984. 
2. EXPLANATION FOR 1988 AND MACROECONOMIC PROJECTIONS FOR 
1993 
No full and detailed explanation can be given for the high 
rate of increase In apparent consumption in 1988 until much 
more sectoral data are obtained. An Initial interpretation 
can, however, be advanced on the basis of the factors 
described in the previous section. 
Observers have been struck not only by the large increase in 
apparent steel consumption (14.1% over 1987) but also - and 
especially - by the fact that the increase Is much higher 
than GDP growth. Does this observation cast doubt on the 
stability of the statistical relationship between GDP and 
apparent steel consumption? Does It reflect a far-reaching 
and unexpected (but very positive) change in the structure 
of this relationship? If so, can we expect a period of 
growth in the steel sector in the years ahead? Can GDP 
trends continue to be used as an indicator of steel 
consumption trends? 
Various studies have sought to identify a structural 
relationship between growth In steel consumption and growth 
in GDP and/or some of its components. m 
1/5. 
The 1982/83 OECD study1 came to the conclusion that steel 
demand in the OECD tended to fall when the GDP growth rate 
was less than 3%, and tended to rise - but more slowly than 
GDP - when GDP increased by between 3% and 4.5% and rose 
faster than GDP when the growth rate exceeded 4.5%. 
The 1988 OECD study2 found a remarkable stability in the 
relationship between the growth rates of GDP and apparent 
consumption throughout the OECD over a thirty year period. 
These General Objectives examine this statistical 
relationship for the Community of Twelve over the period 
1973-88. As will be seen In the following Chapter, the 
results suggest that GDP growth rates of 2.4% and 3.1% are 
required to ensure the same or higher rates of Increase in 
steel consumption. 
Although the relationship has proved to be stable, 
statistical adjustment is not sufficiently reliable to 
provide accurate forecasts: 20% of the trend in apparent 
steel consumption remains unexplained (R2-0.80). 
These findings confirm a certain positive relation between 
steel consumption and GDP and the existence of a significant 
negative trend over time which reflects the gradual decline 
of steel intensity in GDP. They must, however, be treated 
with extreme caution and cannot be used automatically to 
explain a particular phenomenon or, even less, to make a 
specific forecast. In addition to these statistical 
constraints there are a number of factors, already outlined, 
which call for caution In interpretation: 
(1) these thresholds reflect long-term trends-, 
(2) their va Iue dec I 
economic changes; nes over time, mirroring structural 
(3) variations in stock levels cannot be Identified If 
apparent consumption Is used as an Independent variable; 
(4) in periods of economic upturn, the downward trend in the 
steel Intensity of GDP may slow down, and even be 
temporarily reversed as investment and consumption of 
durab les pi cks up. 
In the light of these remarks, 1988 should be seen in the 
context of the general economic upswing already described 
above. Any general comment on 1988 will hence cover a 
number of cyclical aspects, of which the "abnormal" 
stockpiling observed is not the least. It can be concluded 
that there was not a significant change in the structural 
1 "Long-term demand for steel: determining 
forecasting methodologies", OECD, 1983. 
2 "Analysis of longer term developments In the 
steel", OECD Steel Committee, SC/WP(88)28. factors and 
demand for 
1/6. 
relationship between GDP and steel consumption. The GDP 
trend will always be an Interesting Indicator of what will 
happen to steel demand. It can be concluded, therefore, 
that the medium-term sectoral outlook is reassuring. 
The Commission's medium-term macroeconomIc forecasts 
(1989/93) (see Table IV.1 In Chapter IV) point to a period 
of relatively high growth (+3% on average for GDP) in the 
Community which will be fuelled essentially by Investment 
(+5% a year ) . 
This good macroeconomic outlook will be a key positive 
factor in the medium-term prospects for the steel sector and 
should keep the demand for steel at a high level. 
Significant Increases In demand cannot, however, be expected 
in view of the factors discussed above. 
TABLE I.1 
Apparent consumption of ECSC and non-ECSC steel 
In terms of crude steel equivalent 
000 t 
Year 
1970 
1971 
1972 
1973 
1974 
1975 
1976 
1977 
1978 
1979 
1980 
1981 
1982 
1983 
1984 
1985 
1986 
1987 
1988(*) EUR 12 
130.745 
122.504 
130.151 
139.905 
134.998 
113.100 
126.059 
1 18.305 
113.632 
122.936 
1 18.566 
109.285 
104.299 
99.236 
102.282 
101.592 
104.514 
103.637 
118.138 USA 
126.186 
126.885 
137.581 
149.205 
143.433 
115.978 
128.987 
133.043 
145.013 
140.061 
114.015 
128.523 
83.934 
94.011 
1 1 1 . 152 
105.095 
94.810 
101.642 
1 12.200 JAPAN 
70.864 
59.095 
70.621 
88.467 
77.295 
66.783 
65.220 
63.205 
66.652 
78.163 
79.007 
71.136 
69.504 
65.614 
74.367 
73.377 
69.941 
75.757 
86.600 
(*) Prov i s i onaI 
Source : Eurostat (EUR-12) 
ISI (USA, Japan) 
TABLE 1.2 
Average annual growth rates 
EUR 12 
USA 
JAPAN Per capita consumption 
1 
+0.2 
+2.2 
+0.6 2 
-2.2 
-1 .5 
-0.8 3 
-3.9 
-5.5 
-1 .7 4 
+3.0 
-2.2 
+3.0 Per capita product 
1 
+3.3 
+2.0 
+3.2 2 
+2.0 
+2.0 
+3.6 3 
+1 .0 
+1.1 
+3.2 4 
+2.6 
+2.5 
+3.7 Steel intensity 
1 
-3.1 
+0.2 
-2.6 2 
-4.2 
-3.5 
-4.4 3 
-4.9 
-6.6 
-4.9 4 
+0.4 
-4.7 
-0.7 
1 : 1970/74 2 : 1974/79 3 : 1979/84 4 : 1984/88 
Source : Eurostat (EUR-12) 
ISI (USA, Japan) 
300 
700 
m. 600 a 
V) 
£ soo c o 
^ WO 
£ 300 o 
200 
100 WORLD CRUDE STEEL CONSUMPTION 
-V v World 
Western industrialised 
court ries 
fJ"*^ State-planned 
^f economies 
^ Developing countries 
1 
7Ô90 7900 7970 7920 7930 '9^0 7950 7960 7970 7980 7990 
Year 
Gra£h_K1 : World development of crude steel production 
(Source : USD 
150 
100 
^ 50 Crude steel production in the 12 countries 
of the EEC 
I , i , . I i • • i l i * i i I—i—i—i—i—I 
1970 1975 1980 1965 1990 
Year 
Graph_K2 : Development of crude steel production in the EEC 
(Source : USD 
11/1. 
CHAPTER I I 
NEW TRENDS IN THE WORLD STEEL MARKET 
1• TRENDS IN WORLD STEEL CONSUMPTION - NEW GEOGRAPHICAL 
DISTRIBUTION OF STEEL DEMAND 
Over the last two decades, world steel consumption has been 
characterized by a slowing down of long-term growth and 
considerable changes in regional distribution. Most OECD 
markets have seen a stagnation or decline In steel demand, 
while consumption In the developing regions of the world has 
increased substantially. 
World steel production (and demand) increased at a rate-~o~f 
about 6% per annum between 1950 and 1970 (6.1% in the 1950s 
and 5.6% in the 1960s). This slowed during the 1970s to 
1.9% per annum following the first oil crisis, and declined 
further In the 1980s when consumption increased by only 1% 
(and, in fact, decreased in the industrialized world, not 
regaining its 1980 level until 1988). 
There has been a major change over the last 30 years In the 
geographical distribution of steel consumption. 
In 1960, consumption In the OECD countries accounted for 63% 
of the world total, that in the USSR and Eastern Europe 25%, 
and the remaining 12% was consumed by the developing 
count ries. 
In 1988, the OECD countries accounted for only 48% of world 
steel consumption, the share of the USSR and Eastern Europe 
was practically unchanged at 26%, and the rest of the world 
accounted for 25% of the total (see Table II.2). 
Thus, during this period, the developing countries' share of 
world steel consumption had more than doubled, reducing that 
of the OECD by the same amount, and almost matching that of 
the Soviet Union and Eastern Europe. 
Within the OECD, the period 1960-88 was characterized by the 
emergence of Japan as a major steel country, and by the 
relative decline of the USA and the European Community. 
Japan's share of world steel consumption is now almost 12%, 
as against only 5% in 1960. The share of the USA dropped 
from 26% to 14% during the same period. 
The Community's share of consumption was over 23% of the 
world total in 1960 (countries of EC 9), whereas today, 
after the last enlargement (EC 12), It is Just over 16%. 
I 1/2. 
As to the rest of the world, the share of the Soviet Union 
and Eastern Europe has remained relatively stable (moving 
from 25 to 26%), while the greatest Increase during the 
period 1960-88 occurred In the developing regions. 
This is particularly true of Asia (Including China), where 
steel consumption in 1960 amounted to 7.6% of the world 
total as compared with 17.1% today (more than the European 
Community or the USA). There has also been growth In Latin 
America (from 2.5% to 4.4%) and the Middle East (from 0.6% 
to 1.9%), and to a lesser extent in Africa (from 1.3% to 
1 .6%). 
Tab le 11.1 g I ves 
I ast decade. the consumption figures by region for the 
The same trends can be observed in the long-term 
perspective: steel consumption declined rapidly In the USA 
(in particular) and in Europe until 1986, while the decline 
in Japan was less marked. In the OECD countries as a whole, 
the level of demand of the previous decade was regained only 
in 1988. By contrast, steel consumption expanded very 
rapidly In Asia (including China), but demand has stagnated 
in Latin America, Africa and the Middle East over the last 
10 years. 
Steel consumption in the Far East, including China, the rest 
of Asia and Japan, Increased from 170 million tonnes of 
ingots in 1979 to 246 million tonnes In 1988; this 
represents a growth of total steel consumption of 76 million 
tonnes (up by 45%) In ten years, whereas consumption in the 
rest of the world merely regained its level of ten years 
prev i ousI y In 1988. 
Various political and economic uncertainties make long-term 
forecasting of world steel consumption a hazardous exercise. 
Nevertheless, the normal practice Is to extrapolate the 
long-term trends already analysed. The development of steel 
demand in the past was determined by certain basic economic 
factors, the reconstruction process after the Second World 
War and the stagnation that followed the oil crisis. The 
key factors in the structural development of steel 
consumption in future will probably be the industrial 
development of the Third World and the growth of demand for 
certain capital goods and consumer durables (replacement) in 
the industrialized countries. 
The experts unanimously take the view that these forces 
justify forecasts of steel demand in the direction of 
stagnation in the OECD and steady growth in the developing 
countries, particularly of the Far East. In these 
countries, with their high population density and 
infrastructure development needs, steel consumption will 
continue to expand. 
I 1/3. 
In the Industrialized countries, there Is a steady trend 
towards consumption of more sophisticated products. This 
makes any comparison on a volume basis misleading, since the 
better quality steels are both tougher and lighter. The 
qualitative change Is also apparent in the analysis In value 
terms, particularly when comparing production and trade 
flows in the OECD countries and the rest of the world. 
The latest MSI forecasts put world steel consumption in 
1995 at a level slightly above that of 1988, representing an 
annual increase of 1.1% for the period 1985-95. The I ISI 
expects steel consumption to Increase slowly in the 
industrialized countries (0.4% per annum between 1985 and 
1995) and In the state-trading countries (0.5% per annum), 
and to continue to grow rapidly in the developing regions 
(4.3% per annum) (see Table I 1.3). Growth Is expected to be 
most rapid In Asia (6.7% per annum) while consumption In the 
USA is expected to decline. 
In the industrialized countries, the trend In steel demand 
forecast for 1995 is lower, at 344 million tonnes, than the 
1988 level of 370 million tonnes, although this could be 
achieved if 1995 were to be a peak in the economic cycle. 
TREND IN PRODUCTION CAPACITIES: RESTRUCTURING IN THE 
OECD COUNTRIES AND EXPANSION IN, THE NEWLY 
INDUSTRIALIZING COUNTRIES 
Crude steel production capacity in the OECD reached a record 
level of 577 million tonnes in 1980; this had fallen to 496 
million tonnes by 1988, and it is expected to decline to 450 
million tonnes by 1995. 
Production capacity in the market economies outside the OECD 
rose from 75 million tonnes in 1978 to 124 million tonnes in 
1988, and the forecast for 1995 is 151 million tonnes. 
Crude steel production in the state-trading countries was 
321 million tonnes in 1988, and Is likely to be Just over 
333 million tonnes in 1995 (see Table II.4). 
While capacity in the OECD was declining, it was increasing 
at an equivalent rate In the newly industrializing countries 
not part of the OECD. The twelve Community countries and 
the USA together cut their production capacity by a total of 
73 million tonnes In the period 1978-88. During the same 
period, the developing countries (including China) Increased 
their production capacity by 76 million tonnes (mainly in 
Latin America and Asia). This trend is likely to continue 
until 1995, with production capacity in the OECD as a whole 
diminishing by a further 45 million tonnes and capacity in 
the developing countries increasing by 39 million tonnes. 
As a result, the cuts In production capacity by the OECD 
I 1/4 
will probably be offset almost tonne for tonne by capacity 
Increases in the newly Industrializing economies, repeating 
the pattern of the last 10 years. 
It is perhaps worth stressing that the above global figures 
mask some interesting points. While most of the OECD 
countries made major capacity reductions in the 1980s, not 
all did so; Turkey Increased its crude steel production 
capacity from 4.4 million tonnes In 1980 to 9.7 million 
tonnes today. Furthermore, while the production capacity of 
the state-trading countries is likely to expand only 
slightly between 1988 and 1995, China and North Korea will 
probably continue to build up their capacity. 
Both economic and political factors are Involved in the 
changing world picture of steel production. As to the 
economic factors, both demand and supply elements are in 
play. 
On the demand side, there is clearly a close correlation 
between rapid growth in domestic steel consumption and the 
decision to invest in an expansion of production capacity. 
As already discussed in the previous section, the Industrial 
dynamism of the NICs was at the root of the growth in their 
demand for steel and, consequently, of the development of 
their steel production capacities. 
It is clear that, in some cases, the home market is too 
small to Justify a given plant or that It falls to absorb 
the output of a new plant owing to a slump in domestic 
demand. In such cases, and in order to maintain reasonable 
utilization rates, it is vital to export. Latin America is 
example of how an economic crisis can provoke a 
steel exports owing to a lack of domestic outlets 
absorb the fixed costs of investment and to obtain 
currency to pay off the external debt). In the t he best 
surge of 
(both to 
fore i gn 
count ries of 
capac i ty is 
consump tI on . the Far East, by contrast, the growth of 
always matched by vigorous growth In 
During the period 1978-88, production capacity increased by 
21 and 48 million tonnes respectively in Latin America and 
Asia (including China). However, while consumption in Asia 
increased by 58 million tonnes, it was stagnating or In 
decline in Latin America, which explains the boom on the 
Asian markets and the rise in exports from Latin America. 
In general, steel Investments In the past were based on a 
forecast of expanding domestic consumption (misguided in the 
case of Latin America), but there Is an Increase in projects 
aimed chiefly at the export market, above all for 
semi-fInI shed products (Tubarao being one of the first 
ex amp les). 
As far as the supply side Is concerned, the competitiveness 
of the steel industries of the newly industrializing 
countries has been a factor in their growth. 
I 1/5. 
Competitiveness is always difficult to measure, given the 
confidential nature of much of the data and the fact that 
countries have different accounting systems. 
The information available on production costs, e.g. from 
Paine Webber/World Steel Dynamics, appears to confirm that 
certain NICs such as Brazil, South Korea and Taiwan have the 
world's lowest production costs (approximately US$ 420 per 
tonne), while Japan and the USA alternate at the top of the 
production cost league depending on fluctuations In the 
exchange rates. At present, the total cost in Japan exceeds 
US$ 550 per tonne and US producers are managing to turn out 
steel at US$ 484 per tonne. On average, Community producers 
have an intermediate position (around US$ 450 per tonne), 
with overall production costs well below those of their OECD 
competitors, and the most efficient European producers 
achieve costs on a par with those of the NICs. •- _ 
Although the productivity of labour In Brazil is low, its 
extremely low cost gives the Brazilians an advantage over 
their competitors. Raw material costs throughout the world 
are very similar, except In Brazil which has cheap national 
resources (iron ore). 
All these cost comparisons have to be used with the utmost 
caution, as they are based on broad averages which obscure 
considerable disparities with regard to the product ranges 
and other key elements of the structure of every business. 
To conclude, the expansion of Internal demand and the 
competitiveness of certain new plants are two Important 
elements in the growth of capacity in the NICs. However, it 
is perhaps government policy which has played the most 
i mpor tant role. 
All the developing countries which wanted to establish a 
steel industry resorted to protectionist measures. The 
steel industry, with its substantial economies of scale, is 
an ideal candidate for a policy of protecting nascent 
industries. The means employed by the newly industrializing 
countries to protect their steel industries ranged from high 
customs tariffs barriers to import licences Issued only with 
the consent of the national steel Industry. But the role of 
central government was not, of course, limited to protection 
against imports. Many governments in market economy 
countries outside the OECD gave financial support to their 
steel industries. As much of the steel Industry in e.g. 
Brazil, Venezuela, South Korea, Mexico, Taiwan, Iran and 
India is state-owned, the governments of these countries 
were able to bring greater influence to bear In supporting 
the expansion of production capacities. 
In the industrialized countries, governments also played a 
large part in restructuring the industry. In the Community, 
many steel undertakings recording major financial losses 
became state enterprises. Production capacity cuts in the 
I 1/6 
USA were chiefly the result of commercial decisions by steel 
undertakings reacting to massive financial losses due to 
overcapacity. The US Industry, and to a lesser extent that 
of the Community, also received protection against imports. 
The Japanese steel Industry embarked on Its relatively 
modest restructuring under the direction of the MITI, and 
the steel industries of both the USA and Japan enjoyed tax 
concess i ons. 
To sum up, both economic and industrial factors played a 
part in the massive expansion of production capacities In 
the newly Industrializing countries and In restructuring in 
the OECD countries, but in both cases State interventionist 
policies were a key element. It is to be hoped that such 
intervention will not in future result in obstacles to true 
international competition. 
3. THE BALANCE OF SUPPLY AND DEMAND AT WORLD LEVEL 
Recent analyses of world steel supply and demand have 
attempted to evaluate the magnitude and movement over time 
of the international imbalances, which have been an 
important and persistent feature of the world steel market 
since the mid-1970s. 
It is generally agreed that there has been a considerable 
excess supply for about 10 years-, this is still a problem in 
the OECD and could continue to undermine future prospects 
for t he sector . 
However, despite this overall assessment, it is impossible 
to put a precise figure on the magnitude (or to forecast the 
future pattern), for several reasons: 
nominal technical capacity Is a concept which varies 
widely from one country to another, so that comparisons 
(and additions) on a world scale have little meaning; 
the maximum utilization rates of nominal capacity also 
vary from one country to another, with the result that 
actual capacity Is even more difficult to evaluate with 
any accuracy. This Is due to factors such as 
infrastructure bottlenecks, production efficiency 
(including management), availability of raw materials, 
labour law, maintenance and production shutdowns, etc.; 
the structural balance or imbalance between supply and 
demand Is the important Issue here; consequently, it 
must be analysed In relation to steel consumption over 
t he Iong term ; 
global steel consumption figures throw little light on 
the markets for specific products. 
I 1/7. 
However, despite all these qualifiers, the comparison of 
overall production capacity and steel consumption does give 
a general picture of the problem and its evolution. 
3 . 1 Past t rends 
Between 1978 and 1987, the overall imbalance between world 
supply and demand (defined In simplistic terms as the 
difference between production capacities and steel 
consumption) remained remarkably stable at around 
200 million tonnes, owing to the stability of world steel 
production capacity (between 900 and 950 million tonnes) and 
world steel consumption (between 700 and 750 million 
tonnes), except for certain years in which consumption 
co I I apsed (1982). 
During this period, and despite this overall stability, 
different trends emerged as regards both production and 
consumption in the developing countries (In particular the 
newly industrializing countries of America and Asia) and in 
the OECD countries. These divergent trends were analysed In 
sect ions 1 and 2. 
Within the OECD, major restructuring efforts by producers 
led to the elimination of 71 million tonnes of production 
capacity during this period. At the same time, consumption 
declined by 50 million tonnes. The reverse occurred in the 
developing countries (particularly In Latin America and the 
Asian NICs), with steel production capacity and consumption 
increasing by 76 and 57 million tonnes respectively. In 
Eastern Europe, the increases in capacity and consumption 
were more modest . 
3.2 The concept of imbalance and the outlook 
As already said, there are two main problems to be resolved 
if these rough comparisons of production capacities and 
steel consumption are to be used to evaluate the world 
imbalance between supply and demand. 
With regard to supply, actual capacity (i.e. nominal 
capacity multiplied by the utilization rate) will provide a 
better basis for calculating potential production. In the 
case of demand, cyclical fluctuations over the long term 
need not be taken into account when evaluating structural 
i mbaIance. 
In a recent OECD study, the "standard" utilization rates 
were put at 80% for the developing countries and 90% for the 
Industrialized countries. If we apply this criterion, we 
find that in 1987, for example, when nominal steel 
production capacity was 940 million tonnes per annum, actual 
capacity would be no more than 833 million tonnes per annum. 
I 1/8. 
Of course, these global utilization rates do not give an 
accurate picture of the situation of each steel plant, and 
other steel experts come to different conclusions (though 
generally speaking there Is agreement that a standard 
utilization rate should be about 85% on average). 
With regard to steel consumption, the study of imbalances 
between supply and demand must be based on long-term 
estimates of the demand trend in order to avoid being 
influenced by purely cyclical fluctuations. 
Steel consumption reached a record level of 782 million 
tonnes in 1988. This figure should be seen against the last 
peak in steel demand in 1979, when apparent consumption 
reached almost 750 million tonnes. 
The MSI forecasts that world steel demand will reach a new 
record in 1995, bringing consumption to about 800 million 
tonnes. These forecasts take 1985 (average 1984-86) as the 
base year, and assume a global growth rate of 1.1% per annum 
until 1995. In other words, 1988 is regarded as a peak year 
In this cycle which would not be representative of the 
I ong-term t rend. 
A simple extrapolation of world steel consumption since 1973 
appears to indicate slow long-term growth leading to some 
730 million tonnes In 1988. This level is not very far 
removed from the 1984-86 average used by the MSI as a basis 
for forecasting growth in demand in the period 1985-95. (An 
assumed annual growth rate of approximately 1% from 1985 
would indeed result in approximately 736 million tonnes in 
1988.) 
The current structural imbalance between supply and demand 
at world level can be calculated as follows (rounded 
figures) on the basis of the estimates of effective capacity 
referred to above and the trend in structural demand. 
nominal steel production capacity-940 million tonnes 
actual steel production capacity -830 million tonnes 
real demand -780 million tonnes 
structurai demand -730/740 million tonnes. 
This gives a figure of around 90/100 million tonnes per 
annum for the difference between actual capacity and the 
trend in consumption. 
Its future development can also 
method. Of course, all the usual 
long-term estimate of supply and 
those mentioned above). be forecast using this 
qualifiers apply to any 
demand (in addition to 
I 1/9. 
The hypothesis developed above, i.e. the stability until 
1995 of the estimated world steel production capacity and 
the I ISI forecast of a growth of about 1% in steel demand 
during the same period, could lead to a progressive 
reduction In the global imbalance between steel supply and 
demand . 
capac i tI es In the Further reductions In steel production 
OECD countries could offset the new capacities being built 
i n add i t i on, n the rest of the world (see section 2 above); 
consumption Is likely to increase. The 
consumption and growing potential wor I d stee I 
combination of growing tumu i na i IUII ui yi un uiy uuiiounipi IUII anu yi uniuy |iuiciii la i 
production In non-OECD countries and continued restructuring 
within the OECD should partly resolve the problem of global 
imbalance In the coming years 
3.3 Supply and demand Imbalance by product and region 
In spite of all the difficulties and Imprécisions already 
mentioned, the problem of Imbalance must be analysed more 
precisely by product and world region. 
It is extremely difficult to obtain precise Information 
either on production capacity or on consumption per product 
for the various regions of the world. A recent study1 
arrived at the following conclusions: 
world hot-rolling capacity amounted to 
836.2 million tonnes per annum In 1988, of which 339.1 
million tonnes was for long products (40%) and 497.1 
million tonnes for flat products (60%); 
world utilization rates in 1988 were 77% for long 
products and 71% for flat products, or 74% for all 
finished products (73% In 1987); 
forecasts for global utilization rates are of the order 
of 71-76% In 1995, with 75-80% for long products and 
68-74% for flat products. In other words, there is and 
will continue to be a greater surplus for flat products 
than for long products in the world as a whole. 
With regard to the regional distribution of the gaps between 
capacity and Internal consumption, this problem, as already 
indicated, primarily concerns the OECD and to a much lesser 
extent Eastern Europe. The developing countries as a whole 
are virtually not affected. However, structures within 
these broad regions are highly diverse. 
In the OECD area, the European Community and the USA had to 
carry out painful restructuring to reduce production 
capacity by 32 and 41 million tonnes of crude steel 
Paine Webber - WSD "World steel planner" 1989. 
I 1/10. 
respectively during the period 1978-88. By contrast, Japan 
cut Its capacity by only 2 million tonnes per annum, while 
countries such as Turkey greatly expanded their capacity 
during the same period. 
Given the increase in capacity in all the developing 
regions, it is Interesting to examine whether this 
additional production will correspond to the growth in 
national steel demand, take the place of imports or flow 
into world markets In the form of higher exports. 
Iater , the 
Africa and 
In Lat in 
to a huge Table I 1.6 shows that in 1978 each of the developing regions 
had a shortfall In steel production capacity to the extent 
that it did not cover home demand. Ten years 
shortfalls had Increased In Asia and decreased in 
the Middle East. The biggest change occurred 
America, where massive capacity Increases led 
surplus over domestic consumption (which had been affected 
by the depressed home economy since the external debt 
crisis) and, consequently, massive exports. 
The forecasts for 1995 paint a similar picture; Latin 
America would still have a gap of over 20 million tonnes per 
annum between capacity and consumption, while capacity 
shortfalls would continue to grow in Asia (but decline in 
China) and to diminish In Africa and the Middle East. If 
these estimates prove correct, the Asian markets will 
continue to be very buoyant In 1995 and absorb not only 
steel exports from their own region (Japan, South Korea and 
Taiwan), but also from the rest of the world (particularly 
Latin Amer Ica). 
4. WORLD STEEL TRADE 
The world steel markets in the 1960s and 1970s were 
dominated by the emergence of Japan as a major exporter. In 
the 1980s, the dynamism of the traditional leading exporters 
(EEC and Japan) subsided and new steel exporters emerged, 
principally in Latin America, Eastern Asia and the 
Mediterranean region. 
At the same time, the import markets of the USA, China, 
South East Asia and the Middle East registered sporadic 
peaks (Middle East) or sustained upward trends (Asia, USA) 
(see Table II.9 for the world steel trade by region in 
1988). 
With regard to products, flats (HR and CR strip and coil) 
accounted for the largest share of total world exports, but 
there was steady growth in semI-finished products 
(par tIcuIarI y siabs ) . 
There are both economic and environmental factors underlying 
this trend which will probably continue to Influence trade 
in semi-finI shed products. 
M/11. 
Until 1985, net exports from OECD countries and net 
by developing countries Increased at a steady pace. Impor ts 
They moved from 14/13 million tonnes in 1960 to 20/23 
million tonnes In 1970, 50/48 million tonnes in 1980 and 
52/49 million tonnes in 1985. After 1985, however, the 
OECD's net steel surplus dropped sharply to only 24 million 
tonnes in 1988. The two major OECD exporters, the Community 
and Japan, saw their net balance diminish from 67 million 
tonnes in 1985 to 42 million tonnes In 1988 following a 
slump in exports by both parties and an increase in .Imports 
(more particularly In Japan) (Table II.7). 
Only the Asian countries now import more steel than in 1980. 
Net imports in Africa and the Middle East dropped from over 
21 million tonnes in 1980-85 to Just over 11 million tonnes 
in 1988. The trend reversal was even more spectacular in 
the Latin America countries: from having been major net 
importers in 1980 (8 million tonnes), they are now the only 
developing region whose steel exports exceed Imports (almost 
10 million tonnes of net exports in 1988). 
Given that new production capacity is being created in the 
developing regions (the only regions In which consumption 
will probably continue to increase), and that restructuring 
is continuing in the OECD area, this long-term trend towards 
import substitution in the new steeI-producIng countries 
appears to be a likely scenario In the coming years. 
Net steel exports in the Community increased from 13 million 
tonnes in 1970 to 38 million tonnes In 1985 (including both 
ECSC and non-ECSC products), before dropping back to under 
21 million tonnes In 1988. As we have seen, the same 
pattern was followed in Japan. 
The political and economic upheaval in Eastern Europe will 
not fall to have an Impact on the industrial structure of 
the countries concerned, and consequently on their steel 
industries. Nevertheless, it seems premature to attempt an 
evaluation however approximative, of the trends. 
Moreover, a preliminary sketch of certain changes which 
could be envisaged In the long term show certain 
contradictory trends, which prevent conclusions being drawn 
even as to the probable direction of steel production, 
consumption, and trade In the area. Thus, as far as supply 
is concerned, a certain restructuring of the steel 
industries might be expected In most of these countries. 
This could combine plant rationalisation with modernisation 
of production facilities, with a very uncertain result in 
terms of output (lower nominal capacity, higher 
productivity). In the same way, on the demand side, the 
desirable improvement in economic activity may not 
necessarily be in sectors with a high steel consumption. 
I 1/12. 
Unfortunately, all these structural trends give no precise 
indications of short and medium term effects of the change 
in the economic structure of the region. The investment 
strategy of the Community's Industry (notably In steel-
consuming sectors) will probably have a considerable role to 
play in this new structure, and consequently In the 
structure of the steel Industry. 
Among traditional steel producers, there is a general trend 
to concentrate on internal markets and/or "natural" outlets, 
and to avoid low-price exports to "exotic" markets. After 
the first oil crisis, European and Japanese steel exports 
expanded rapidly to make good the fall in internal 
consumption. However, after the second oil crisis, it 
became clear that restructuring, and not exports, was the 
only way out of a structural crisis. 
During the last few years, three quarters of steel exports 
from the European Community were concentrated on Europe 
(both East and West), North America, Africa and the Middle 
East; an equivalent proportion of Japanese exports was 
directed towards the Asian markets (including China), 
Australia and the USA. Thus, traditional steel producers 
and exporters tend to target markets close to home and to 
shy away from undue dependence on far-off markets. 
In the share-out of the world market (see Table II.8), the 
developing countries have succeeded not only in increasing 
their share of steel consumption in their own region (from 
46% in 1960 to 70% in 1987, and from 67% to almost 76% if 
China is included), but also In capturing over 4% of OECD 
consumption and more than 1% of consumption in Eastern 
Europe. The reverse has been the case for the OECD 
countries, which not only lost part of their internal market 
to the developing countries and the countries of 
Eastern Europe (the OECD share falling from 99.6% to 93.8% 
between 1960 and 1987), but also half of their share of the 
market in the developing world. 
For the European Community, which supplied 40% of the steel 
consumed in the OECD area in 1960 and 33% in 1987, the slump 
in its market share has been particularly marked in the 
developing countries: it fell from 34% in 1960 to 10% In 
1987 (see Tab le I I .8). 
If China is included among the developing countries, the 
Community's market share fell from 20% in 1960 to only 7% In 
1987, while the overall volume of consumption in the 
developing countries rose from 41 million tonnes to 
203 million tonnes over the same period, throwing into sharp 
relief the extent of such a drop on extremely dynamic 
markets. 
Table 11.10 gives a more detailed analysis of the 
Community's market shares. They have remained stable 
overall in its traditional markets: approximately 30% in 
I 1/13. 
Western Europe (with certain fluctuations due to the 
accession of Spain) and about 3% in Eastern Europe; there 
was a substantial Increase In North America during the 
1980s. 
The course of development was different In the markets of 
Latin America (the share of Community exports plummeted from 
27% of consumption in 1960 to under 4% in 1988), Asia (from 
24% to 7% during the same period), Africa (from 44% to 19%), 
the Middle East (from 74% to 19%) and Oceania (from 13% to 
4%) . 
In all these regions, the combination of expanding Internal 
production (and import substitution) and Increased 
competition in export markets (first from Japan and then 
from the newly Industrializing countries) explains the fall 
in Community market share. 
Another important trend Is the Increase in exports from non-
EC countries to the Community market, whose share of Its own 
internal consumption fell from 96% In the 1960s to 90% in 
the 1970s and, following a sharp rise In Imports in 1976-77, 
to only 87-88% in the 1980s. 
TABLE 11.1 APPARENT STEEL CONSUMPTION (million tonnes 
Ingot equivalent) 
1979 1984 1986 1987 1988 
USA 
Canada 
EEC (9)<1) 
EEC (12) 
Other West European^2) 
coun tries 
Japan 
Aust ra 1 i a and 
New ZeaI and 144. 1 
15.8 
1 20.4 
34. 2 
83.9 
7 .6 118.8 
14.2 103.9 
13.5 
104.7 (103.6) 
116.8 
35.3 25.8 
85.8 
7.3 81 . 2 
6.9 111.5 
14.6 
118.0 
26. 3 
88.3 
6.9 122.6 
17.5 
1 36.6 
25.6 
101.1 
7 . 2 
OECD 406.1 366.1 348.2 365.5 410.6 
Latin Ame rIca 34.6 30.5 35.5 37.4 37. 1 
South Africa 6.9 6.7 5.9 6.5 7.1 
Other African countries 8.4 7.5 6.9 6.5 6.6 
Middle East 
India 
Other Asian countries 17.9 
11.9 
24.5 20 
1 2 
31 15.6 
15.4 
36.6 13 
16 
43 16 
17 
48 
Western WorId 510.3 474.9 464.0 489.3 544.0 
Eastern Europe 
( i ncIud i ng USSR) 214.0 218..4 223.4 225.5 224.4 
China and North Korea 49.8 67 .0 81.5 79 . 4 78.7 
Wor I d 774.1 760.3 768.9 794.2 847.1 
(1) EEC (8) in 1979 
(2) Including: Greece In 1979, Spain and Portugal in 1979 and 
1984 
SOURCE: OECD 
TABLE 11.2 DISTRIBUTION OF WORLD STEEL CONSUMPTION 
(%) 
OECD 
of which 
USA 
Japan 
EEC 1960 
62 .6 
26. 1 
5.6 
23.6 1988 
48.5 
14.5 
11.9 
16.1 
Eastern Europe 
(including USSR) 25.4 26.5 
Developing 
count r i es 
- Africa 
- Middle East 
- Latin Ame r I ca 
- China and North Korea 
- Other Asian countries 12.0 
1 .3 
0.6 25.0 
1 .6 
1 .9 
4.4 
9.3 
7.8 
WORLD TOTAL 100 100 
Sour ce : OECD data and own calculations 
TABLE 11.3 WORLD APPARENT STEEL CONSUMPTION 
(million tonnes of crude steel) 
1985 
(average 
1984-85-86) 1988 1995 
(trend) 1985-95 
(% per annum) 
Industr ial ized 
coun tries 
Deve loping 
count r i es 
State-trading 
count ries 332 370 
99 115 
289 297 344 
151 
305 + 0.4 
+ 4.3 
+ 0.5 
WORLD TOTAL 720 782 800 + 1.1 
Sour ce : I I S I 
TABLE 11.4 CRUDE STEEL PRODUCTION CAPACITIES 
(m I I I ion tonnes) 
1978 1988 1995 
OECD 566 496 450 
of which: 
EEC (12) 221 189 
USA 143 102 
Japan 151 149 
non-OECD 75 124 151 
market econom i es 
of which: 
Latin America 31 52 57 
Af r I ca 12 16 17 
Middle East 4 7 14 
Other Asian 28 49 63 
count rI es 
USSR, Eastern Europe 240 254 254-262 
China, others 40 67 79 
TOTAL: 921 941 934-942 
Source: OECD data and own estimates 
TABLE II.5 CRUDE STEEL PRODUCTION 
(mI I I ion tonnes) 
1975 1980 1988 
OECD 377 390 382 
of which: 
USA 105 101 91 
EEC (12) 137 142 137 
Japan 102 111 105 
non-OECD market 
economies 50 80 106 
of which: 
Brazil 8 15 25 
South Korea 3 9 19 
State-trading 218 246 291 
count r i es 
WORLD TOTAL: 645 716 779 
Source : IISl/OECD 
TABLE II.6 STFFI. CAPACITY AND (XNSIMPTICN HY RffîîCN. 1978-1988-1995 
(million tonnes crude steel) 
Latin America 
Africa and 
Middle East 
China and North 
Korea 
Rest of 
Asia 1978 
CAPACITY CCNSLMPT. 
31.6 32.2 
15.5 30.7 
40 48.3 
28.2 35.8 DIFF. 
-0.6 
-15.2 
-8.3 
-7.6 1988 
CAPACITY CCNSLMPT. 
52.3 30.5 
23.1 26.5 
67.4 78.8 
48.7 63.6 DIFF. 
+21.8 
-3.4 
-11.4 
-14.9 1995 
CAPACITY CCNSLMPT. 
56.9 35 
31.1 32 
79.1 85 
62.7 90 DIFF. 
+22 
- 1 
- 6 
-27 
Source: OECD, IISI, WSD - own estimates. 
TABLE 11.7 EXTERNAL TRADE BALANCE IN VARIOUS REGIONS 
(million tonnes ingot equivalent) 
EEC (1) 
JAPAN 
EEC + JAPAN 
USA 
TOTAL OECD 
EASTERN EUROPE 
(including USSR) 
CHINA, NORTH KOREA 
OTHER ASIAN COUNTRIES 
LATIN AMERICA 
AFRICA, MIDDLE EAST 
TOTAL DEVELOPING 
COUNTRIES 1960 
16,6 
2,7 
19,3 
-0,1 
14,6 
-1,2 
-1,0 
-4,2 
-3,9 
-4,2 
-13,4 1970 
13,0 
22,7 
35,7 
-7,1 
19,6 
4,3 
-2,9 
-7,0 
-5,3 
-7,9 -
-23,2 1980 
23,9 
37,1 
61 ,0 
-12,9 
50,8 
-0,2 
-6,1 
-12,6 
-8,0 
-21 ,6 
-48,3 1985 
38,0 
37,2 
67,4 
-27,0 
52,3 
-1.3 
-25,7 
-10,3 
7,6 
-21 ,1 
-49,4 1986 
25,5 
33,0 
58,5 
-22,7 
39,3 
2,4 
-23,4 
-12,0 
6,5 
-11 ,8 
-40,7 1987 
26,2 
26,3 
52,5 
-22,1 
32,9 
2,3 
-16,1 
-14,2 
7,2 
-10,2 
-33,3 1988 
20,9 
21 ,8 
42,7 
-22,2 
24,5 
7,5 
-10,9 
-14,9 
9,9 
-11 ,6 
-27,5 
Source: OECD data and own calculations. 
(1) EEC (9) -->/80 1985 --> EEC (12). 
TABLE II.8 W)RIJD M\RKFT SHARES 
(%) 
CCNSLMER 
RBGICN 
DELIVERIES FROM 
EBC 
USA 
JAPAN 
OECD 
USSR + EASTERN 
EUROPE + CHINA + 
NORTH KOREA 
DEVELOPING 
COUNTRIES 
WORLD 
TOTAL CCNSLMPTICN 
(million tonnes) OECD 
1960 1970 1980 1987 
40,3 34,4 30,7 33,3 
41,0 31,1 27,1 24,3 
9,4 21,9 25,2 24,3 
99,6 98,3 97,0 93,8 
0,4 1,5 1,6 2,0 
0 0,2 1,4 4,2 
100 100 100 100 
216,1 376,5 374,1 365,5 STATE TRADING COUNTRIES 
1960 1970 1980 1987 
2,8 1,6 3,1 3,0 
0 0 0 0 
0 1,5 2,5 3,3 
3,5 3,6 6,5 7,0 
96,5 96,2 93,3 91,8 
0 0 0 1,2 
100 100 100 100 
106,0 175,7 262,3 304,8 DEVELOPING COUNTRIES 
1960 1970 1980 1987 
34,2 13,5 12,5 10,0 
6,2 5,8 3,2 0,5 
7,7 18,4 20,5 12,3 
50,5 39,9 41,5 26,9 
2,7 5,2 1,9 2,7 
46,8 54,9 56,4 70,4 
100 100 100 100 
23,3 47,5 111,6 123,9 
Source: OECD data and own calculations 
TABLE II.9 IMPORT/EXPORT MATRIX 
DESTINATION 
ORIGIN EEC 
(12) OTHER 
WEST 
EUROPEAN 
COUNTRIES USA CANADA JAPAN AUSTRA­
LIA AND 
NEW 
ZEALAND OECD EASTERN 
EUROPE CHINA AND 
NORTH 
KOREA OTHER 
ASIAN 
COUNTRIES LATIN 
AMERICA MIDDLE 
EAST AFRICA OTHERS TOTAL 
1988 
EEC (12) 8.4 7,3 1,9 0.4 0,3 18.3 6,3 0.8 4,7 1,4 3.1 2,6 -0.8 36.4 
Other West European 8.4 2,2 1.7 0.2 0.6 0,1 13,2 1.4 0,5 0,7 0,2 3,7 0,3 -0,2 19,8 
countries 
USA 0.3 0,7 0,2 1,2 0.1 0.4 0,6 0.1 0,1 -0.1 2.4 
Canada 0.1 3,7 3,8 0,1 0,2 0,1 0,3 4,5 
Japan 0,4 0.2 5,1 0.3 0.7 6,7 2.4 6.4 11,8 0.8 1,6 0.5 0.5 30,7 
Australia and N. Zealand 0,4 0,2 0.2 0.8 0.5 0.2 0.3 1.8 
OECO 9,2 10.8 18,2 3,1 1,4 1.3 44.0 10,2 7.8 18.3 3.1 8.7 3.5 95.6 
Eastern Europe 4,0 2,9 0,4 0.3 0,6 8,2 14,4 2,0 1,4 1,0 0.9 0.1 4.5 32,5 
Latin America 1,3 0.7 3.1 1.3 1.5 0.2 8,1 0,2 0,9 4,3 2.3 0.4 0,3 16,5 
Other Asian countries 0,3 2,7 0.3 4,9 0,1 8,3 0,4 4,0 0,1 0.8 13.6 
Rest of the world 0.7 0,5 0,2 0.5 1,9 0.2 0.8 0,5 0,1 0,8 0,8 0.2 5.3 
Others, non specified 0.3 -0,1 0,2 -0,2 
TOTAL 
Source: OECD. 15,5 15,2 24,6 5.0 8.9 1.5 70,7 25,0 11.9 28,5 6,6 11,6 4,7 4.5 163.5 
TABLE TT.10 
ShaTe of Cnrniin t tv steel deliveries in-world 
consumption by region 
EBC (1) 
Other West European 
countries 
USA 
Canada 
Australia, New 
Zealand 
Japan 
OBCD 
Africa 
Middle East 
Asia 
Latin Anerica 
USSR + Eastern Europe 
China + North Korea 1960 
96,0 
34,5 
2,8 
8,2 
13,2 
0,7 
40,3 
44,7 
74,7 
24,0 
27,5 
2,8 
3,3 1965 
96,6 
36,0 
4,5 
13,2 
6,3 
0 
36,3 
37,1 
53,0 
12,0 
14,8 
0,9 
2,4 1970 
90,8 
25,3 
4,9 
3,6 
2,7 
0 
34,4 
25,4 
31,4 
7,3 
8,1 
1,5 
2,6 1975 
90,9 
24,5 
4,1 
4,5 
2,1 
0 
31,0 
25,4 
31,0 
3,9 
12,5 
4,2 
3,1 1980 
87,9 
29,4 
3,9 
2,6 
0,7 
0 
30,7 
23,7 
27,5 
5,6 
7,1 
3,4 
1,8 1985 
87,4 
34,6 
7,1 
7,0 
1,6 
0 
31,2 
21,2 
18,7 
6,5 
4,7 
3,6 
4,3 1986 
(EBC 12) 
87,3 
32,2 
7,5 
8,8 
1,3 
0,2 
34,5 
21,9 
21,7 
6,3 
6,9 
3,3 
4,1 1988 
(esti­
mate) 
88,6 
32,8 
6,0 
10,3 
4,0 
0,4 
34,0 
19,0 
19,1 
7,0 
3,8 
2,8 
1,0 
(1) until 1985, EBC9 
Source: QBQD figures (%) 
I I 1/1 
CHAPTER I I I 
TECHNOLOGICAL INNOVATION 
1 . INTRODUCTION 
The competitiveness of the Community steel industry depends 
to a very large extent on Its application of advanced 
technology. While, on the one hand, the restructuring 
activities of the last few years led to some streamlining of 
the means of production (elimination of obsolete plant and 
duplication of jobs, more suitable locations, etc.), the 
introduction of more modern, efficient production techniques 
is, on the other, a recent phenomenon, linked to the final, 
qualitative phase of restructuring. 
Thus the ground made good In respect of the more advanced 
steel industries (Korea, Japan) does not represent the final 
step, for the gap has not yet been closed and, above all, 
investment by the Community steel Industry In innovation and 
applied research is still running below that of the most 
serious competitors. 
The Community steel industry must therefore exploit the 
current favourable profit situation due to the business 
upswing and launch a concentrated technical and financial 
effort . 
2. CHANGES IN THE EUROPEAN STEEL INDUSTRY 
The technological innovation that has taken place in the 
European steel industry In the last few years, In part as a 
result of the R&D effort, concerns both processes and 
product s . 
These two aspects are often intimately linked. In the first 
place, ne production techniques are generally accompanied 
by improved or even completely new products (continuous 
casting of sheet); secondly, the creation of new products 
developed in the laboratory and tested In the pilot plant 
frequently involves the construction of new production lines 
(coated products). 
2.1 Process changes 
Steel Is no longer produced in the same way as In 1974 and 
in many cases it is no longer the same product. 
The main changes In the production lines that have now 
become standard are ore beneficiation and improvements in 
blast furnace operation, pre-treatment of pig Iron and 
oxygen steelmaking process, direct feeding of scrap to 
I I 1/2. 
electric-arc furnaces, ladle metallurgy, casting and 
solidification, hot rolling, cold finishing or rolling, heat 
treatment, product coating, etc. These will be considered 
in the light of the following benefits: 
lower production costs; 
Improved productivity and working conditions (6.9 h/t In 
1983, 3.9 h/t In 1988); 
lower energy consumption (10-15% of cost of production); 
enhanced product quality and industrial environment. 
Manufacture of pig Iron 
Extensive research has provided Improved knowledge of 
various phenomena; the use of new measurement sensors and 
software in sintering plant and blast furnaces has given 
operators a more complete and precise picture of conditions, 
enabling them to react more quickly and on better 
information and to apply new strategies in the choice of 
materials, e.g. use of pellets and agglomerates with a high 
iron content and improvement of their reduction properties 
and behaviour in the blast furnace. 
This has led to improvements in metal yields and Increased 
productivity, In particular by concentrating operations on 
large-diameter blast furnaces and closing small plants, as 
well as on improving pig iron quality, particularly in 
respect of sulphur content. 
A number of energy-saving measures have been Implemented, 
such as recovery of sensible heat from the off-gases of the 
sintering plant and hot-blast stove, blast furnace 
gas-recovery turbines, dry quenching of coke, etc.', while 
coke is increasingly being replaced by coal Injected 
directly to the tuyeres. 
Steel manufacture 
In oxygen steelmaking plants, the use of pig iron with lower 
silicon and phosphorus contents has made for a considerable 
saving in flux (lime) consumption. This, together with 
combination-blown processes, has resulted In considerable 
gains in metal yield (5-10%) and refractory life 
(approximately tripled). 
R&D has also been geared to developing new converter gas 
recovery techniques, in particular by dry filtration. 
Thirteen European steelworks currently recover this gas, 
which leads to a considerable enhancement of the steel 
environment and yields savings of over 0.5 GJ/tonne of 
steel . 
I I 1/3 
Considerable advances have been made in electric steelmaking 
with the aid of power transformers, scrap preheating and 
some injection of oxygen, Including from the bottom. This 
led to an average 20% saving In electricity. An Industrial 
DC furnace has been developed, reducing electrode 
consumption by half with, in addition, an appreciable effect 
on the level of noise and scale of load fluctuations In the 
electricity supply networks. 
Furthermore, the virtually general application of ladle 
metallurgy has made it possible to cope not only with 
extremely tight analytical ranges, but also to steadily 
reduce impurity content. 
In the particular case of electric steelworks, separation of 
the melting operations in the furnace proper and refining in 
the ladle has made it possible to achieve productivity 
levels of one cast per hour or below. 
Finally, in the manufacture of stainless steels, AOD ladle 
metallurgy has made it possible to Increase recycling of 
stainless steel scrap and to use high-carbon ferrochromI urn 
in place of costly refined ferrochromI urn. This saving is 
particularly welcome in view of Europe's dependence on third 
countries for supplies of these materials. 
Continuous casting and hot rolling 
This process is now very widespread owing to the 
considerable savings in costs and energy obtained In 
continuous casting of slabs, blooms or billets. However, it 
should be stressed that its growing importance is related to 
on-going improvement of all aspects of the process, e.g. 
design, instrumentation, metallurgy, which have made 
possible the current achievements In the field of 
productivity, reliability and quality 
programme. An example of this final 
development of horizontal continuous 
particula well suited to the manufacture of small lots of 
special steals. of the manufacturing 
poInt is the recent 
casters , whIch are 
Wide-strip mills have undergone profound changes in the last 
few years in order to adapt to feed exclusively from 
continuous casters; larger dimensions of semis, 
discontinuation of pretreatment , hot charging and, if 
possible, direct rolling have required engineers to study 
large width reductions and more flexible scheduling of the 
widths rolled. 
The downstream requirements, mainly of the cold-rolling 
mill, concerning dimension tolerances, flatness and section 
of the strip have led scientists to develop new measurement 
and control techniques: trimmers, AWC, AGC, axial 
displacement and bending of the rolls, tens Iometers, etc. 
I M/4. 
In the case of long products and heavy sheet, harnessing of 
the rolling heat for in-line heat treatment, such as the 
Tempcore or QST processes developed entirely In Europe, 
greatly improves the weldabiilty and formablllty of steel 
while reducing the need for costly alloying elements. 
As far as energy savings are concerned, there has been a 
steady improvement of the order of 3% per annum for the 
whole hot chain - manufacture of pig Iron and steel and 
hot-strip mills - the best results of 18.65 GJ/tonne of hot 
coil being comparable to the efficient Japanese results. 
Cold rolling and coatings 
The cold-rolling mills for sheet have also made productivity 
gains, particularly by grouping tandem cold-rolling mills In 
continuous/semi-contInuous arrangements, and savings as 
regards dimensions by the same means as those described for 
the hot-rolling mill, except that the absolute precision 
required is much greater and requires further development. 
Other improvements in productivity and product quality have 
been obtained in annealing processes, in particular 
continuous annealing, skin passing (temper rolling) and/or 
high-convection hydrogen furnaces. Considerable research is 
required to develop such processes, not only on the 
technological level, but also on metallurgical aspects, with 
repercussions reaching to the steelmaking stage, 
particularly regarding the analysis of pig iron and scrap. 
There has been an increase in demand in Europe for flat 
products with improved corrosion resistance, which has led 
to an increase in both quantity and quality terms in 
production capacities for coated sheet. Developments In the 
quality of the base metal (formablllty), the coating (hot 
dip process, eIectrogaI vanizing ) and the quality of its 
adhesion may serve as examples. 
In the same connection, although more geared to the 
construction and capital goods markets, the production of 
organically coated flat products has developed to replace 
expensive painting or enamelling of finished products. In 
this field Europe already has combined galvanization and 
coil-coating plants. 
2.2 Changes in products 
There has been a considerable change over the same period in 
the products manufactured In the European Community. 
- Cold-rolled sheet: the development of new sheet qualities 
for deep-drawing (interstitial free, etc.) has made it 
possible to satisfy the most stringent requirements of 
I I 1/5. 
processors. Enamelling steels have had to be adjusted to 
the continuously cast killed steels, while the new 
continuous annealing lines have permitted the development of 
new high-strength steels (HSLA), with good form and welding 
properties for the motor Industry. 
Fabrication techniques have been improved In collaboration 
with the manufacturers themselves, such as new pressing 
techniques (plastic forming) or surface monitoring 
(roughness) and joining to other materials by bonding. 
Coated sheet: galvanized coatings, 
products, zinc-aluminium coated or 
pre-painted products which can 
processes and welding after coating, have made It possible 
to meet the specific requirements of the 
construction Industry with regard to corrosion 
and aesthetic appearance. eIectrogaI van 1 zed 
a I urn i nI zed and 
withstand severe forming 
OS 
motor and 
res I stance 
In the field of tlnplate, improvements In gauge (double 
reduction) and formablllty have permitted the use of 
high-speed production processes which enable tlnplate to 
compete with other packaging materials such as aluminium, 
plastics, glass, etc. It Is worth mentioning here the 
project supported by the Commission on developing a drinks 
can made entirely of steel. 
Hot-rolled sheet: progress In the form of various 
treatments has led to an expansion in the use of such 
products with good forming and welding properties In the 
building of tanks for the petrochemicals and offshore 
i ndust ries. 
- Wire rod: steel cord is continuing to make advances In the 
manufacture of radial tyres, conveyor belts and hoses. 
Products heat-treated in rolling heat, such as concrete 
reinforcing bars, rails and beams, which are more resistant 
to wear and less vulnerable to brittle fracture while 
remaining weldable, represent a major advance In European 
technology although standardization work on these products 
is in some cases still in progress. 
ncreasing the competitiveness of steel in the construction 
industry requires a great many 
notably concerning the choice of 
the shape and dimensions of the 
of construction techniques, the 
joints and combinations with 
resist ance ) . studies and developments, 
the weight/strength ratio, 
sections, the modification 
use of simplified (nodal) 
other materials (fire 
- The particularly vigorous growth of stainless steels in 
Europe is due not only to the significant reduction in 
production costs, but also to work on opening up new markets 
in connection with the development of services to important 
I I 1/6. 
customers in various fields: decoration of buildings, lamp 
posts, beer casks, railway wagons, Installation of flue gas 
desuIphurization equipment, etc. 
The growth In wear-resistant steel has followed the 
development of better-performance and low-alloy grades, 
while heat-resistant steels - chromium-aluminium alloys 
capable of service up to 900°C - are set to experience major 
expansion in view of the Community decision on equipping 
vehicles with catalytic converters. 
There has also been a considerable change in the composition 
of certain special steels, e.g. the replacement of 
heat-treatable chromIum-nI eke I-mo Iybdenum steels by boron 
steels or micro-alloy steels not requiring further 
treatment, the manufacture of unleaded free-cutting steels 
and the enrichment In alloying elements, chromium and 
molybdenum, of steels resistant to creep at increasingly 
elevated temperatures. 
The result of these efforts is that: 
1. The European steel industry has been able to meet the 
specific demands of Its principal customers. 
2. The substitution of alternative materials for steel has 
been s I owed down. 
3. The level of net exports from the Community has remained 
practically unchanged. 
3. SHORT- AND MEDIUM-TERM INNOVATION 
3.1 Key objectives in support of competitiveness 
Maintaining and strengthening the competitiveness of the 
European steel industry In the world industrial and 
commercial context depend on continuing the efforts already 
undertaken in the two directions described above: 
reducing production costs and improving quality; 
maintaining the traditional markets for steel and 
opening up new markets. 
In the first case, the lenght of time taken to produce 1 
tonne Is an issue. If In Europe, It currently takes between 
three and five hours of labour to produce one tonne of 
standard rolled products, some competitors are already 
aiming to reduce this time to two hours per tonne. With 
regard to energy consumption, Europe must reduce its current 
average from 22 GJ/tonne to 18 GJ/tonne, the level of the 
most efficient producers. 
I I 1/7. 
As far as the second point Is concerned, the previous 
chapter has shown that the substitution of alternative 
materials for steel has yet to make an Impact. This may 
well change In future, in view of the R&D activity scheduled 
in the field of competing materials and the changes In 
consumer habits which will occur when the 1993 single market 
has become a reality, particularly as a result of the 
application of new standards relating to products and their 
utI I IzatI on . 
Substitution must also be understood in the sense of 
Internal substitution of one type of steel for another: 
a I Ioy/mIcro-aI loy steels, coated/non-coated products, etc. 
The third domain In which technological Innovation will be a 
determining factor is that of the environment. To keep up 
in a more and more demanding industrial context, the steel 
industry will have to keep up its efforts to create 
operating conditions, which on the one hand are not harmful 
to the surroundings - water, air, noise - notably by 
resorting to clean technologies, and on the other hand, give 
good performance in terms of the economy of its resources, 
notably by the recycling of its waste products and 
developing its by-products. 
3.2 Expected results of technological nnovatI on in 
processes In the period 1991-95 
During the period 1991-95, 
optimize existing processes 
better and more cheaply. research efforts will tend to 
with a view to producing faster, 
- "Faster" means that there must be further Improvement In 
lead times, in the technical and qualitative reliability of 
equipment and process stages and in the flexibility of the 
production chain, particularly with regard to its 
"divers i f icatIon" I Ink . 
To attain these objectives, It will be necessary to apply 
the new information monitoring techniques and engage in the 
integrated quality schemes already being implemented in some 
quar ters . 
- "Better" 
operat i ng I calls for Improved knowledge of the phenomena 
n multi-phase systems at high temperatures. 
The basic studies to be carried out in this field must 
involve a broader range of scientific disciplines: flow 
properties of fluids, shaping of solids, physIco-chemIstry 
of interfaces, or they must exploit new scientific 
discoveries such as the theory of fractals to study the 
kinetics of the reactions of porous materials. 
I I 1/8 
New measuring sensors and software to process and Interpret 
the data, I.e. automatic control, expert systems, etc. must 
be installed to provide operators with continuous 
information on phenomena such as dimensions, shapes, 
microstructures, mechanical properties, etc. 
This Is true of the traditional processes, but even more so 
of the processes being developed such as smelting reduction 
and continuous casting of thin products. 
Finally, the construction of off-line models based both on 
theory and experience should make it easier to define 
operating strategies and optimize operations as a whole. 
- "More cheaply" means continuing efforts to economize on 
specific consumption of raw materials, labour and energy and 
in the choice of the most appropriate materials and energy 
sources. 
The issues at stake in the various fields are: 
production at lower temperatures of agglomerates with a 
higher iron content and better reduction properties; 
reduction of coke consumption in the blast furnace by 
increased Injection of pulverized coal to the tuyeres, 
and in particular the use of higher hot-blast 
temperatures and oxygen enrichment of the blast; 
with regard to steel manufacture, the problem will be to 
increase recycling and decontamination of scrap by 
removing residual materials harmful to the steel; 
increase In the efficiency of electric-arc furnaces and 
ladle metallurgy processes, particularly in the 
manufacture of stainless steels, the expected growth in 
which of over 1 million tonnes in the coming five years 
depends on a reduction in production costs. Efforts 
will have to be made to conserve energy - electricity 
remains a costly energy form - and to save on raw 
materials, in this case chromium, 
recycling, developing silicon- and 
substitute grades and/or reducing the 
steels In product finishes-, by stepp i ng up 
a I urn i n i um-based 
use of chrom i urn 
continuation of the efforts to improve continuous 
casting plant and to make technological and 
metallurgical improvements to the new casters for thin 
products and the downstream hot-rolling mills for thin 
slabs, sheet and bars that are beginning to be Installed 
in various parts of Europe and the world. These 
developments should aim for an Improvement of quality -
surface condition and geometry - and of material and 
energy yield; 
I I 1/9. 
the emphasis with regard to the cold-rolling mills and 
the finishing lines will be placed on raising production 
speeds, linking operations, diversifying production on 
existing equipment and developing more efficient 
techniques - in particular of pickling and electrolysis 
and new products, such as painted tinned sheet, 
plastic films, composite soundproofing products, steel 
foils, etc., in respect of which Japan has already built 
up a cer tain Iead; 
at each manufacturing stage, considerable efforts will 
be necessary to Improve refractory life and use, to 
utilize by-products from an ecological point of view, 
and to design less expensive and more reliable equipment 
with a view to reducing maintenance costs. 
The object i ve of 
reduce cost pr i ces developing these new techniques is to 
3.3 Expected results of technological innovation in products 
for the period 1991-95 
As in the case of processes, activities during the period in 
question will be geared to optimizing existing products and 
finalizing products under development to meet customers' 
requirements: faster, better and more cheaply. 
"Faster" means cutting lead times for the 
required by the customer, and consequently: products 
improved customer i nformat i on, n par t i cuIar by 
providing reliable, detailed descriptions of the various 
products available - through the approval and 
standardization bodies whose cover will extend to the 
whole of the Community in the light of 1993 - and by 
efficiently promoting new products; 
acquiring a better understanding of the behaviour of 
steels in order to respond more rapidly to planned new 
app I i cat i ons. 
"Better" means supplying fewer products to customers 
which are defective or in need of repair when put Into 
service. This depends on: 
stricter quality control in manufacture and on leaving 
the works. This is taking the form of quality assurance 
measures and there will be an increasing need for 
non-destructive testing techniques; 
a better understanding of fabrication processes 
forging, drawing, forming, milling, welding, etc. - In 
order to assist or advise the customer. In this 
connection, pilot plants or simulators equipped with 
adequate measuring facilities must be developed. 
111/10. 
"More cheaply" should not be interpreted in the sense of 
cuts In selling price, but of maintaining the market 
share of steel vis-à-vis competing products, I.e. Its 
competitiveness In terms of application costs and 
utilization properties. 
It Is clear that these competitiveness goals will, on the 
one hand, have to be achieved by developing new products, 
but also by developing new, more efficient fabrication or 
design processes. 
Let us consider some of the new developments expected In the 
various product categories: 
with regard to cold-rolled sheet for drawing, there are 
expected to be developments In surface condition, in 
particular the development of new roughness categories, 
while it is essential In the case of high-strength 
steels to reduce the spread of current grades and to 
create a new bake-hardening grade. Soundproofing 
products for the motor industry will probably be 
developed by combining steel with other materials 
(sandwIch pane Is); 
research Is in progress in the field of coated products, 
both with regard to the base metals and the coatings, 
and measures similar to those undertaken in the case of 
lids for drinks cans will have to be initiated for 
tlnplate, in order to design and implement competitive 
packagings for tomorrow's markets; 
with regard to electrical sheet, Europe must keep up its 
diversification efforts undertaken In non-orientated 
sheet, but it cannot leave unchallenged Japan's monopoly 
in grain-oriented sheet in view of the advances these 
products have also made In the field of amorphous 
materials; although they are asserting themselves In the 
long-term, it is necessary to pursue actively the 
development of continuously cast steel foils by the melt 
spInn i ng process ; 
efforts will be continued to increase further the 
elastic limits and high-temperature weldabiilty of 
hot-rolled sheet, particularly in response to demand 
from the welded tube market, but also in order to access 
new markets, including the new hydrogen industry. 
progress in the field of long products by heat treatment 
in rolling heat must be consolidated and generalized; 
efforts in the field of special steels will concern a 
deeper knowledge of the behaviour of these steels in 
respect of their resistance to corrosion, oxidation at 
elevated temperatures, wear, milling and welding, in 
order to identify the possibilities for adapting 
111/11 
analyses or compositions. The search for new 
applications will also be actively pursued, for example 
high-resistance stainless steels for the construction 
i ndustry. 
The development of new and more efficient production and 
design processes depends on R&D activities In fields more 
and more remote from the traditional skills of steelmakers 
and which will be of benefit to a wider public. 
Steelmakers must be aware 
discourage the producers of 
that solutions can be found 
users . that these problems do not 
certain other materials, but 
in joint research with some 
3.4 Results expected from technological Innovation In the 
area of the environment 
Certain companies have already made considerable efforts in 
this area, but attention must be paid to the fact that not 
all the solutions exist yet, and putting new procedures and 
new products Into operation can pose new problems which have 
to be tack I ed. 
These are certain fields in which technological innovation 
is already being seen, and which need to be developed by 
recourse either to clean technologies, or to the recycling 
of recoverable materials or developing by-products. 
In the first category fall : 
carbon injection In blast furnaces, 
pre-treatment of pig-iron, minimising the production on 
non-usable slag, 
secondary metallurgy and, in particular, vacuum-
degassIng, 
direct charging of continuously cast slabs in reheating 
furnaces, 
neutral pickling, regeneration of pickling baths, and, 
for stainless steels, the replacement of nitric acid, by 
oxygenated water. 
In the second are 
the treatment of residual coking-plant water, 
the separation and retreatment of sediments rich in 
volatile metals, alkalis, and oils from blast furnaces, 
steel plants, and rolling mills, 
the extraction of noble metals - Cr , Ni, Mo, V - from 
the dust coming from electric arc furnaces used for the 
production of stainless steels, 
the destruction of dioxine produced by organic materials 
contained in electric furnace scrap. 
111/12 
So, so far as individual products are concerned, the 
attention of recycling steel must be emphasised, along with 
Its degradable nature which, particularly In the area of 
packaging, gives this material a decided advantage over its 
less degradable competitors. 
4. LONG-TERM PROSPECTS FOR TECHNOLOGICAL INNOVATION IN THE 
STEEL INDUSTRY 
A substantial contraction of research budgets during the 
long crisis led to the postponement in the industry of 
long-term projects, which explains: 
the proliferation of current projects; 
the diversity of fields investigated. 
What will a steelworks be like in 20 years? 
It is by definition Impossible to know In advance what will 
be the results of research and where they will be achieved: 
in Europe, Japan or the USA. For the moment, we shall have 
to be content with listing the channels currently being 
explored. 
Manufacture of pig iron 
The objective Is to use coal directly, without having to 
pass through the coking stage, and possibly to use raw ore 
without the need for agglomeration or peI I etizatI on . 
These processes, known In French as "fusion réductrice" and 
in English as "smelting reduction", are the subject of major 
strategic research In Japan, Australia and the USA. A 
process originating in Europe has begun to be used 
industrially, at the pilot stage, in South Africa. It has 
emerged that dust filtration and recycling operations are 
critical, and it is not certain that this problem, 
fundamental to the economics of the process, can be 
over come. 
The European Community must be attentive to developments, 
throughout the world, in techniques using coal alone for the 
production of pig iron. 
Such experiments are very costly, principally because of the 
adaptation of these new technologies at the industrial 
level. Extensive exploration in the field of the concept of 
equipment Is necessary, preliminarly at any attempted 
development to an operational stage which may compete with 
the blast furnace, which offers experience more than a 
hundred years old. As the challenge is important, 
particular attention must be paid to the cautious management 
of funds available for R&D in this sector. 
111/13 
In expectation of these developments, the European steel 
industry has already taken steps to increase the life of 
blast furnaces undergoing reconstruction and to promote high 
rates of coal Injection to the tuyeres in order to postpone 
the need to construct new coke oven batteries. 
Steel product Ion 
The equipment of the steelworks, e.g. converters, 
electric-arc furnaces, ladle metallurgy facilities, etc. 
appear well adapted to face any possible change in steel 
production strategy: continuous scrap feed, smelting 
reduction, etc. It Is for this reason that work on new 
steelmaking processes, such as continuous refining, has been 
shelved. 
Direct continuous casting of products close to the finished 
product 
The objective here, too, Is to cut out a manufacturing stage 
- in this instance, hot rolling - while maintaining a very 
high standard of product quality. 
The technique of continuous casting of thin slabs, developed 
entirely by European designers and already at the marketing 
stage, does not meet the final objective of the total 
suppression of a manufacturing step; It provides substantial 
savings only In the event that a finishing train has to be 
renewed. 
Various projects based on different principles are being 
developed for direct continuous casting of coll or wire rod, 
e.g.: 
continuous casting to paired rolls; 
continuous casting in a mould table followed by paired 
rolls: casting-pressing-rolling; 
casting of steel strip or film on a single roll or on a 
movIng be 11 ; 
casting of a Jet of liquid steel atomized in an inert 
gas and projected on a substrate of appropriate form: 
flat, tube, forging blank, etc. 
Europe is very active in this field, but so are its main 
competitors, Japan and the USA. 
Treatment of cast products 
The treatments to be applied to the products cast using the 
techniques referred to above, probably reduced to cold 
111/14. 
rolling and finishing lines, will have to be adapted to the 
new dimensions and new structures - In particular 
microstructures - obtained by these processes and adjust 
them to meet customers' requirements. 
Many laboratories are already engaged in basic studies of 
the new microstructures In order to define the working and 
use properties of these new products. 
Surface treatment 
The development of non-ferrous metal alloys of new synthetic 
films in conjunction with improved fundamental knowledge of 
steel properties should lead to the development of new 
composites with improved properties. Existing lines will 
have to be modified or new production lines constructed to 
produce these new materials. 
It is also likely that new coating processes, such as vacuum 
coating by evaporation or deposition In Inert or reactive 
plasma, will make advances and lead to considerable 
improvements in the cost, quality or flexibility of 
production compared with the current, even improved 
techniques of hardening, electrolysis, coating or gluing. 
Steel appI I cat i ons 
The steel industry must remain vigilant vis-à-vis the 
long-term developments which will take place both with 
regard to technological changes and to requirements for 
materials for general or specific uses on the part of Its 
traditional customers and new industries. 
It will also, in order to gain Its customers' confidence, 
have to find suitable solutions to the problem of the 
interruption in some of its sources of supply, in particular 
of fer ro-a I Ioys. 
With this in mind, European R&D must undertake: 
fundamental studies of steel properties: weldabiilty, 
formablllty, fracture mechanisms, fatigue behaviour, 
resistance to corrosion and creep at high temperatures 
with the modern means at its disposal; 
more specific studies relating to specific applications, 
particularly In respect of the major customers such as 
the motor and construction Industry; 
promotion schemes to raise the awareness of users 
IV/1 
CHAPTER IV 
THE STEEL INDUSTRY AND THE INTERNAL MARKET 
1. THE CURRENT SITUATION AND THE OUTLOOK FOR 1993 
The framework provided by the Treaty of Paris has enabled 
the Commission/High Authority to develop a Community steel 
policy which has contributed towards aligning an industrial 
economic reality to the European scale, which, In certain 
respects, may be considered as a single steel market. 
For this reason, the Commission White Paper of June 1985 on 
the completion of the Internal market makes no explicit 
reference to the steel industry. 
This does not mean, however, that this "sectoral reality of 
European dimensions" actually constitutes a truly 
competitive market as described by the White Paper and as it 
is possible to achieve through the legal instrument provided 
by the Single European Act. 
The Treaty of Paris is still In force, but the deregulatory 
thrust of the Single Act will probably Inject a liberalizing 
influence into the Treaty, which was conceived In a much 
more interventionist spirit. This general change in 
philosophy will probably generate the main, and therefore 
indirect, consequences of the completion of the internal 
market on the steel industry. 
On economic grounds, there are many reasons to Justify the 
Commission's developing a generally Interventionist steel 
policy. (From the legal point of view, It simply applied 
the provisions of the ECSC Treaty.) The main reasons are 
probably the enormous economic and social Importance of this 
basic industry and its great sensitivity to cyclic trends. 
But in the past the financial effects have been multiplied 
by serious structural problems, such as an often obsolete 
organization of the industry and especially the existence of 
surplus capacities which are absolutely Intolerable during 
periods of recession. 
The Commission and steel firms did not wait for the spur of 
the 1993 deadline to look at these problems and react 
accordingly. There Is no need to list again all the efforts 
made by both sides in recent years to reduce excess 
capacity. And firms are beginning to be very active with 
regard to industrial organization and more and more major 
operations are taking place. 
What is added by the 1993 objective Is the clear conviction 
of the irreversible need to adapt the industry to the 
requirements of the market economy. 
IV/2. 
At the same time, the 1993 open market will provide the 
Ideal framework for ensuring a competitive European steel 
industry: a genuine large Internal market which, provided 
that firms adopt suitable strategies, should make It 
possible to achieve efficient structures In the industry 
(size of companies, mergers, etc.) for meeting the external 
competition effectively and on equal terms. 
A brief analysis follows of the most significant effects of 
the completion of the internal market on the steel Industry. 
First, we analyse the effects on production and marketing 
costs and on conditions of competition; secondly, we examine 
certain strategies which undertakings could follow; finally, 
we put forward the guidelines of competition policy. 
2. WILL THE SINGLE ACT CHANGE STEEL MARKET STRUCTURES? 
Even if the completion of the internal market has little 
direct impact on the steel industry, inasmuch as none of the 
300 or so Directives set out in the White Paper concern this 
sector, the indirect effects may be very significant. 
The indirect effects may be felt at two 
and thereby in conditions of competition. I eve I s : In costs , 
2 . 1 Costs 
The new environment Is certain to have an impact on firms' 
manufacturing and marketing costs. Even if it Is virtually 
Impossible to quantify, the effect will certainly be to 
harmonize and approximate the conditions of production and 
distribution for firms In different Community countries. 
Since one of the major discriminatory factors on the 
Community steel market at present is of course the 
differences which still exist between costs, it is clear 
that the impact could be significant. 
(a) The outlook for the energy market 
Energy, particularly electricity, is an important element in 
the costs of steel firms, especially those operating 
electric furnaces. As is well-known, the electricity market 
is far from open to competition. The national markets are 
almost entirely walled off from each other within the 
Community's internal frontiers, with monopolies or 
oligopolies in every Member State and a resulting 
considerable lack of transparency In pricing systems. 
Clearly such a situation is a source of a good deal of 
economic inefficiency and substantial discrimination between 
European consumers. The steel industry, as a major 
consumer, is immediately concerned by this situation. 
IV/3. 
In the gas Industry the situation Is very similar as regards 
conditions of competition, even If the causes and 
circumstances Involved are very different. 
Building the internal energy market is thus 
within the single European market. Given the 
the outset, it Is a difficult task, but the 
intent on completing It step by step. a major task 
cond11 ions at 
Commission Is 
As far as price transparency Is concerned, the Commission 
has adopted (C0M(89)332) a draft directive setting up 
transparency of gas and electricity prices to final 
Industrial consumers. This proposal received a large degree 
of consensus within the Council of 30th October 1989, and 
the opinions of the European Parliament and the Economic and 
Social Committee are being formulated now. 
A similar and parallel approach between the gas and 
electricity sectors has also been adopted for the fixing of 
a first stage towards an Internal market for energy. 
The communications adopted by the Commission on the Internal 
market for gas and electricity (C0M(89)334 and 336) focus on 
the concern for competition In these sectors to be extended, 
so that all consumers, large and small, can benefit from it. 
The objective pursued by the Commission is therefore to 
create an adequate legal framework guarantelng free 
circulation of natural gas and electricity, and favouring a 
reduction In the cost of supply. It Is emphasised that In 
no case must the quality of service to the consumer and the 
security of Its supply be reduced from their current high 
I eve I . 
The Commission's proposals contain, notably : 
a draft directive (on the basis of Article 100A of the 
EEC treaty) setting out the terms of application of the 
right of transit between two Integrated gas or 
elect, city networks, with a view to exchanges being 
increased and liberalised; 
the setting up by the Commission of consultative 
committees (composed respectively of representatives 
from Member States and those Interested parties 
concerned) to examine whether access by third parties to 
gas and electricity transport networks must be 
organised, and if so, on what conditions, in order to 
guarantee that quality of service to the consumer and 
security of supply be maintained. 
Community authorities have begun the examination of the 
Commission's proposals the Economic and Social Committee 
should express Its opinion In January 1990, and the 
Parliament (on first reading) In February 1990. In both 
cases, the welcome given to the proposals has been broadly 
IV/4. 
pos i tIve In the CouncI I the f I rst d1scussI on on 
electricity transit has also been positive. The directive 
on gas transit has met with reserves from several 
delegations, notably because of the fact that current 
transboundary transit already accounts for 22% of 
consumptI on. 
Nobody ever Imagined that the Internal Market In Energy 
would be easy to bring about. The advances already outlined 
today in the Community show, however, that this movement is 
underway, and It appears broadly Irreversible : producing as 
well as consuming Industry is concerned with it, and Is 
preparIng for i t . 
The effects on the European steel Industry will no doubt be 
very considerable. There are still big differences In 
energy prices between Member States. In the electricity 
industry, for example, there are pre-tax differences of over 
80% in prices charged to major consumers, as most steel 
firms are. This applies not only to standard prices but 
also for those enjoying special conditions under contracts 
containing specific interruption and modulation clauses, 
et c. 
In the gas industry, the differences appear to be smaller 
but may still exceed 60% before tax. 
The effect of the single energy market will probably be to 
reduce price levels, at least for gas and electricity, but 
above ail it should narrow the wide differences in prices 
which still exist from one Member State to another. 
( b ) The Impact of liberalization of the capital market on 
fInanc i a I cost s 
The financial services supplied to steel firms (Interest 
rates for long-term debts, commercial effects, insurance 
policies paid, etc.) generally represent a not Insignificant 
part of steel firms' overall operating costs. In the recent 
years of crisis the heavy financial burden, and especially 
the Interest on long-term debts, has been one of the major 
obstacles facing the industry. It became one of the key 
factors at the heart of plans for restructuring, which 
established, among other things, maximum limits beyond which 
viability was not guaranteed. 
As pointed out above, this general Indebtedness has been one 
of the features of the steel crisis common to all Member 
States. A feature not common to them all and responsible 
for differing debt burdens on firms is the big differences 
in interest rates from one country to another, resulting In 
major discriminatory effects on firms. 
IV/5 
One of the prime objectives of the Internal market is the 
Integration of the European financial markets. Its 
Importance lies not only In the greatly Improved 
competitiveness of the industry Itself but also In the 
macroeconomIc effects and the resulting stimulus for firms 
using these services. 
There are still great divergences between Member States. 
According to the Cecchlnl report, these are often more than 
50%, and this highlights the disparities In conditions of 
competition in the Member States. 
The integration of the financial markets will have the 
twofold effect of eliminating differences, or at least 
considerably reducing them, and bringing down prices. A 
study by DG II puts the potential reduction of financial 
costs at 10% at the least. 
Even if it is true to say that steel firms, faced with this 
discriminatory situation, have enjoyed the major corrective 
of Community loans under Article 54 of the ECSC Treaty, the 
fact remains that the harmonizing effects and lower 
financial costs should constitute a major stimulus for them. 
(c ) Impact of environment policy on production costs 
The European steel Industry is changing. Production and 
demand are now becoming Increasingly geared towards alloys 
and products coated with zinc and/or other heavy metals. 
Although these are niches and products with a high added 
value, and therefore the logical specialization path to 
follow, this type of production and consumption undoubtedly 
poses problems of recycling, as regards both the emission of 
heavy metals and the generation of non-recoverable waste. 
It is therefore important to focus attention on the threat 
of increased pollution, stemming from this sort of change. 
What is -o true and deserves immediate mention is that 
steel firme- are making ever greater efforts to solve this 
problem through major Investments, either directly to 
improve the environmental performance of a given production 
process or in research projects which also aim to reduce or 
eliminate pollution in steel manufacturing. 
It is perhaps worth adding that, as was pointed out at the 
last I ISI conference,1 the steel Industry Is a pioneer in 
the development of systems for monitoring industrial 
emissions. It is also one of the largest users of recycled 
energy. Steel Itself Is probably one of the most recyclable 
materials in the world: around 40% of annual steel 
production derives from recycled steel products. At present 
that represents annual savings of about 160 million tonnes 
IISI, 23rd annual conference, Berlin, 1-4 October 1989. 
IV/6. 
of coal and 200 million tonnes of Iron ore. The fact that 
steel can be recycled should be emphasized in any assessment 
of the importance of the use of steel In everyday life. 
There are no environmental standards specifically aimed at 
the steel industry at Community level. Steel firms are, 
however, directly covered by Community Directives on the 
emissions of pollutants from industrial plants. Their 
activity can also be affected by the Directives concerning 
quality levels of different media, I.e. air (emissions or 
immissions) or water, or problems of waste or noise. 
Perhaps the only Community standard which directly affects 
the steel Industry is Directive 85/337/EEC, which entered 
into force on 3 July 1988; It provides, inter alia, that all 
projects concerning Integrated factories for the Initial 
smelting of Iron and steel should be the subject of an 
environmental Impact assessment, carried out in compliance 
with the procedure laid down in the Directive. 
The Single European Act, in force since 1987, has given a 
legal basis to Community environment policy. It states: 
"Environmental protection requirements shall be a component 
of the Community's other policies." The Single Act also 
requires that the Commission, in its environmental 
proposals, shall take a high level of protection as a base. 
The steel industry can indeed generate large quantities of 
pollutants, given the nature of Its manufacturing processes; 
but progress in pollution-control technologies has been such 
that the elimination of pollution can now be claimed to be 
an economic rather than a technical problem. 
The Community applies a guiding principle which is now well 
established and widely accepted as regards the financing of 
investments to be made by firms In the context of 
environmental protection: the "polluter pays" principle. 
This principle, which already appeared in the 1973 First 
Community Action Programme on the environment, was adopted 
in the Council recommendation of 3 March 1975, essentially 
In the name of defending competition. Many exceptions to 
this general rule are, however, provided for; in 1974 the 
Commission established, In the context of competition 
policy, a Community code of aids for environmental purposes, 
approved as an exception to the general principle of the 
incompatibility of State aids (Article 92(3)(b) of the EEC 
Treaty) and aimed at establishing a system of standard and 
coherent criteria for the growing number of environmental 
aids granted to firms by the Membe.r States. 
This code, initially introduced for the period 1974-80, has 
been extended twice and Is currently In force until 1992. 
It is not applicable to steel firms, which are covered by 
the ECSC Treaty. 
IV/7. 
Article 4(c) of the ECSC Treaty prohibits the Member States 
from granting aids to coal and steel firms and does not 
allow any exceptions to this general ban. The Commission 
had to turn to Article 95, first paragraph, to establish the 
first aid codes for 1981-85 (Decisions Nos 257/80/ECSC and 
2320/81/ECSC) . 
It was not until the third steel code for 1986-88 (Decision 
No 3484/85/ECSC) that provision was made explicitly for the 
first time for the possibility of State aids to enable steel 
firms to adapt their plant to new standards of environmental 
protection. 
Decision No 322/89/ECSC of 1 February 1989 renewed the Steel 
Code up to 31st December 1991, with the same criteria and 
conditions for granting aids for environmental purposes, in 
particular for adapting plant which entered Into service at 
least two years before the introduction of the standards and 
with a ceiling of 15% net grant equivalent of the costs 
directly related to the environmental measures concerned. 
The context of Community environment policy has changed 
significantly in recent years. Firstly, the Single European 
Act has provided this policy with a legal basis. In 
specific terms, for the financing of environmental 
protection measures to be taken by firms, the Single Act 
explicitly establishes that Community action must be based, 
inter alia, on the application of the "polluter pays" 
principle. Hence, over and above the relevance of this 
principle to competition policy, the Single Act recognizes 
it as the guiding principle of environment policy. 
The Fourth Programme for Action on the Environment makes 
revision of the "polluter pays" principle a priority for the 
Commission is currently working on this in 
new environmental context. If it concludes 
need to amend the 1975 recommendation, the 
put forward a draft recommendation on the 
interpretation and application of the "polluter pays" 
pie to the Council for approval as soon as possible. Comm 
the 
that 
Comm 
new 
pr i nc ss i on . The 
i ght of the 
there is a 
ssI on will 
(d) Liberalization of transport 
The transport sector, whether road, rail, air or waterway, 
is highly regulated and the conditions for healthy 
competition at European level are far from being fulfilled. 
The White Paper on the completion of the internal market 
provides for the gradual liberalization of transport, a 
IV/8. 
process already set In motion by specific measures, 
especially In road haulage (relaxation of quotas, etc.) and 
a I r transpor t.1 
The combined effects of economies of scale and competition 
will help achieve the twin objectives pursued through the 
actual completion of the Internal market, i.e. a lowering of 
transport costs and an end to discrimination between users 
on the basis of country or sector. For Instance, the 
Commission's Directorate-General for Economic and Financial 
Affairs estimates that road haulage prices could drop by 
some 5%. 
It is extremely difficult to quantify what proportion of the 
total cost of a steel product Is accounted for by transport 
since it depends on many factors, such as the value added 
content of the product In question (there would naturally be 
a big difference between concrete reinforcing bars and 
galvanized sheet), the means of transport actually used, the 
average size of deliveries, etc. However, It is generally 
accepted that transport accounts for a not Inconsiderable 
proportion of the total cost of a product. 
Liberalization of the transport sector should therefore have 
a beneficial effect on the steel sector and lead, 
inter alia, to increased Intra-Commun Ity trade, for lower 
transport costs would have the same effect as lower customs 
duties. 
2 . 2 Conditions of competition 
The 1993 single market will therefore have the effect of 
harmonizing and lowering the costs borne by steel 
undertakings. This will enable them to lower their prices 
(within strict limits) without thereby reducing their profit 
margins and consequently become more competitive 
internationally. Naturally, this is subject to "other 
things being equal" or, In other words, our ensuring that 
any back-up policies do not hinder the dynamic flow of the 
economy towards 1993. 
But all this will affect more than the Industry's ability to 
compete abroad. It will also speed up the growing 
importance of factors other than prices in internal 
competition. Prices will of course continue to play a very 
important role, particularly in markets for volume products 
which are difficult to differentiate, but the abolition of 
all barriers and growing awareness of the oneness of the 
The White Paper does not include any proposals to 
liberalize rail transport because the specific nature of 
this mode largely rules out competition or free access 
to the market . 
IV/9 
market (already reflected in anticipatory moves by the 
undertakings) will highlight the growing Importance in 
competition of such aspects of customer service as 
flexibility and speed of delivery. 
Proximity to the customer, for instance via a good 
distribution network, will thus become an increasingly 
important aspect of marketing. This shows how strategically 
important new commercial Investment is, particularly where 
it is made with the aim of ensuring a stronger presence in 
the Community's many submarkets. 
In addition, where products with a high value added content 
are concerned, product quality and the kind of service 
offered will be the best means of differentiating the 
product and, therefore, a major strand in competitiveness. 
3. THE SINGLE MARKET AND INDUSTRIAL ORGANIZATION 
(a) Corporate strategy 
For various reasons - some described in the preceding pages 
the 1992 deadline has triggered a dynamism now chiefly 
driven by the anticipatory activities of undertakings. In 
steel, this dynamism Is combined with the Industry's 
restructuring efforts, with appropriate aid and accompanying 
measures by the Member States and the Commission (see 
i nt roduct ion). 
This combination is leading to a fundamental reappraisal 
which should generate the right strategies for the future. 
The measures accompanying restructuring were strictly 
temporary, their sole aim being to make the industry 
compet i t i ve. 
The prospects opened up by the 1992 deadline simply 
reinforce the concept of a fully competitive 
envi ronment. 
The financial and social structural adjustments in the 
steel sector should allow it, as in other industrial 
sectors, to face up to the real pattern of good and bad 
market conditions. 
Competition from outside the Community will be stronger, 
but the competitiveness of a business should be Its only 
weapon, as long as the competition is not unfair. If it 
is unfair, commercial policy measures must be taken vis-
à-vis third countries. 
The internal market provides the right framework fc*r 
achieving a competitive position in foreign trade, for 
instance through economies of scale combined with 
product specialization or differentiation strategies. 
IV/10 
Such considerations are fundamental to the strategies that 
undertakings should adopt in the coming years. Customer 
service and commercial Investment were mentioned earlier, 
but these are to some extent governed by others that are 
even more fundamental for any undertaking: 
When it comes to fluctuations in business cycles, 
various strategies are possible. Production can be 
diversified to sectors other than steel, but It would 
also be worth considering a strategy of takeovers, 
mergers, etc. From past experience we know that no 
hierarchy can be laid down in advance. 
There are many strategies for meeting competition from 
outside the Community. However, one certain direction 
must be towards specialization In high-quality products 
and highly integrated production processes which result 
in products with a high value added. Here, too, various 
approaches are possible - vertical integration by means 
of merger or acquisition and cooperation agreements 
between undertakings giving similar results but with 
greater flexibility and without the disadvantages of 
large-scale operations. 
In any event, the main advantage enjoyed by European steel 
is that Its domestic customers are extremely demanding where 
quality and service are- concerned. The large Internal 
market should enable the Industry to put In place the kind 
of technology and organizational structure needed to satisfy 
these demands to the full. 
The steel industry has begun moving In this 
great deal of strategical thinking along 
already taking place. d i rectI on and a 
t hese I l nés I s 
(b) The Community's competition policy 
The current general objectives highlight the significant 
improvement in the industrial, financial, and social 
structure of the Community's steel industry, as well as a 
better match between production capacity and demand. From 
now on, these Improvements must allow undertakings, whilst 
still preserving the specific nature of the dispositions to 
this effect in the ECSC treaty, to adapt to new requirements 
similar to those in other sectors, with similar 
characteristics, in the field of EEC competition rules. 
In this context, the Commission's policy in this area, as 
far as the application of ECSC Articles 65 and 66 is 
concerned, will continue to be prompted by twin objectives 
on the one hand, to preserve effective competition, equally 
valid in the interests of the dynamism of producers and 
distributors as far that of consumers; on the other hand, to 
facilitate the structural development still necessary which, 
IV/1 1 
without being an impediment to the first objective, will 
allow the steel sector to pursue Its restructuring and to 
modernise, so that it can better face up to sharper 
industrial competition. 
Wi th 
cone 
t r an 
resp 
neve 
na r r 
sect 
cone 
g i ve 
sake 
I ead 
prie 
cont 
f ac i 
stee I i n the framework of the application of ECSC Article 66 
rning concentrations, certain fusions, particularly 
national, will no doubt prove necessary in this 
ct . In its appreciation of them, the Commission will 
theless have to take into account the existence of 
wer and narrower oligopolies, at least In certain sub-
rs. As far as agreements under Article 65 are 
rned, the Commission will not, of course, be able to 
its approval to these being associated, even for the 
of rationalisation or specialisation, to measures 
ng to market sharing, or to concerted attitudes on 
ng matters. In the same way, the Commission will 
nue to watch that no financial and personal links 
tating concertations be established among the large 
makIng groups. 
In the distribution sector, and particularly as regards 
concentrations which have the effect of tlghting the 
producers' control of distributors, the Commission continues 
to consider that certain transnational operations play a 
useful role, from the point of view even of competition, by 
allowing certain producers to have an even greater presence 
in the territory of other Member States. The Commission 
must nevertheless examine with greater attention, from the 
point of view of the consumers' interests, national 
operations which have the effect of strengthening the 
already very strong positions of certain producers at the 
d i st r i but i on I eve I . 

PART 
STUDY OF THE MARKET FOR STEEL PRODUCTS 
IN THE COMMUNITY 
AND FORECASTS FOR 1992 AND 1995 

V/1 . 
CHAPTER V 
INTERNAL DEMAND FORECASTS 
1. METHODOLOGY 
Before discussing the actual forecasts, a description of the 
methodology used to prepare them would perhaps help the 
reader put the results Into context. 
There are basically two ways of forecasting steel 
consumption. One Is based on the relationship between steel 
consumption and GDP trends and the other on the relationship 
between steel consumption and the sectors which use steel. 
Both are structural (and not functional) methods based on 
input and output, and both therefore suffer from the same 
disadvantage, namely that they cannot easily reflect the 
structural changes in the economy which affect these 
re I a t i onshIps. 
There is one further problem with the global approach, i.e. 
that which considers the relationship between steel 
consumption and GDP trends, in that it does not take 
explicit account of developments in the steel-using sectors. 
Against this disadvantage, however, the global approach 
presents at least two major advantages: 
(i) forecasts are based on only one variable, GDP, which 
is itself a well-known variable and the subject of 
extensive forecasting; 
(ii) to the extent that it is possible to determine a 
statistical relationship between the two variables, 
the statistical machinery required is very simple. 
The difficulty of taking structural changes into account can 
be partially resolved by adding into the equation a second 
independent variable, such as the trend over time. However, 
it should be made clear that by doing this the problem is 
only very partially resolved because structural changes are 
dynamic and the models generally used are static. For this 
reason, the coefficients estimated on the basis of these 
models may provide a statistically satisfactory synthesis of 
historic trends but are Incapable of projecting the dynamic 
trends of structural change into the future. Forecasts 
based on these models will therefore generally tend to 
overestimate actual levels of steel consumption in the 
future . 
Another important drawback of the global approach is that it 
uses apparent consumption as a forecasting variable. 
V/2 
The selection of this variable derives exclusively from the 
lack of statistical Information on actual consumption. 
While It is true that changes in stock levels even out over 
a long period and are not therefore Important when 
estimating long-term trends, it is also true that specific 
forecasts about consumption cannot be made without taking 
stock movements Into account. 
It Is well known that the stock situation has the effect of 
amplifying, often very considerably, the upward and downward 
movements of the trade cycle. 
One final disadvantage of the GDP approach Is that It cannot 
be applied to the Individual steel products: the concept of 
crude steel must be used as the only level at which steel 
consumption can be treated homogeneously. 
To conclude, using trends In GDP to explain trends In steel 
consumption and more particularly to prepare forecasts Is a 
valid approach, but must be used with caution In view of all 
the restrictions and constraints which limit the 
significance of the results obtained. 
The sectoral approach, on the other hand, also has the 
shortcoming of not allowing for structural change, but at 
this level of disaggregation the problem Is less complex 
since the changes are reflected in the specific consumption 
of steel, whose pattern is governed by two 
substitution for steel by other products and 
lighter materials, both of which are easier to 
sector a I I eve I . thIngs , the 
the use of 
eva I uate at 
Nevertheless, even at sectoral level It is extremely 
difficult to project past specific consumption trends Into 
the future. There Is the added difficulty of forecasting 
changes in the steel-using sectors, which usually has to be 
done by less orthodox methods than the GDP method. 
In any case, this Is 
make forecasts for the only method which 
individual products, can be used to 
and it will 
consequently be the essential reference 
quantitative objectives. Nevertheless, the 
will be included for information, and to 
comparison with the results obtained from 
approach . po i nt for 
first met hod 
serve as a 
the sectoraI 
2. APPARENT CONSUMPTION OF CRUDE STEEL FOR 1993 
The r eI a t i onsh i p 
dIscussed in the 
on this, it must 
certainly exists 
made when us i ng between GDP and crude steel consumption was 
previous chapter. Without dwelling further 
be remembered that, while the relationship 
, certain Important reservations should be 
it for forecasting purposes. It usually 
tends to overstate future values 
V/3 
Various econometric models were tested using convent! 
methods, I.e. alternating the independent variable(s) ( 
Investment, etc.) and the proposed functional form (I In 
log-linear, etc.). The need to optimize statist 
adjustment eliminated all the models but one and showed 
GDP and a linear trend were the variables to be used, 
that the relationship must be expressed in terms of gr 
--*-- The model thus arrived at has the addlti rates . 
adv 
add 
by 
estimated equation is therefore: WW. • I I W I1IVUW I IIIU» W. I I I » W Vf U V I I U W V I I w U W VI I «. I 
antages of being clear and easy to use and offers 
itional guarantee of being the model most frequently 
other international institutions, e.g. the OECD.1 
A Apparent consumption 
Apparent consumption + b a GDP2 
GDP ona I 
GDP, 
ear , 
leal 
that 
and 
owt h 
ona I 
the 
used 
The 
The corresponding analytic regression results are: 
R2 - 0.80 ; DW - 2.01 a - -10.38 
(t-6.78) b - 4.32 
(t-7.12) 
It will be seen that the coefficients are very significant, 
but the quality of the adjustment is only fair (R2 
0.80), which Is a further reason for exercising caution when 
making forecasts since 20% of apparent consumption Is due to 
factors which cannot be explained by the model. 
It should also be mentioned that the data used apply to 
apparent consumption of crude steel for "ECSC and non-ECSC" 
products.3 This is in order to include Spain and Portugal, 
for which we have no statistics on apparent 
ECSC products before 1986. The same applies 
with non-Community countries (USA and Japan), 
data comparable to "ECSC and non-ECSC" 
available. When preparing these forecasts, 
that the growth rates generated by the model 
ECSC products only. consumptI on of 
to compar i sons 
for which only 
products are 
11 was assumed 
a I so applied to 
On the basis of these results and the Commission's 
medium-term macroeconomic projections, it was possible to 
establish medium-term trends in the apparent consumption of 
steel within the Community. 
Table V.1 shows some of the Community's macroeconomic 
projections and the forecasts of GDP growth in the USA and 
Japan in real terms compatible with these internal growth 
trends. The forecasts show that the European economy will 
continue to grow relatively fast over the next few years and 
1 "Analysis of longer-term developments In the demand for 
steel", OECD Steel Committee, SC/WP (88) 28. 
2 Data used covers EUR-12, and the period 1973-1988. 
3 For a definition of this aggregate, see the footnote to 
Tab Ie V.3 be Iow. 
V/4 
that growth will continue to be fuelled mainly by steady 
Increases in Investment, although on a smaller scale than in 
1988 and 1989. According to the table, there will be a 
slight and very brief economic downturn after which the 
single market should stimulate further economic growth In 
1992 and 1993. 
i t wou I d 
forecasts to be 
be Given these macroeconomIc prospects, 
unreasonable to expect steel consumption 
pessimistic or negative. But, It would also be unreasonable 
to Jump to over-opt I m Istic conclusions too quickly. 
The discussion on methodology which preceded this section 
and the first chapter on the factors determining steel 
consumption contained a number of caveats on the 
interpretation of the results of an econometric model, 
particularly If it Is used for forecasting. Moreover, the 
above macroeconomic forecasts are derived from a basic 
scenario which rests on certain assumptions, such as 
constant real exchange rates and oil prices over the period, 
unchanging economic policies in the developed countries and 
no serious crises in the developing countries. 
Other scenarios would of course change the macroeconomic 
forecasts and therefore the forecasts of steel consumption. 
As an example, graph V.2 shows the forecasts 
result from a "dollar shock" scenario (a 10% 
dollar in 1990 and again in 1991) and an 
scenario (an increase In the price of a barrel wh I ch wou I d 
fall In the 
"olI shock" 
of oil from 
$16 to $20 In 1990 followed by 10% Increases each year). 
It is important to stress here that in order to forecast 
trends in global steel consumption it is essential to define 
the point of departure very carefully. 
Since the year 1988 Is considered to be an observation point 
that Is heavily Influenced by many purely cyclical factors, 
it Is necessary first of all to neutralize their effects in 
order to Identify underlying trends and extrapolate them by 
means of regression analysis up to 1993. 
In practical terms, allowing chiefly for assumed stock 
trends, the level of apparent steel consumption considered 
to correspond to the underlying trend in 1988 is 
116.7 million tonnes. This figure is arrived at by applying 
to 1987 apparent consumption a growth rate equal to half 
that actually recorded. The projection to 1993 obtained 
from the level of consumption which this gives for 1988 Is 
considered to be the most probable consumption level for 
1993 (as the underlying trend). The figure is 130.6 million 
tonnes. 
V/5 
As we have already said, any global forecast tends to 
overestimate the true trends, In particular because the 
forecast takes no account of the gradual decline In the 
proportion of GDP represented by steel. This means that 
these forecasts must be revised downwards. 
Thus the most likely level of crude steel consumption in 
1993 can be estimated at 130 million tonnes, and deviations 
from this central value will be chiefly due to cyclical 
factors . 
This forecast is borne out by the results obtained using the 
sectoral method, as will be seen in Section V.3 below. 
3- DETAILED ANALYSIS OF TRENDS IN STEEL CONSUMPTION SECTOR 
BY SECTOR 
3 . 1 Genera I 
3.1.1. Steel consumption sectors 
Table V.3 shows in order of size the main sectors which used 
ECSC and non-ECSC steel products in the Community of Twelve 
in 1987. The average of the figures for 1986, 1987 and 1988 
was taken as the reference point as recent detailed 
statistical surveys are available for these years as a basis 
for determining actual steel consumption (after allowing for 
stock movements). 
In order of size therefore, the main sectors of final 
consumption (as a percentage of total consumption of ECSC 
and non-ECSC products) rank as follows: 
Building, civil engineering and construction 28% 
Transport, including shipyards 20% 
Metalwork 14% 
Mechanical engineering 13% 
Electrical engineering ) 
Boi ler-mat »-ig ) 4-5% each 
Cann i ng ) 
Other (railways, steelworks, mining, etc.) 11.5% 
3.1.2 Qualitative aspects 
Before discussing past and future trends in the steel 
consumption sectors, it Is perhaps worth repeating some of 
the comments on specific consumption trends already made In 
the previous chapter. The unremitting drive to improve 
competitiveness and the quality of manufactured products 
entails both the rationalization of steel-based 
manufacturing processes, leading to a reduction in the 
"specific" unit consumption of steel, and also ever more 
stringent requirements with regard to steel quality and 
terms of trade (e.g. delivery dates). 
V/6. 
The downward trend In specific consumption, I.e. the 
structural reduction In the quantity of steel required for 
each manufactured product, is the statistical result of a 
combination of several factors: 
(i) making the product lighter by changing Its design or 
by using lighter materials (either substitute 
products or lighter steels); 
(ii) using steel more economically and thus reducing 
processing waste; 
(iii) in mixed manufacturing sectors, producing products 
with a lower steel content, i.e. changing the 
product mix. 
The sharp rise in steel consumption in 1988 and 1989 seems 
to indicate that none of these factors is fundamentally 
i r rever s IbIe . 
it is even 
substI tut I on 
product mix. tempt Ing 
i s often to 
I ess conclude that 
important than the effect 
changes in of 
the 
consumpt ion over the 
and A look at general trends in specific 
last few years, particularly In the building, motor 
mechanical engineering Industries, shows that for several 
years now the trend has been slowing down or has perhaps 
even been reversed (Table V.4). This may In part be due to 
factors relating to product mix. 
Moreover, considering trends In steel consumption from the 
product angle, there are only a very few trends which could 
be described as universal, e.g. the fact that steel is no 
longer used for forged or cast products (now sometimes made 
out of pig-iron) and the trend towards coated products. 
One 
cons 
acco 
to 
AI th 
s I ow 
d i f f 
ma i n 
spec 
and 
was 
proc 
beca 
mark 
30%) 
f i na 
t r an 
be m P ig 
indication of the need for quality products is 
tant increase in the proportion of steel consump 
unted for by special steels. The same probably app 
quality steels and, more recently, coated ste 
ough overall the move towards special steels may 
because the different sectors of consumption 
erently over time, change has been much swifter in 
customer sectors. For example, the proportion 
ial steels increased overall by only 1.3% between 
1987, but in the transport equipment sector the incr 
1.9% and in mechanical engineering 4.6%. First-s 
esslng is particularly interesting in this res 
use in 1987 that sector accounted for two thirds of 
ets in special steels (tubes alone accounting for ne 
, with most of this steel going to a limited numbe 
I consumption sectors like mechanical engineer 
sport equipment and met a Iworking. Further comments 
ade in the sections on these sectors of consumption. the 
t ion 
I les 
els. 
seem 
move 
the 
of 
1980 
ease 
tage 
pect 
the 
ar I y 
r of 
i ng , 
will 
3.2 Review of the main steel-using sectors and V/7. 
the I r 
prospects 
Preliminary remarks 
The opinions expressed In this section are based on a wide 
range of meetings which Commission staff have had with steel 
users or their associations, and are backed up by a number 
of specific sectoral studies. 
It is worth emphasizing from the outset that, In general, 
neither the macroeconomIc growth which Is expected in the 
first half of the 1990s (Table V.1) nor the single market 
will necessarily boost steel-using sectors more than others. 
In fact, a study1 to Identify the impact of opening up 
markets on the various industrial and service sectors does 
not classify any steel-using sector In the group which will 
enjoy extra rapid-growth, like the information technologies 
sector. 
3.2.1 Building, civil engineering and construction 
After years of decline or stagnation, the construction 
sector started to grow again In 1986, although the recovery 
of the non-housing sector actually began In 1984. 
Activity was vigorous in 1988 (6% up on 1987)2 with even 
above-average growth rates for civil engineering (8%) and 
for non-housing construction (7%) but lower for housing 
construction (4.3%). 
Even though these rates may fall slightly, they will still 
be high compared with the first half of the decade. It 
should be pointed out, however, that the strong recovery of 
this sector in 1988 and its good performance In 1989 have 
partly been helped by the good weather. 
In the longer term, the prospects in this sector depend 
essential on demographic trends, and the evolution of 
interest tutes and purchasing power (and therefore of 
Inflation), as well as public expenditure on construction. 
Housing construction, which had initially benefited from a 
catching up after the decline seen up to 1985, could 
maintain its dynamism. A certain degree of optimism, 
suggesting a rate of growth In the order of 2% per year, 
could be justified not only in the light of existing 
1 European sectoral forecasts, November 1988 - Bipe, IFO, 
Promote I a. 
2 Source: International European Construction Federation 
(IECF). 
V/8 
requirements, particularly In southern European countries In 
general economic expansion, but also from demand stemming 
from the massive immigration which the Federal Republic of 
Germany has been seeing since 1989. 
In some countries, however, particularly countries like 
Spain and Portugal whose economies are generally expanding, 
the housing market could continue to grow Just as 
v i gorousI y . 
At the same time, civil engineering and non-housing 
construction, a large and ever increasing proportion of 
which involves met a I work Ing, are of major Importance as 
steel consumers, particularly as they use steel more 
Intensively than the housing sector. Prospects In these two 
subsectors are good. 
For one thing, non-housing construction should continue to 
develop virtually in parallel with gross fixed-capital 
formation. Investment is likely to have a greater effect 
than in the past in strengthening capacity and will form 
part of the commercial and industrial restructuring in the 
run-up to 1992. 
In civil engineering, it Is virtually impossible to offer 
quantitative forecasts for more than two years ahead since 
most of its activities depend on public procurement. 
However, it is also worth mentioning the growing interest in 
investment in environmental protection and waste treatment. 
In any case, the current recovery is good reason for 
optimism for the next few years, and there are a number of 
major infrastructure projects which will certainly provide 
the sector with work and may have spin-off effects. These 
include preparations for major events like Italia '90, the 
1992 Olympic Games and the 1992 Expo in Seville, and 
projects like the high-speed rail network, the Channel 
Tunnel, the Great Belt project In Denmark and improvements 
to Spain's rail and road networks. 
To sum up: in view of the uncertainties referred to above, 
the average annual growth rate in the whole of the 
construction industry can be expected to decline: 4% up to 
1990, 3% from 1990 to 1992 and 2% from 1992 to 1995. 
As far as steel products are concerned, apart from the 
general buoyancy of metallic construction, account should be 
taken of the increasing use of wire mesh Instead of concrete 
reinforcing bars, cold-rolled sections and tubes instead of 
merchant steels and coated sheet Instead of uncoated sheet. 
Altogether, coated sheet and stainless steels should capture 
new markets, but on the other hand some markets for steel 
tubing are being lost to tubes made from copper and 
synthetic materials. All in all, however, steel consumption 
should closely follow the level of activity in the Industry. 
V/9 
3.2.2 Transport equipment 
This sector essentially comprises the motor Industry 
(including vehicles) and shipbuilding and to a lesser extent 
the railway equipment Industry. 
Since the motor industry builds some 12 million private cars 
but only slightly over 1 million commercial vehicles, trends 
In steel consumption will obviously depend largely on 
pr i va te car sa I es. 
Demand for and production of private cars in the EEC has 
risen continuously since 1985 as a result of various 
factors, which include tax Incentives In some countries and 
lower fuel prices. After rising for five years, these 
figures are expected to stabilize or even decline In 1990, 
with a moderate recovery by 1992. According to the DR I 
forecast at the end of 1989, production could Increase by 
1994/95 by some 1.1 million units over 1988 and by 750 000 
units over 1989, that is, an average annual Increase of a 
little more than 1.5% between the reference period 1986-88 
and 1995. 
The main uncertainty surrounding this forecast is the market 
share of imports, which could Increase following the opening 
up to the outside world Implied by the completion of the 
Internal market . 
Output of commercial vehicles Increased even more 
dramatically with growth of 10% a year between 1985 and 
1988. Industrial investment will probably benefit this 
sector too, although the gradual saturation of the road 
network could hold down expansion in this area and work to 
the advantage of the railways. 
Although the railways are by no means a major user of steel, 
the rolling stock sector should show a significant increase 
in activity and In investment (high-speed rail network, 
integration of the Iberian and British networks). 
Shipbuilding is now showing signs of recovery from a very 
low level. According to a detailed study,1 world activity 
should increase from 10 million compensated gross register 
tons in 1987 to 11.5 million cgrt in 1995. Since this Is in 
specialized sectors, Community shipyards should be able to 
restore their share of the market to 20%. Production would 
then be able to increase from 1.715 million cgrt in 1987 to 
2.3 million cgrt In 1995, which is an average annual 
increase of some 3.5%. 
Moore and Stephens, study conducted for the Commission 
in 1988; the study arrived at more cautious conclusions 
than those reached by the world's main shipbuilders. 
V/10. 
Steel requirements for the transport equipment Industry 
should match activities In the Industry much more closely 
than was the case in the past. 
Specific consumption of steel (i.e. the steel required per 
unit manufactured) dropped by 10% In each of the periods 
1975-80 and 1980-83 and then virtually stagnated. Because 
of Its importance it Is worth considering first of all the 
trends in the motor industry. This Is a complex phenomenon 
which can be explained to some extent by the following 
factors : 
(I) the production shift towards medium-sized or larger 
cars, a trend which intensified as fuel prices 
dec I i ned; 
(ii) less pressure on producers to cut weight, also as a 
result of falling fuel prices, thus halting the 
trend towards substitution of lighter materials 
(aluminium and synthetic materials) and the use of 
thinner steel sheet; 
(iii) further slowdown In substitution to prevent 
corrosion because of the success of coated sheet 
(steel parts have already been reintroduced to 
replace some synthetic materials, e.g. In fuel 
tanks); 
(iv) the use of robots and automatic welding have tended 
to reduce the Importance of conserving raw materials 
(sheet) . 
Nevertheless, for reasons of cost, quality and 
computer-aided design and manufacture (CAD/CAM), there has 
been substitution between steel products: certain forged 
products, long products (merchant steels and tubes) and 
ordinary steels are being replaced by castings of special 
pig iron, coated sheets, cold sections and particularly 
spec i a I steels. 
From now on, virtual stagnation in the specific consumption 
of steel must be expected, except for a few changes In the 
consumption structure by product: 
(i) the percentage of coated sheet will continue to 
increase until It reaches some 55% of all sheet used 
by 1992 and more than 60% by 1995 (with electro-
galvanized plate possibly accounting for two thirds 
of all coated plate); 
(M) increasing use of special steels with the wider use 
of CAD/CAM and catalytic convertors (in which 
stainless steel has to be used). 
V/11 . 
Better car design and the use of special steels could result 
In some weight trimming, which should not exceed the rate of 
expansion of production (an average of 1% a year). 
To conclude, steel consumption should 
1992-95 as it was from 1986 to 1988. be much the same 
In the other transport equipment sectors, there are unlikely 
to be substantial changes In the use of materials, except 
that aluminium is being used more widely for railway 
equ I pment. 
this cap i ta I goods 3.2.3 Mechanical engineering 
Since 1984, after years of decline I 
sector, production activities have slowly recovered, firstly 
because of the revival of the US economy and later because 
of the renewed growth of the European economy. In 1988 it 
achieved an extraordinary growth rate of 5%. 
Some subsectors are worth particular mention as regards 
steel consumption. In 1985 the four subsectors with the 
highest consumption were as follows (the shares of total 
consumption by the sector are only approximate): 
(i) civil engineering, hoisting and handling equipment: 
between 25 and 30% of consumption of ECSC and 
non-ECSC products; 
(ii) agricultural equipment: nearly 15%; 
(iii) machinery for the textile and food industries: 
near I y 15%; 
( i v) machine tools: up to 10% 
The importance of the civil engineering equipment subsector 
and its development serves to explain, in part at least, the 
fact that towards the middle of the decade steel 
requirements in the mechanical engineering sector Increased 
sharply compared with the level of activity in the sector. 
In fact, apart from increasing construction activity, the 
sector shifted towards major infrastructure projects, which 
tended in turn to create demand for powerful heavy 
machinery. 
In general, the outlook for the sector remains favourable. 
1. The climate Improved for civil engineering equipment in 
1986, with the resumption of construction, civil engineering 
and industrial investment In general. in the year 1988-89, 
growth rates in the region of 10% were recorded. Growth can 
be expected to continue at moderate to high rates of 2 to 3% 
p.a. by volume in all sectors except mining equipment. The 
V/12. 
prospects for Industrial lifting and handling gear also 
remain good, thanks to Investment In the Industry and In 
dIst rI but ion. 
2. Textile machinery has picked up since 1984 and Europe 
has consolidated its position as world leader with Japan. 
This sector will benefit from the conversion of the textile 
industry in the years ahead, suggesting moderate growth of 1 
to 2% p.a. 
3. The food-processing machinery Industry has seen 
appreciable growth, averaging between 2 and 4% p.a. since 
1986. Overall growth (except in such areas as canning and 
milk processing) will continue as concentration In this 
sector continues In the run-up to the full Internal market. 
Similar conclusions can be drawn for equipment for the 
chemicals industry. 
4. In the machine-tool sector, the European Industry's rate 
of investment heralds future growth, although sharper 
international competition in this sector is not without 
r isk . 
5. The agr I cuItura I-machinery sector has been stagnant 
since 1984's halt in agricultural investment following 
reform of the common agricultural policy. This Is primarily 
a market of replacement, where moderate growth In the area 
of accessories (e.g. harvesters) might be sustained until 
1992 at a rate of no more than 1% p.a. 
The mechanical engineering sector as a whole is expected to 
grow by about 3% p.a. An average growth of this order is 
feasible if the higher increases seen In 1988 and 1989 are 
taken into account, along with the demand for consumer goods 
which will flow from the economic reforms underway or 
envisaged in eastern European countries. 
Steel consumption should grow at a slightly lower rate than 
activity, reflecting the generalized trend towards higher 
products. By contrast with the motor-vehicle sector, this 
trend is not a necessity in itself but stems (apart from 
materials cost considerations) from factors specific to the 
machines themselves, operating conditions, or the pursuit of 
improved performance. For example: 
In agricultural tractors and some civil engineering 
plant, by contrast with such agricultural equipment as 
harvesters, weight is not a criterion. Therefore 
substitute materials such as plastics and fibre-glass 
are introduced only for specific purposes, such as 
sound-proofing a tractor's cab or reducing the weight of 
a crane ' s Jib; 
V/13 
in machinery for processing food or chemicals, the 
product determines the material used. Stainless steels 
are increasingly preferred to aluminium because they 
better satisfy health, physIcaI-resistance and heat-
resistance requirements; 
In some machine tools, steel has been partly replaced by 
other materials, Including concrete, for reasons 
including thermal Insulation and better vibration 
absorpt i on ; 
more generally, machinery is being made more flexible by 
incorporating numerical controls and electronics, which 
primarily Impinge on the use of forged or cast-steel 
parts, such as transmissions. 
Overall steel consumption by the mechanical engineering 
sector could grow at about 2% p.a., and for the reasons 
given, the use of special steels (primarily stainless and 
structural steels) will show marked growth. 
Outlets stagnating or In danger of declining 
3.2.4. Metal work Ing 
This sector covers a wide range of articles, most of which 
are intermediate products for the mechanical engineering, 
transport equipment or building industries: 
intermediate products: bolts, ironmongery, most drawn-
wire articles (cables, springs, wire mesh, tyre cords), 
heavy packagings, Joinery metalwork; 
consumer goods: household goods (cutlery, heaters, 
etc. ) ; 
multi-purpose products: metal furniture, tools. 
The recovery in this sector has been slower than in others, 
arising, In part, to substitution and the pressure of 
imports, which are hitting this sector harder than others 
(e.g. bolts and large containers). 
At the risk of generalizing, prospects for intermediate 
products for the motor vehicle, mechanical engineering and 
building sectors seem relatively encouraging, while those 
for consumer goods seem mediocre. The outlook is 
favourable, with the knock-on effect, for the following 
sector s : 
me ta I furn i ture: 
and of f I ce the demand created by new commercial 
„..._„ buildings can be expected to continue, 
together with, for fire-prevention reasons, an increase 
in its market share over wooden furniture; 
V/14 
wire products (mesh) for the building Industry, and bar 
or wire products for the motor vehicle or mechanical 
engineering industries (e.g. screw-cut parts): It 
should be noted that the substitution of welded mesh for 
concrete reinforcing bars has yet to be completed In 
cer tain countrles ; 
industrial packagings: after considerable growth In 
this sector in recent years, the expansion of trade 
offers great opportunities for this type of product, 
even though non-member countries dominate the supply of 
large containers (for shipping etc.). 
No great growth Is expected In the household goods sector 
apart from heating appliances, demand for which Is 
determined by construction and renovation. 
Despite the prospects for growth (about 2% p.a. maximum) In 
most sectors, some manufactures may show much substitution 
for steel. This Is particularly true of Industrial 
packaging (with the Introduction of plastic) and heating 
appliances, and even in the furniture sector, for reasons of 
cost . 
However, stainless and coated steels can offer (in the case 
for example of industrial packagings) an alternative to 
substitution In many instances. Therefore substitution will 
not be such as to reduce this sector's overall demand. In 
such conditions, steel consumption should be able to 
maintain its current level. 
3.2.5 Light packagIngs 
This is a mature sector with only a few areas of potential 
expansion, such as pet-food tins, drink cans and aerosols. 
Steel (tlnplate and, to a lesser degree, black plate) Is in 
fierce competition with aluminium In this area. By playing 
up the cost and environmental aspects, It should gain a lead 
on aluminium in, for example, the area of two-piece drink 
cans. However, any small growth In demand could be 
cancelled out by the continuing reduction in thicknesses, 
and volume growth Is therefore not expected to exceed 1% 
p.a. If the sector falls Increasingly under the financial 
domination of aluminium producers, not even the 
stabilization of tlnplate demand can be taken for granted. 
3.2.6. E I ectr I caI goods 
Domestic appliances (white goods) make up the largest part 
of this sector. Production of these consumer durables could 
grow by between 2 and 3% by 1995. 
countries this market is now one of 
products such as dishwashers and microwave ovens are A I though i n 
rep Iacement, many 
some 
V/15. 
developing a dynamic of their own. In these product areas, 
substitution has already had a dramatic effect and Is 
expected to continue at a moderate rate, affecting even 
stainless steels. The expected consequence Is stagnating 
demand for steel, or at the most a small rise of 1% p.a. 
Only coated steels are expected to increase their market 
share . 
The manufacture of heavy electrical equipment should 
experience no marked growth (by contrast with machine 
making), the European electricity network having been 
largely compIeted . 
Electronics, telecommunications and computers are not major 
out lets for steeI . 
3.2.7. Bollermaking and related sectors 
Boi IermakIng, which covers the construction of boilers and 
large industrial receptacles, declined continuously from 
1980 to 1986. Since 1987, the sector has been recovering 
gradually, In the Federal Republic of Germany and Italy 
particularly, owing to investment in the chemicals, 
pharmaceutical and foodstuffs industries, which have offset 
the fall In demand from the energy sector. This sector is 
expected to stabilize, or perhaps grow at a rate approaching 
1% p.a., and the growth in demand should 
increase in the use of stainless steels, 
areas as reservoirs and boiler piping, 
vulnerable to substitution by plastics. a I so i nc I ude an 
However , I n such 
this sector I s 
In other sectors, where consumption is in structural decline 
because of problems in agriculture, mining and the railways, 
consumption, beyond the restructuring of the rail network, 
cannot be expected to recover. 
3.2.8. Tubes and the rest of first-stage processing 
The requirements of these sectors depend on the consumption 
of steel in the areas analysed above. In short, although 
the outlook is encouraging for the tubes and cold-processing 
sectors, the wire-drawing and smelting sectors will probably 
stagnate or decline slightly, while forging Is expected to 
decline more noticeably. 
The tubes sector is the most heavily dependent on exports. 
It is impossible to be optimistic: In the absence of any 
firm evidence of a recovery in the oil sector, demand for 
non-welded piping will remain depressed, while for large-
gauge welded piping, the few large pipeline construction 
projects known (Norway, Zeebrugge, Iraq, Russia etc.) will 
barely ensure stagnation at 1987 levels until 1992. Without 
a sharp rise In the profitability of the oil industry, no 
lasting improvement can be envisaged In these areas. 
V/16. 
3.3 Forecasts based on the sectoral approach 
3.3.1 MethodoIogy 
in order to arrive at forecasts, the breakdown given In 
Table V.3 was extrapolated to 1992 and 1995 by applying the 
activity indices given In Table V.5 but correcting the 
result, In some cases downwards, to take account of expected 
specific consumption trends. These are summarized In 
Table V.6, while Table V.4 lists annual figures for certain 
selected sectors by way of Illustration. 
3.3.2. Forecast resuIts 
Table V.7 summarizes the results In the different consumer 
sectors. In the final consumption sectors, consumption is 
expected to show an increase of 88.5 million tonnes (see 
Table V.3) over the 1986/88 period rising to 99.5 million 
tonnes by 1995, a rise of 12.5%. The proportion of special 
steels is expected to rise by between 13.5 and 15% largely 
to meet the needs of the mechanical engineering and 
transport equipment sectors. The sectors mainly 
underpinning this increase are building and public works, 
mechanical engineering and transport equipment, which ties 
in with the sectoral developments referred to above. (N.B. 
The figures In Tables V.3 and V.7 are percentages of a 
totaI . ) 
Table V.8 shows the recent trends in apparent consumption by 
product, and forecasts for 1992 and 1995. In order to 
evaluate these results properly, it is important to remember 
that this forecast is based on actual consumption figures 
for 1986/87/88 and that these form a reliable basis for 
comparison. Because of stockpiling of certain products, 
apparent consumption reaches a peak in 1988. When 
forecasting for the years ahead, It was necessary to assume 
that the effect of stocks would be neutral (so that actual 
consumption corresponds to apparent consumption). 
Demand for ECSC products 
1986/88 and 1992, and by 
basically the result of 
transport equipment sectors 
and long products equally, 
demand for coated sheet should increase by 8% between 
12% by 1995. This increase is 
activity In the building and 
and should benefit flat products 
For reasons explained elsewhere, 
Is showing the fastest increase 
followed by demand for special steels. 
TABLE V-1 
MEDIUM-TERM MACROECONOMIC FORECASTS - EUR 12 
(percentage change In volume over previous year) 
GDP 
GDP deflator 
I nvestment: 
- of whIch private 
i nvestment 
Internal demand 
Expor ts 
Impor t s 
Long-term reaI 
i nterest rate 
USA-GDP 
Japon-GDP 1989 
3.2 
4.9 
6.8 
7.4 
3.5 
5.8 
6.0 
4.9 
2.6 
4. 3 1990 
2.9 
4.7 
5.0 
5.3 
3. 1 
5.8 
5.9 
4.8 
1 .7 
3.6 1991 
2.9 
4. 1 
4.8 
5. 1 
3.0 
5 .8 
5.8 
4 .7 
2.0 
3.5 1992 
3.0 
3.7 
5. 1 
5 .4 
3. 1 
5.9 
5.9 
4.7 
2.2 
3.6 1993 
3.2 
3.3 
5.5 
5.9 
3.3 
6.0 
6.0 
4 .7 
2.4 
3.8 
Source : Commission of the European Communities 
TABLE V-2 
Projection of growth rates in consumption of crude steel 
(ECSC products) and consumption forecast for 1992 and 1993 
EUR 12 - (%) and million tonnes 
1989 
3.06 1990 1991 1992 1993 
1.76 1.76 2.19 2.62 Consumpt i on 
forecas t 
1992 
127.3 1993 
130.6 
TABLE V-3 
Actual consumption of ECSC and non-BCSC products 
in EBC 12 bv sector in 1986-1987-1988 (provisional) (annual average) 
% of total 
Sector BCSC of which 
products special steels Non-BOCS of which 
products* special steels ECSC and non-
ECSC products of -which 
special 
steels 
Steel foundries, deep-
drawing and cutting 
Forging and stamping 
Drawing 
Cold rolling and 
shaping 
Tubes 
First-stage processing -
Total 
Construction of non­
electrical machinery 
Construction of electrical 
machinery 
Shipbuilding 
Transport equipment 
Metallic construction 
Building and civil 
engineering 
Metalwork 
Canning 
Boilermaking 
Miscellaneous (including 
final consumption) 
End-user sectors - Total 2.5 
4.6 
9.0 
5.5 
17.7 
39.2 
6.2 
2.8 
1.1 
10.9 
6.0 
13.1 
8.3 
3.5 
3.0 
5.8 
60.8 0.6 
2.6 
1.8 
0.5 
4.4 
10.0 
1.6 
0.2 
0.1 
1.4 
0.2 
1.3 
0.2 
0.4 18.5 
5.7 
0.9 
19.8 
6.2 
14.3 
15.7 
0.3 
2.6 
15.9 
5.6 5.6 
1.1 
0.3 
5.8 
1.2 
2.1 
2.9 
1.1 
3.2 12.7 
4.9 
1.6 
18.5 
8.8 
19.4 
14.3 
4.1 
4.3 
11.4 3.6 
0.6 
0.2 
3.4 
0.5 
0.7 
2.4 
0.6 
1.4 
Total (x million t) 100% 
102 621 15.6% 100% 
26 199 23.2% 100% 
88 543 13.4% 
Source: Commission surveys 
* Non-BCSC products: tubes, drawn wire, drawn products, cold-roiled products or cold sections, deep-drawn 
or cut products, steel castings. 
Exp Ianatory note to Tab le V.3 
The first-stage processing sectors make "non-ECSC" products 
(I.e. products not covered by the Treaty of Paris) and are 
intermediate sectors. 
The difference between the consumption of ECSC steel 
products for first-stage processing (40.3 million tonnes, or 
39.2% of 102.6 million tonnes) and the 26.2 million tonnes 
used after processing by the other "end-user" sectors Is the 
result of processing losses plus net exports of non-ECSC 
products (some 6 million tonnes). 
The "miscellaneous" sector includes the railways, mining and 
steelmaking Itself, but also absolutely final consumption 
like the use of tubes by the oil industry or agriculture. 
TABLE V-4 
Trends In the specific consumption of steeld) 
In all steel-using sectors 
and some selected sectors 
(ECSC and non-ECSC steel products - EUR-10) 
(1980 - 100) 
Year 
1980 
1981 
1982 
1983 
1984 
1985 
1986 
1987 AI I 
sectors 
("f inal ") 
(2) 
100 
99.3 
98. 1 
95.0 
97.8 
97. 1 
97.8 
99.0 Transport 
equIpment 
100 
102.4 
96.7 
90.0 
95.4 
92.7 
93.3 
89.8 Mechan I caI 
eng I neerIng 
100 
97.8 
99.2 
95.7 
94.3 
94.0 
95.4 
95.7 Bui I d I ng, 
pub I Ic 
works 
and 
meta I I Ic 
engIneer i ng 
100 
98.4 
99.7 
95.5 
97.5 
100.3 
101 .5 
107. 1 
Source: Commission studies 
(1) Steel consumption compared with the activity index of 
the s; :or (in the case of transport equipment this is 
the nuu.oer of vehicles produced, excluding shipyards). 
(2) Weighted by the total consumption of ECSC and non-ECSC 
steel products in 1980. 
TABLE V-5 
T.evel of activity of steel-using sectors 
EUR 12 indices 1985=100 
Sector 
Steel foundries, deep-
drawing and cutting 
Forging and stamping 
Drawing 
Cold rolling and shaping 
Tubes (1) 
First-stage processing -
Total (3) 
Construction of non­
electrical machinery 
Construction of electrical 
machinery (4) 
Shipbuilding (4) 
Transport equipment (4) 
Metallic construction 
Building and civil 
engineering (4) 
Metalwork 
Canning 
Boilermaking 
Miscellaneous (including 
final consumption) 
End-user sectors - Total(3) 1984 
93.7 
95.5 
99.9 
100.7 
99.3 
98.9 
94.8 
94.0 
113.5 
94.3 
94.2 
101.5 
100.6 
101.7 
100.7 
97.6 1985 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100-1986 
98.5 
98.8 
99.4 
101.4 
90.8 
95.9 
99.0 
103.9 
77.4 
106.1 
99.5 
102.9 
101.4 
98.3 
99.1 
101.7 1987 
123.7 
98.5 
101.0 
106.1 
89.0 
97.8 
96.5 
106.3 
70.0 
112.2 
106.5 
106.1 
102.9 
97.2 
97.9 
104.0 1988 
provis­
ional 
92.2 
102 
111.6 
66.7 
119.6 
114 
112.4 
109 
100 
103 
110.0 Reference 
for forecsts 
(86-87-88p) 
90.7 
99.2 
107.3 
71.4 
112.6 
106.7 
107.1 
104.4 
98.5 
100.0 
105.2 Forecasts(5) 
1992 1995 
94(2) 
115 
121 
83 
121 
127 
128 
115 
103 
105 
118 96(2) 
126 
130 
92 
129 
135 
136 
122 
106 
108 
126 
(1) Source: "Orange report" by the liaison comnittee for the steel tube industry in the EBC. 
(2) Forecast derived from final activities. 
(3) Weighted averages. 
(4) All the activity series are based on production by weight ('000 tonnes) except electrical construction 
(NACE index 34), shipyards ('000 cgrt; completions), transport equipment (number of private cars and 
commercial vehicles + three times the number of goods vehicles), building and public works (FIBC index) 
(5) Source: European Corrmission data 
TABLE V-6 
OveraI trends In the specific consumption of steel(*) 
by sectors of final consumption 
SECTORS 
Non-electrical machinery 
Electrical machinery 
Sh i pbu i 1dIng 
Transport equipment 
Metallic construction 
Building and public works 
Met a 1 work 
Cann i ng 
Bo i 1 ermakIng, etc. 
Other consumers 
TOTAL Avérai 
i 
1980-87 
-0.72 
-3.64 
-1 .53 
+ 2.71 
-0.76 
+ 2.87 
-0.23 je annual growth 
•ate (%) 
1986/87 1986/87 
/88-92 /88-95 
-1 
-1 .5 
-2 
-0.72 -1 
-1 .5 
-2 
-0.63 
(*) ECSC and non-ECSC products. 
TABLE V-7 
Forecasts of actual consumption of BCSC and non-RCSC products 
in FFT-12 bv sector for 1992/1995 
(Reference: average for 1986, 1987 and 1988 provisional) % of total 
Sector BCSC 
products 
1992 1995 of which 
special 
steels 
1992 1995 Non-ECSC 
products* 
1992 1995 of which 
special 
steels 
1992 1995 ECSC and non-
ECSC products 
1992 1995 of which 
special 
steels 
1992 1995 
Steel foundries, deep-
drawing and cutting 
Forging and stamping 
Drawing 
Cold rolling and 
shaping 
Tubes 
First-stage processing -
Total 
Construction of non­
electrical machinery 
Construction of electrical 
machinery 
Shipbuilding 
Transport equipment 
Metallic construction 
Building and civil 
engineering 
Metalwork 
Canning 
Boilermaking 
Miscellaneous (including 
final consumption) 
End-user sectors - Total 2.7 2.6 
4.3 3.9 
9.2 9.3 0.7 0.6 
2.6 2.4 
1.7 1.8 
5.6 
17.0 5.7 
16.8 0.7 
4.2 0.8 
4.0 
38.8 38.4 
6.5 6.7 
2.7 2.6 
1.3 1.3 
11.2 11.7 
6.7 6.9 
13.4 
7.6 
3.3 
3.1 13.5 
7.3 
3.3 
3.1 
5.4 5.2 9.8 9.7 
2.0 2.3 
0.3 0.3 
0.1 0.2 
1.7 2.0 
0.2 0.3 
0.1 0.1 
1.3 1.3 
0.2 0.2 
0.4 0.4 18.6 19.0 
5.9 6.1 
1.0 1.1 
18.9 18.3 
6.3 6.2 
16.5 17.3 
15.2 14.9 
0.1 
2.6 2.5 
15.0 14.5 6.3 6.6 
1.0 1.0 
0.3 0.3 
6.4 6.8 
1.3 1.2 
2.4 2.4 
2.4 2.2 
1.2 1.2 
3.0 2.9 12.9 13.2 
4.8 4.8 
1.8 1.9 
18.5 18.8 
9.6 9.8 
20.4 
13.2 
3.8 
4.4 20.6 
12.7 
3.8 
4.3 
10.6 10.2 
61.2 61.6 6.5 7.1 4.2 4.6 
0.6 
0.2 
3.9 
0.6 
0.8 
2.2 
0.6 
1.3 0.7 
0.3 
4.2 
0.6 
0.8 
2.2 
0.6 
1.3 
Total (x million t) 100% 
110.7 114.7 16.3% 16.8% 100% 
27.8 28.8 24.3% 24.6% 100% 
95.5 99.5 14.6% 15.3% 
* Non-BCSC products - tubes, drawn wire, 
or cut products, steel castings. drawn products, cold-rolled products or cold sections, deep-drawn 
TABLE V-8 
Apparent consumption (l) of BCSC steel products by product 
(EUR12-Million t) 
Products 
Liquid steel, ingots, semis 
- Liquid steel 
- Ingots and other semis 
Long products 
- Heavy sections 
- Light sections 
- Wire rod 
Flat products 
- Strips and coils/sheet <3mn 
- Coils/sheet >3mn 
- Coated sheet 
ECSC - TOTAL 1986 
11.2 
1.3 
9.9 
35.1 
6.5 
17.5 
11.1 
52.2 
23.2 
17.7 
11.3 
98.5 1987 
11.5 
1.2 
10.4 
35.8 
6.7 
17.5 
11.6 
53.0 
24.2 
16.6 
12.3 
100.3 1988 
13.5 
1.2 
12.3 
40.7 
7.6 
20.3 
12.8 
57.5 
25.2 
18.4 
13.9 
111.7 Forecast 
reference 
period 
(average for 
1986-87-88p) 
11.5 
1.2 
10.3 
37.4 
6.7 
19.0 
11.6 
53.8 
23.4 
18.2 
12.1 
102.6 Forecasts 
1992 1995 
12.7 
1.6 
11.1 
40.6 
7.1 
20.9 
12.6 
57.4 
23.8 
19.6 
14.0 
110.7 13.0 
1.6 
11.5 
41.6 
7.2 
21.2 
13.2 
60.0 
25.0 
19.8 
15.2 
114.7 
(1) Actual consumption for forecasts and the reference period. 
TABLE V-9 
Apparent consumption of crude steel (ECSC products) 
Comparison of macroeconomIc and sectora 
forecast results 
(EUR12-MI I I ion t) 
Macroeconomic approach 
Sectoral approach (1) 1987 
110 
110 1988 
123 
123 I 
1992 
127 
124 :orecasts 
1993 
131 1995 
: 
129 
(1) The coefficient used to convert finished products Into 
crude steel consumption Is 1.1360, which assumes the 
proportion for continuous casting to be 85% of the 
tota I . 
ECSC APPARENT STEEL CONSUMPTION 
131 Forecasts based on GDP scenario 
130 -
129 -
128 -
127 -
126 -
125 -
124 -
123 -
122 -
121 -
120 -
119 -
Î18 -
117 -
TI6 -
Î15 -I 
114 -
113 -
in - •-
no -
109 / 
^ / / / 
0 
Sf 
s* 
/ vS 
rg'88 : growth seen (+ 12.3 %) reduced by half 0 
-j 
c 
m 
cz 
70 
I IO 
13D 
I3> 
I'D 
IX 
I 
l< 
I986 1987 1988 1969 1990 1991 1992 1998 
YEAR 
APPARENT CRUDE STEEL CONSUMPTION 
140 -a EUR-12/ECSC + non-ECSC steel 
135 
130 
125 
120 -i 
ns H 
no 
105 -
100 -
95 • _~ 
\ 
a 
a Base scenarip 
73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 
D Observed YEAR 
Forecast model ten 
130 
ii> 
ITJ 
IX 
i 
K 
l« 
ll\> 
1988: growth observed (+ 10 %) reduced by half 
VI /1 
CHAPTER VI 
EXTERNAL TRADE 
1 . RECENT TRENDS 
This chapter examines the trends in the Community's external 
trade In steel over the last few years and to analyse the 
trend in Community imports and exports of steel by product 
and by geographical area. 
In general, exports and imports of ECSC products were 
relatively stable during the 1980s. Imports ranged from 
8 million to 10 million tonnes per year while annual exports 
were between 22 and 25 million tonnes, apart from a few 
exceptional years such as 1982. However, this overall 
stability conceals divergent trends for different products 
and different producer or consumer countries. 
Community exports of long products declined (in the case of 
concrete reinforcing bars and merchant bars) or remained 
stable (e.g. heavy sections). In the case of flat products, 
exports of coil, strip and heavy plate, remained stable (or 
fell slightly) while exports of sheet, and in particular 
cold-rolled and coated sheet, rose to some extent. There is 
one exception to this logical tendency to export products 
with higher added value: the substantial increase in 
exports of semI-fInI shed products. 
Comparative figures for Japanese and Community steel exports 
show that semi-finI shed and long products account for a 
greater proportion (15% and 28% respectively) of the total 
exports from the Community than from Japan (1% and 18% 
respectively). Japan exports more flat products (81% of 
total exports as against 57% for the Community), especially 
coated products, which account for 21% of all Japanese 
exports as against only 13% of Community exports (1987 
figures). These differences in the structure of exports 
between the Community and Japan seem to indicate that the 
Community industry should make a greater effort to export 
more sophisticated products rather than those with low added 
va Iue . 
The same pattern is seen in imports, with increases for 
volume and semi-fInished products, concrete reinforcing 
bars, small sections and wire rod and relatively stable 
figures for the major categories of flat products. 
Tables VI.1 and VI.2 show the trend In Community exports 
from 1986 to 1988. 
The Community's trade balance worsened considerably over 
this period (1986-1988) in respect of semi-finished products 
(as a result of the growth in imports) and long products (as 
VI/2. 
a result of a sharp fall In exports of concrete reinforcing 
bars, merchant bars and wire rod and a growth In imports of 
wire rod). in semI-fInI shed products, the overall trade 
surplus fell from nearly 2 million tonnes In 1986 to 
1 million tonnes In 1988 while the surplus for long products 
fell from 4.7 million tonnes In 1986 to 2.7 million tonnes 
in 1988. The decline in the trade surplus in long products 
was particularly sharp in the case of concrete reinforcing 
bars and wire rod. 
In the case of flat products, there was a fall In Imports 
(except for hot-rolled sheet) and exports (in particular of 
coils and strip). The overall trade surplus rose from 
7.2 million tonnes in 1986 to 7.7 million tonnes In 1988. 
This very poor performance In respect of semI-fInI shed and 
long products was not offset by the slight Improvement in 
flat products, and consequently the overall balance fell 
from 13.8 million tonnes In 1986 to 11.4 million tonnes in 
1988 . 
Geographical analysis of recent trends In the Community's 
external trade shows the Importance of the rest of Europe 
(West and East) as a steel trading partner for the 
Community, which accounts for three quarters of its imports 
and a third of its exports. If Europe is added to the other 
traditional markets for the Community's steel exports (North 
America, Africa and the Arab countries), these countries 
also account for three quarters of all exports from the 
Commun i t y. 
As far as distant or "exotic" 
were considerable fluctuations in 
and China (the Community's trade 
regions was 2.5 million tonnes in 
later) and marginal trade flows wi 
countries. On the other hand, the 
a very important market because markets are concerned, there 
trade with Latin America 
surplus with these two 
1986 and ni I two years 
th Japan and the Pacific 
rest of Asia is becoming 
of the great growth in 
domes t i c demand 
those count ries. generated by rapid industrialization in 
The Community has a large export and Import trade in all 
categories of steel products with the other countries of 
Western Europe. It imports all categories from Eastern 
Europe (in particular heavy sections and heavy plate) but 
exports very little to these countries. On the other hand, 
the Community exports all types of flat product to the USSR, 
from which it imports only semi-finished products 
(Tab le V I .3) . 
The Community exports all steel products to North America 
(in very large quantities), Africa and the Middle East -
three traditional export markets from which it imports very 
I i t t le . 
VI/3 
Sheet and coated sheet are the main products exported to 
Latin America, from which the Community Imports mainly 
sem1-finished products and wire rod. Finally, Community 
exports to Asia (Including China) cover the whole range of 
steel products but the Community Imports hardly any products 
from those countries. 
Clearly, the three key markets for Community exports are 
North America (particularly for semi-finI shed products, 
heavy sections, wire rod and coils), Western Europe 
(reinforced concrete bars, merchant bars and coated 
products) and the Soviet Union (In particular heavy plate 
and sheet ) . 
The Community imports mainly from Western Europe (wire rod, 
concrete reinforcing bars, merchant bars, colls and plate, 
Including coated sheet), Eastern Europe (heavy sections and 
heavy plate) and Latin America (semI-fInI shed products). 
2. FUTURE PROSPECTS 
2.1 Gener a I t rends 
in the preparation of the General Objectives for Steel, the 
estimates of the net trade balance (exports - Imports) has 
always been the chapter least supported by quantitative 
models and therefore the most subject to qualitative 
est imates. 
It is easy to see why: 
the trends In steel consumption broken down by region 
and product are hedged with uncertainty, depending as 
they do on political, macroeconomIc and industrial 
developments in each country or region; 
it is difficult to evaluate actual production capacities 
(because of different methods of calculation and 
utilization rates) and almost Impossible to predict 
future trends with any accuracy. There is also a lack 
of systematic data for individual products-, 
each firm has different commercial 
future development of Industrial and 
i s uncer tain. strategies and t he 
commercial policies 
Nevertheless, it should be possible, by analysing recent 
trends in the Community's external trade in steel and the 
available forecasts for steel consumption and world 
production capacities, to identify certain medium-term 
trends in Community steel imports and exports. 
The forecasts set out 
overall assumptions: below are based on the following 
VI/4. 
a macroeconomIc climate unaffected by major changes (no 
dollar or oil price shocks); 
stable exchange rates (no major fluctuations affecting 
competIt iveness); 
a growth In steel consumption concentrated In the 
developing countries (particularly the NICs), as 
predicted by the MSI; 
growth of production capacity 
as predicted by the OECD; In these same countries, 
further restructuring, on the other hand, in the OECD 
countries, where steel consumption shows less dynamism. 
These forecasts come also from the realisation that the 
Community steel Industry has once more found its dynamism 
and overall competitIvIty vis-à-vis Its competitors. It is 
consequently in a good position to maintain Its part of the 
market and its exports, which could be achieved if companies 
were to adopt adequate strategies and behaviour, which 
should not In any case lead them to unprofitable export 
c i r cumst ances . 
Steel trade between the OECD countries is also expected to 
remain as stable as it has been for the last decade. 
North-South trade in steel, on the other hand, will continue 
to be affected by the growth of capacity within the newly 
industrializing countries. 
The NICs will take an increasing share of world markets if 
their domestic demand stagnates (In order to achieve 
satisfactory utilization rates for their new plants) and 
also because they need foreign currency. Steel consumption 
is booming in the Asian countries, whose new production 
capacity will enable them, In part, to satisfy this growth 
in domestic demand without becoming too dependent on imports 
(the case of South Korea). 
"Zones of influence" and "natural markets" are also expected 
to play a greater role, as is to be expected for products 
with low added value whose price is considerably affected by 
t r anspor t cost s. 
A large part of the Increased demand for steel in Asia 
(including China) may reasonably be expected to be met 
either by new production capacity in those countries (China 
and the ASEAN countries) or by exports from neighbouring 
countries (Japan, South Korea, Taiwan and Indonesia). It is 
also reasonable to expect European steel manufacturers to 
continue targeting neighbouring markets, i.e. the EFTA 
countries, Eastern European and Mediterranean countries, and 
traditional markets such as the United States. 
VI/5. 
In the case of the Eastern European countries, the political 
and economic changes currently taking place could bring 
about a very different industrial situation, with 
consequences for the steel Industry. These changes will 
probably not have any substantial effect on trade In steel 
before 1995, though there may be some growth In Imports due 
to a gradual liberalization of quantitative restrictions on 
imports from some of these countries. 
In addition to this specialization In terms of major 
geographical areas, further specialization by products Is 
also to be expected. 
The Community, like Japan, should continue to adjust its 
product mix both for exports and for Imports. 
Exports of more sophisticated products (coated sheet and 
special steels) will probably increase and new producers are 
likely to concentrate on bottom-of-the-range products such 
as semi-manufactures, colls and certain long products. 
Consequently, the steel trade figures expressed in tonnes 
and in value should continue to diverge. 
Finally, it must be stressed that although most of these 
trends have already been apparent for a number of years, 
they were held back by a whole range of commercial and 
industrial policy measures adopted In the OECD countries and 
most of the developing countries. 
Any long-term forecast must now be based on the assumption 
of a gradual and multilateral liberalization of trade in 
steel . 
The Community already began this process in 1989 by 
increasing the quantities authorized under the arrangements 
and reducing the geographical areas and types of products to 
which they apply. The new US Presidential Programme expires 
in 1992 and the attempt to achieve a multilateral consensus 
could lead to a certain world-wide discipline in non-tariff 
barriers, including State aids. 
There 
s i nee has been 
the rise a sharp r I se 
n the Yen. in steel Imports into Japan 
All this seems to 
be indicate that the major steel markets will 
more open in 1995 than they are today, and 
enable the most competitive producers t< 
exports of certain products in which they enjoy a 
comparative advantage. ^ this shouId 
I ncrease their 
Naturally, this openness must go hand In hand with continued 
and even stiffer anti-dumping measures, which are often 
triggered by subsidies in the exporting countries. 
VI/6. 
It is too early to assess the effects of 1992 on steel 
products, I.e. the free movement within the Community of 
products from non-Community countries. But the discussion 
has started and the first indications are that there will be 
an Increase In Imports, although probably not a significant 
one . 
Technological progress In the steel Industry will affect 
trade in steel products In the medium or long term, and this 
should, In principle, favour the Community Industry. 
2 . 2 External trade balance 
As mentioned above, the economics of the situation are such 
that, all other things being equal, there Is a trend towards 
increasing product specialization, with European and 
Japanese producers Increasingly concentrating on the 
manufacture of more sophisticated products and the new 
steeI-producing countries Increasing their output of volume 
products required for domestic consumption and for which 
they have a comparative advantage. These trends may, 
however, be checked or even reversed by deliberate 
strategies especially when the rediscovered good health of 
the Community steel Industry is taken Into account, at 
company level as well as at the level of the structure of 
the sector, even if, in particular at this level, further 
progress Is necessary. 
For all these reasons, the most reasonable scenario for the 
medium-term development of Community external trade seems to 
be for the Community industry to maintain Its current 
position on the world market. It was decided to use the 
average figure for the last three 
fact that 1988, being the peak year 
characterized by very high domest 
consequences for our external 
development forecast by product do 
movements towards specialisation wh i 
in international steel trade. years to allow for the 
In the steel cycle, was 
ic demand with obvious 
trade. However, the 
take into account the 
ch seem to be appearing 
In table VI.4, export and Import trends by product can be 
seen along with the resulting balances. Overall, exports 
should be around 22.5 million tonnes, with Imports being 
around 9.5 million tonnes, the resulting net balance being 
13 million tonnes. In 1988 Community exports were 
21 million tonnes while imports had risen to 10 million 
tonnes (a surplus of 11.4 million tonnes). 
At product level, and in comparison with the reference 
period (86-87-88), a certain reduction of the net balance 
for semis, reinforcing bars, and light profiles might be 
expected. On the other hand, the balance expected for heavy 
sections, sheet, and coated sheet, could improve slightly. 
VI/7. 
These trends are clearly Influenced, in particular, by 
changes In the Community's Internal demand. A slackening In 
Internal demand would have the effect of curbing the growth 
in Imports and would oblige the Community steel companies to 
look for new export outlets, whilst, at the same time, not 
endangering their profitability. 
Furthermore, continued restructuring within the Community is 
bound to Influence steel trade flows, either because of 
closures (e.g. foundry closures leading to Imports of 
semi-finI shed products) or because of fresh Investment 
(coat i ng plants). 
Finally, as has already been stated, the commercial 
strategies adopted by Community steel firms are still the 
key factor Influencing their share of the world market. 
TABLE VT.1 
EXTERNAL TRADE: PRODUCTS (EtlR 19/) 
(million tonnes) 
1986 
EXP IMP 1987 
EXP IMP 1988 
EXP IMP 
Ingots, semi-fini shed products 3.0 1.1 3.6 1.2 2.9 1.9 
Heavy sections . 2.5 0.8 2.4 0.7 2.5 0.7 
Concreting reinforcing bars 
and light sections 3.4 1.3 3.0 1.2 2.1 1.4 
Wire rod 1.5 0.6 1.2 0.6 1.2 1.0 
LONG FRCDUCTS 7.4 2.7 6.6 2.5 5.8 3.1 
Coils and strip 
Heavy plate 
Hot- and cold-rolled sheet 
Coated sheet 3.4 
1.8 
4.7 
2.8 1.9 
1.6 
1.3 
0.7 3.4 
2.0 
4.9 
3.0 1.8 
1.3 
1.3 
0.7 2.9 
2.0 
4.9 
2.6 1.4 
1.2 
1.4 
0.7 
FLAT PRODUCTS 12.7 5.5 13.5 5.1 12.4 4.7 
TOTAL 23.1 9.3 23.7 8.8 21.1 9.7 
SOURCE: EUROSTAT 
TARIF VT .0. 
EXTERNAL TRADE IN STEEL (1): RHÎTCMS 
(million tonnes) 
1986 
EXP IMP 1987 
EXP IMP 1988 
EXP IMP 
Western Europe 
Eastern Europe 
USSR 
North Anerica 
Pacific Countries 
Africa 
Middle East 
Latin America 
Japan 
China 
Other countries in Asia 4.9 
0.3 
2.2 
5.7 
0.1 
2.4 
1.3 
1.7 
0.1 
2.2 
2.1 4.8 
2.0 
0.4 
0.4 
0 
0.6 
0 
1.4 
0.4 
0 
0.2 5.5 
0.3 
2.2 
6.1 
0.2 
2.2 
1.1 
1.7 
0.2 
1.1 
3.2 5.0 
1.9 
0.6 
0.4 
0 
0.7 
0 
0.9 
0.2 
0 
0.2 5.2 
0.3 
2.1 
5.9 
0.2 
2.0 
1.2 
0.9 
0.2 
0.5 
2.5 5.4 
2.1 
0.9 
0.4 
0 
0.6 
0 
1.4 
0.1 
0 
0.2 
TOTAL EXTRA-OCMvUNITY TRADE 23.1 10.3 23.8 9.9 21.1 
(l) All ECSC products, including pig iron, cast iron and ferro-manganese. 11.2 
.SOURCE: MJROSTAT 
TARI .F. VT . 3 
EXTERNA!, TRADE; REGIONS AND PROrXJCLS 
('1000 tonnes) 
YEAR: 1988 
Partner??: 
1) WESTERN EUROPE 
2) EASTERN EUROPE 
3) SOVIET UNION 
4) NORTH AMERICA 
5) AUSTRALIA 
6) AFRICA 
7) MIDDLE EAST 
8) LATIN AMERICA 
9) ASIA 
10) CHINA 
11) JAPAN INGOTS & 
SEMI­
FINISHED 
PRODUCTS 
E 
567 
2 
10 
1445 
0 
300 
68 
54 
397 
21 
1 I 
479 
197 
361 
3 
0 
87 
10 
696 
39 
0 
2 HEAVY 
SECTIONS 
E 
462 
4 
0 
914 
51 
147 
73 
50 
611 
74 
77 I 
228 
395 
9 
11 
0 
25 
3 
33 
4 
0 
0 WIRE 
RCD 
E 
392 
20 
2 
433 
8 
93 
10 
49 
158 
31 
4 I 
551 
191 
0 
14 
0 
46 
1 
124 
0 
0 
49 LIGHT 
SECTIONS & 
CONCRETE 
REINFORCING 
BARS 
E 
664 
22 
24 
331 
48 
464 
175 
76 
221 
64 
1 I 
1073 
241 
2 
3 
1 
12 
0 
35 
20 
0 
8 COILS 
AND 
STRIP 
E 
725 
18 
58 
965 
21 
221 
302 
197 
244 
73 
72 I 
745 
233 
60 
52 
0 
98 
0 
110 
67 
0 
21 HEAVY 
PLATE 
E 
387 
74 
513 
365 
9 
98 
195 
122 
140 
37 
22 I 
546 
570 
12 
4 
0 
48 
0 
33 
1 
0 
8 HTT- AND 
COLD-ROLLED 
SHEET 
E 
1257 
60 
1403 
868 
11 
331 
99 
204 
538 
119 
4 I 
1088 
174 
1 
8 
0 
28 
0 
46 
23 
0 
14 CXJATED 
SHEET 
E 
774 
68 
93 
558 
8 
338 
268 
180 
247 
106 
8 I 
427 
67 
0 
77 
3 
46 
0 
33 
22 
0 
49 
TABLE VI.4 
EXTERNAL TRADE FORECAST FOR 1995 
(million tonnes) 
Sem i-f i n i shed 
and i ngot s 
Heavy sections 
Concrete reinforcing 
bars and light 
sect I ons 
Wire rod Exp . Imp. Bal ance 
2.9 1.7 1.2 
2.6 0.7 1.9 
2.4 1.3 1.1 
1.3 0.7 0.6 
Long produc t s 
Co i I s and strip 
Heavy plate 
Hot- and cold-rolled 
shee t 
Coa ted sheet 
Flat product s 6.3 2.7 3.6 
3. 2 
1 .9 
5 . 1 
3. 1 1 .7 
1 . 4 
1 . 3 
0.7 1 .5 
0.5 
3.8 
2 .4 
13.3 5.1 8. 2 
Tota 22.5 9.5 13.0 
VI 1/1 
CHAPTER VI I 
COMMUNITY SUPPLY 
The analysis of steel supply within the Community Is made In 
two parts. The first is devoted to the production sector 
and looks at certain aspects relating to structure, 
specialisation, investments, and production capacities. It 
also presents production forecasts up to 1995, taking into 
account the Internal demand and external balance forecasts 
analysed in the previous chapter. The second part gives a 
short analysis of the indirect steel distribution sector, 
that is, that affected by steel merchants. 
1. PRODUCTION 
1.1. Present structure 
1.1.1. Now that Spain and Portugal have joined, the 
Community's steel Industry comprises 379 companies with a 
total capacity of 190 million tonnes of steel production, 
that is, more than 20% of world capacity. 
It has a turnover of around ECU 50 000 million with an added 
value of ECU 15 000 million and directly employs 400 000 
peopIe. 
Following the major changes which occurred during the 
restructuring carried out In the Community of Ten between 
1980 and 1986, and in Spain between 1984 and 1988, the 
structure of the Community steel industry, in terms of its 
geographical distribution, is now becoming settled. 
Historical factors determined the great changes of the past. 
Originally, the industry had been located around deposits of 
raw materials, such as the coalfields of the Saar and the 
Ruhr, which gave birth to the steel industries of France, 
Germany, Belgium and Luxembourg. The discovery in the Third 
World of cheap, high-quality ore deposits, and a secure 
supply of coal at competitive prices, led to the 
establishment of the coastal steelworks with port facilities 
(France, Italy, United Kingdom and Netherlands - see 
Table VII.1). Finally, the amount of very cheap scrap metal 
which became available at the end of the last world war led 
to the birth of the electric-steel Industry near the major 
conur ba t i ons. 
1.1.2. Today there are two types of steelworks: integrated 
and electric. Their market shares have now stabilized; the 
electric branch represents about 33% of production capacity 
and integrated works account for the remainder 
(Tab le VI I .2). 
VI 1/2. 
Over the last decade the Integrated steel industry has 
proved vulnerable to fluctuations In the market because It 
remains dependent on the heavy investments needed to 
optimize production capacity. However, It has recently 
improved production methods to guarantee higher-quality 
products. 
The electric-steel Industry developed In response to the 
availability of demolition scrap at the beginning of the 
Fifties. Its spectacular growth since then has been due 
primarily to massive Industrialization within 
which has resulted In a substantial supply 
manufacturing Industry, on the one hand, 
industrial plant, on the 
industry provides a third of all scrap metal 
the rest coming from scrap-metal collection, 
demolition and ship-breaking etc. pay-back on 
manufacturIng 
on the market , 
oId mach i nery , the Commun Ity, 
of scrap from 
and a rapid 
other . Today 
Because scrap metal is a product of uncertain quality and 
chemical composition, the electric-steel industry has been 
confined to the production of ordinary steels such as 
concrete-reinforcing and merchant bar. In recent years, the 
demand for products of an ever-higher quality has caused 
steel producers to invest in quality improvement and to 
select higher-quality scrap. 
Current electric-furnace technology is able to satisfy the 
market's quality requirements; plants are being constructed 
to produce flat rolled products. 
The e I ect r i c-steeI 
flexibility wh i ch 
comparison with the I ndust ry 
makes i t 
Integrated enjoys an operational 
extremely competitive by 
Industry (Table VI I .2). 
1.2. Spec I a I I zat i on 
Technical developments in the construction of industrial 
plant, machinery and means of transport are creating an 
ever-greater demand for steel products which meet strict 
physical and engineering specifications. Production of 
quality and special steels has therefore grown substantially 
in recent years and now 
production (Table VII.3). represents 16.4% of 
Although this growth is partly due to real expansion in 
sectors such as steels for ballbearings and high-speed 
steels, special steels often replace ordinary steels in 
order to improve the quality of the end-product. This is 
true of stainless and structural steels. 
In other cases, steels with special properties are developed 
to compete with aluminium, plastics and other non-steel 
products. 
VI 1/3. 
This qualitative change Is advancing apace, 
steel industry Is making a great research 
effort to meet the challenge. The Commun Ity 
and technology 
Coated steels are playing a special role. Ant I-corrosI on 
protection is an Increasingly Important requirement in an 
environment Increasingly polluted by corrosive manufactured 
products, but it also meets the growing demand for steel 
suitable for use in difficult natural conditions (wet, 
saline etc.). Research Into ever-higher performance 
coatings is expanding all the time. In recent years the 
industry has perfected, in addition to hot-galvanized sheet, 
eIectrogaI vanized and mixed coatings involving zinc and 
other metals (aluminium, nickel and chrome) to meet the 
differing requirements of sectors such as the construction 
and motor Industries. Coated steels currently represent 
45.8% of the total production of cold-rolled sheet. 
1.3. Investment and Innovation 
It is clear from the last paragraph that the steel Industry 
is having to make a great effort to keep abreast of the 
needs of its customers. It will have to focus Investment 
and much of Its financial resources on modern I zatI on, 
innovation and research. 
Reducing production costs and improving quality entails 
rationalizing the production process, improving the 
performance of existing plants or designing new production 
techno i ogy . 
1.3.1. Smelting pig-iron is a crucial stage because of its 
high cost in terms of investment and energy (50% of the cost 
of a hot-rolled product). Work to reduce energy costs is 
concentrated on two areas: 
Replacing coke, an expensive energy form, with cheaper 
forms by injecting coal and oil into the blast furnace; 
Reducing specific energy consumption by optimizing 
processes. This intervention increasingly involves the 
use of high-precision, computerized measurement and 
control systems which allow necessary adjustments to be 
made in real t i me. 
These methods have been successfully employed for several 
years now; their general use must be a medium-term 
object i ve. 
Blast-furnace structure Is not expected to change, although 
the Community average is still below optimum size, which 
requires a hearth between 10 and 12m in diameter. 
VI 1/4. 
In conclusion, no spectacular 
this stage In production. developments are expected at 
It is not, therefore, surprising that Investment In blast­
furnaces Is in relative decline. By contrast, Investment In 
coking plants is expected to Increase, particularly because, 
for a number of reasons, It Is overdue. 
The specific consumption of coke In blast furnaces has 
decreased (from 800 to 400 kg/t), following the introduction 
of fuel-oil and coal Injection techniques and also because 
growth has been greater In the electric steel sector. 
1.3.2. Major advances have recently been made in 
steeI work Ing, both in the area of pneumatic plants with the 
application of combined top and bottom blowing, and In the 
area of electric steel plants, where productivity has been 
increased by a series of developments involving oxygen 
injection, raising the specific electric capacity, 
preheating scrap, cooling furnace walls and the bottom tap-
hole. 
If one adds to this the development of ln-ladle refining and 
the robotlzation of steelwork operations, It is easy to 
understand the relatively high level of investment in this 
stage of production; this level should fall In the medium 
term because the margins for improvement are now small. 
1.3.3. In recent years the steel 
considerably in continuous casting 
now almost completed and the industry has invested 
plants. This phase Is 
level of investment should 
therefore dec I i ne . 
At present, work is focused on increasing flexibility 
(format changes), productivity (high-speed casting) and 
levels of automation, but also on casting a product in its 
final or near-final dimensions. In the case of continuous 
slab casting, the first industrial applications are being 
set up for thin and ultra-thin slab plants, an important 
step towards continuously-cast sheet, a longer-term 
ob ject i ve . 
The margins for improvement in this area are enormous, and 
once the process has been mastered completely (a few years 
after the first such plants come on stream), thin-slab 
continuous casting could revolutionize the very structure of 
hot-strip production. 
1.3.4. The design of hot-roiling mills is at present more 
or less stable. The only foreseeable technological 
developments in flat-rolling mills concern bending, and 
systems for shifting, CVC or similar rolls. 
VI 1/5. 
Any Improvements to long-rolling mills will tend to be In 
the areas of robotlzation and automation, and no large-scale 
investment Is therefore expected. 
1.3.5. Increased investment will probably be focused on 
introducing continuous annealing into cold-rolling mills to 
pave the way for continuous rolling, I.e. without any 
interval between the different stages of rolling. 
Continuous annealing is the Innovation which will permit 
this by eliminating bell annealing, the most important cause 
of d i scontInuIty. 
1.3.6. The coated-sheet sector is traditionally the most 
dynamic and, generally the most sensitive to the changing 
needs of manufacturing industry. 
Customers seem to be satisfied with current product quality 
and the steel industry will be Investing heavily to meet the 
growing demand for galvanized and e I ectrogaI van I zed 
products. Research and Innovation are concentrating on 
perfecting alloyed coatings (zInc-aI urn InI urn etc.) to meet 
the specifications of certain subsectors. 
1.4. Capacity and output 
1.4.1. Genera I 
Within the Community, steel supply Is measured In terms of 
"maximum possible production" (MPP). The MPP for pig Iron, 
steel and rolled products represents the maximum output 
achievable by all plants, taking into account the 
bottlenecks which some plants might impose on others. 
the MPP is the maximum output which can be 
given year under normal working conditions, 
account repairs, maintenance and normal 
the plant available at the start of the year, 
the additional output of any plant brought 
and any reduction in output due to the 
definitive closure of existing plants. The assessment of 
production must be based on the probable share held by each 
of the plants in question, and on the assumption that raw 
materials will be available. More prec i se I y 
ach i eved i n a 
taking into 
ho I i days , with 
toget her with 
into service 
The MPP is therefore a realistic way of assessing capacity 
and, if properly calculated, it can be achieved by firms 
when all circumstances are favourable. This situation has 
almost been achieved in the past few months, during which 
the industry has been stimulated by very high demand. 
But a certain caution is called for In this area. Of course 
it is interesting that in recent months production - at full 
throttle to meet very strong demand - should be nearing MPP, 
but this should not lead us to false conclusions. Only 
VI 1/6. 
certain plants are in the ideal position to achieve top 
performance. In some cases, technical problems have been 
encountered; some countries are involved In major 
restructuring and this Is reflected by the level of capacity 
in production; labour is an increasingly inflexible factor 
of production and producers are very reluctant to take on 
new workers to meet a surge in demand. And, finally, the 
restructuring and rationalization of the means of production 
have not yet been completed: some firms' production 
processes are not yet perfectly proportioned, and, In 
general, supply does not yet perfectly match demand. 
After the period of restructuring directed by the Commission 
and the Member States, the structure of the Community steel 
industry was both quantltively and qualitatively changed. 
Closures and reductions in capacity were easily accounted 
for, and the MPP reduced accordingly, but the formula failed 
to allow most of the changes resulting from improved 
productivity to be taken into account. 
Firms were, therefore, asked to study, In addition to the 
survey on their 1989 Investments, their own MPP and 
introduce any quantitative changes arising from improved 
productivity. The figures discussed below are those which 
firms have adjusted for this prupose. 
1.4.2. Steel and continuous casting 
In 1988, production of crude steel In the Community of 
Twelve stood at 138.0 million tonnes, compared with 
126.6 million tonnes in 1987, an increase of 9%. 
The Community of Twelve's 1988 MPP for crude steel was 
190.9 million tonnes, 0.6% up on 1987's 189.8 million 
tonnes. 
According to the information from steel produceers, the 
Twelve's 1992 MPP for crude steel should be 186.0 million 
tonnes . 
Electric steel's share of this total is expected to 
stabilize at about 33% by 1991. 
Continuous-cast steel accounted for 84% of the Twelve's 1988 
production, compared with 81% In 1987. The Twelve's MPP 
rose from 143.1 million tonnes In 1987 to 
151.2 million tonnes in 1988, an Increase of 8.1 million 
tonnes or 5.7%. 0 
According to the producers, the Twelve's continuous-casting 
capacity could amount to 152.5 million tonnes by 1992. 
VI1/7. 
Of the expected reduction In the MPP, about 5 million tonnes 
by 1992, 4 million tonnes can be ascribed both to the 
integrated Industry's technical reduction in crude steel 
requirements due to the development of continuous casting, 
and the necessary adjustment of Its liquid-phase capacity, 
following the reduction of hot-rolling plant capacity. 
1.4.3. Hot-rolled products 
In 1986, following the decline observed during the preceding 
years, the steel market seems to have entered a new phase. 
This phase of expansion is, according to partial statistics 
for the first half of 1989, being sustained, In terms of 
both volume and selling prices. The Twelve's industry 
produced 115.4 million tonnes of hot-rolled products In 
1988, compared with 105.1 million tonnes In 1987, an 
Increase of 9.8%. 
As for the breakdown by product, the overall increase In 
production (up 9.8%) was greater for hot-rolled flat 
products (up 10.4% on 1987), which were then still partly 
covered by Article 58, while long products showed very good, 
although less spectacular growth (up 8.9%). 
The 1989 survey shows a reduction in the MPP for hot-rolled 
products from 165.2 to 162.4 million tonnes by 1992. This 
reduction Is essentially the result of closures carried out 
during Spanish restructuring. 
1.4.4. Cold-rolled and coated products 
Cold-rolled sheet production rose to 33.4 million tonnes in 
1988 from 30.9 million tonnes In 1987, an increase of 8.1%. 
The MPP for cold-rolled steel remained stable at 
47.7 million tonnes and should fall slightly (by 1.0%) by 
1992. Nevertheless, firms are predicting a slight rise, 
0.4 million tonnes, in the MPP of cold-rolled stainless-
steel sheet, offset by a greater decline for carbon steels. 
The 1988 results were characterized by a substantial 
increase In the production of all types of coated sheet, 
which grew by 11.9% overall. In 1987 13.5 million tonnes of 
cold-rolled steel strip were coated; by 1988, the total was 
up to 15,3 million tonnes. 
The figures for 1988 production of tinned and ECCS sheet, 
4.8 million tonnes, is the highest recorded since the 
accession of the United Kingdom, Denmark and Ireland. The 
MPP, 6.8 million tonnes In 1988, should decline slightly to 
6.5 million tonnes in 1992. 
From 1987 to 1988, production of hot-coated sheet 
(galvanized or otherwise hot-coated) increased by 13.2%, 
rising from 6.8 to 7.7 million tonnes. The MPP rose from 
VI 1/8. 
8.0 to 8.4 million tonnes. Firms are expecting to Increase 
capacity by 3.5 million tonnes for 1992, which would bring 
the MPP to 11.9 million tonnes. 
The MPP for e I ectrogaI van I zed sheet climbed from 2.8 million 
tonnes in 1987 to 3.4 million tonnes In 1988, a rise of 23%. 
This was due to several new lines entering production to 
supply, In the main, the motor Industry and marked a major 
Increase In demand for the third year In a row. The 
industry expected a further Increase of 1.5 million tonnes 
by 1992. 
Production of organic coatings rose by 12%, from 1.7 million 
tonnes In 1987 to 1.9 million tonnes In 1988. Over the same 
period, the MPP rose by 13%, from 2.3 to 2.6 million tonnes. 
This MPP should reach 3.6 million tonnes by 1992. 
The statistics used in this section reflect the results of a 
study carried out by the Commission in 1988/89. 
1.5. The outlook for production and MPP between 1992 and 
1995 
1.5.1 MethodoIogy 
The MPP development forecasts provided by producers reflect 
their medium-term strategies, and look no further than 1992. 
For 1995 we have adopted the hypothesis that MPP will remain 
at 1992 I eve Is. 
Production figures are derived from forecasts for the growth 
in consumption and for the external trade balance. It Is 
assumed that fluctuations In stocks will balance out over 
the period in question and therefore have no Impact between 
1992 and 1995 (Table VII.4). 
The production figures which can be obtained using this 
methodology refer to finished products; In the case of flat 
products, they are not comparable with figures for 
production at the different stages of rolling. 
These figures must, therefore, be converted by identifying 
the quantities attributable to the different rolling plants. 
1.5.2. Forecasts for 1992 to 1995 
The forecasts show (Table VI 1.5) that production of hot-
rolled strip in 1992 and 1995 will be at levels similar to, 
or even higher that, the very high levels of 1988. 
The fall in cold-rolled production in 1992 is attributable 
to a forecast dip in the motor industry between 1991 and 
1993, which should pick up again in 1994 and 1995. 
VI1/9. 
Production of coated sheet, and In particular galvanized 
sheet, is forecast to rise. These forecasts were backed up 
by the study carried out by the Commission in 1988/89, which 
confirmed both the growing demand from user sectors and the 
need for major Investment in hot-galvanized and 
eIectrogaI van I zed sheet. 
Crude-steel production figures, although connected to 
figures for hot-rolled products, will be proportionally 
lower, following the entry into service of several more 
continuous-casting plants. At the same time, closures of 
liquid-phase capacity (Bagnoll, Rheinhausen etc.) already 
decided or under consideration will contribute to a 
5 million-tonne reduction In capacity, compared to 1988. 
After such structural adjustments, the utilization rate 
forecast for 1995 will be around 77% (Table VI 1.6). 
Production of hot-rolled wide strip, which was very high In 
1988, will be at a similar level In 1995. At the same time, 
the exercise carried out with firms to assess the Impact on 
MPP of Investment In Improving productivity has enabled 
figures to be revised upwards by some 2 million tonnes. 
Despite these corrections, the utilization rates forecast 
for 1992 and 1995 are between 76 and 80%. These rates, 
about 3 points down on those of 1988 and 1989, must still be 
regarded as acceptable, although this product's great 
sensitivity to fluctuating prices and production requires 
very cautious evaluation. 
Rêver s Ing-m l I I plate capacity will experience quite low 
utilization rates because the average size of these plants 
makes reducing capacity difficult. 
wide - as the market requires -
capacity of 2 to 3 million tonnes, 
plant would greatly exceed any 
restructuring needs. Any solution 
combined action by firms. Producing sheet 5 or 6 m 
automatically Imposes a 
and the closure of such a 
individual sheetmaker's 
will, therefore, require 
Because of their structure and the wide range of sections 
and dimensions which they have to produce, heavy and I Ight-
sect ion mills never operate at very high rates. Despite 
this, the forecast rates are surely too low (between 62 and 
64%) and restructuring seems necessary to restore a balance 
acceptable to the markets for such products. 
In 1992 and 1995 respectively w i re-rod 
operating at between 67 and 70% of capacity, 
specificity of these mills and their great 
utilization rate of 69% could suffice. mills will be 
In vIew of the 
e I ast i c i ty, a 
Co Id roI I Ing is a stage of production which Is not expected 
to see any significant quantitative changes (utilization 
rates are less important in such plants than In hot 
rolling), while the coated-steel sector Is particularly 
dynamic. In 1995, despite a 2.5 million-tonne Increase on 
1988 capacity, the expected utilization rate will be 82%. 
VI 1/10 
In conclusion, the comparison between production and MPP for 
the period from 1992 to 1995 shows the situation to be 
satisfactory for hot-rolled wide strip and derivatives 
(cold-rolled and coated), while producers of rever s I ng-mI I I 
plate and long products will have to expect utilization 
rates that are unsatisfactory on average. 
2. STEEL DISTRIBUTION 
2 . 1 The merchant sector, a very var i ed sector 
Steel distribution constitutes a very varied sector. It Is 
characterised, on the one hand, by 380 steel producers being 
concentrated in certain areas, notably the old raw materials 
(coal, Iron ore) basins, and In certain coastal regions as 
well as near the big conurbations, and, on the other hand, 
by steel consumers being dispersed In all the areas of the 
Community. The merchant sector is the link between the user 
and the steel producer, and is essentially located near the 
steeI-producing works of in large transformation Industry. 
The distribution of steel products manufactured within the 
Community or Imported from third countries is carried out by 
steel producers themselves, merchants - with or without 
stocking facilities, and agents. 
Nevertheless, within the distribution 
certain allocation of functions. system, there is 
Steel producers sell a large part of their production direct 
to consumers. In certain countries such as the United 
Kingdom, Italy, and Spain, these direct sales cover round 
about 50% of the market or more. On the other hand, direct 
sales cover around 30% in Germany, France, and Italy. 
Another part Is sold via a merchant, deliveries going 
straight from the producer to the consumer. This type of 
transaction ("Strecke") is particularly known in Germany 
(40%), and 
transaction n Bene lux. In the 
is not known at all United Kingdom, this type of 
Stockholders, supplied by Community producers and third 
countries, sell ex-stock between a quarter and two-thirds of 
the total consumption of commercial grade steels in most 
countries (see table below). Together with traders, they 
put on the market almost all imported products coming from 
third countries. Stockholders alone sell ex-stock a total 
of more than 25 million tonnes of commercial grade steels 
within the Community. To this figure must be added 
"Strecke" sales, and sales to third countries. In total, it 
is estimated that at least half the deliveries to the 
Community market is sold by the trade. 
VI 1/11 
Ex-stock deliveries by merchants (1988) 
RoI led products (special steels excluded) 
Ex-stock % share of supply to 
(x 1000 tonnes) national market 
Germany 6,002 24 
UEBL 1,890 50 
Dennmark 331 31 . 
Spain 2,490 29 
France 3,906 29 
Italy 5,640 28 
Nether lands 700 27 
United Kingdom > 6,000 +/- 55 
I re I and 
Greece 
Por tuga I 
Luxembourg 
Note : These figures cover deliveries of commercial grade 
steels made by the merchants of each country on to 
their national market. Deliveries to other 
Community markets are not Included. 
Long products take a larger proportion of ex-stock sales. 
In France, Italy, and the United Kingdom, sales of long 
products are lower than those of flat products. In other 
countries, the reverse Is the case : flat products are 
mostly sold direct by producers to final consumers 
(particularly to producers of motor vehicles, of domestic 
electrical appliances, and in other sectors). 
It is to be noted also that in the special steels' sector, 
merchants play a significant role in distribution, 
particularly of stainless. 
Many stockholders have further processing facilities (Steel 
Service Centres) for long and flat products. Approximately 
85 000 people In several thousands of companies work in 
steel distribution. The size of these companies varies a 
great deal, between an annual sales volume of under 
1 000 tonnes, up to 1 million tonnes. 
There have always been strong financial links but different 
from country to country between a good number of steel 
producers and certain merchants. Interests taken by steel 
producers in the stock-holding sector have increased 
particularly over recent years in certain countries, and the 
integrated stockholding sector is very important today. 
VI1/12. 
This moving of producers towards integration has been 
accompanied by a process of concentration, stimulated in 
part by acquisitions made by producers, but also by the 
development of the Steel Service Centre concept, and 
consequently the need for significant investment. On the 
other hand, small and medium merchants, able to adapt to the 
needs of their regional customers base, have a chance of 
success for the future. 
2 . 2 The future 
As indicated above, steel distribution carried out by steel 
merchants is currently in a period of structural change. 
Stocking, and re-sale to different steel consumers will be 
combined more and more with activities covering not only re­
sale, but a system of supplying consumers which adds to 
standard steel products a whole range of new services. The 
scope ranges from further processing and product 
transformation to very close co-operation between 
distributor and consumer, as, for Instance, "Just-In-tI me" 
del i ver I es . 
The growing transfer of certain steel user functions towards 
the distribution sector Is extending merchant activities. 
In view of their new role on the stee 
have looked to the setting up of 
computerised premises, and to personnel 
to face the needs of a more and 
distribution system. I market, merchants 
new depots, and 
training, in order 
more sophisticated 
However, despite their Importance on the steel market, 
merchant companies are not undertakings within the meaning 
of the ECSC Treaty. As far as Articles 65 and 66 of the 
ECSC Treaty are concerned (Agreements and Concentrations), 
only those companies which habitually exercise a 
distribution activity are undertakings within the meaning of 
the Treaty. Consequently, merchants are not 
Treaty's price rules except, according 
Decision 30-53, distribution companies which 
by a production company. sub ject to the 
to Comm i ss i on 
are cont ro I led 
Nevertheless, during the crisis period between 1981 and 
1985, the Commission obliged merchant companies to publish 
price-lists, on the basis of Article 63 of the TreatyC). 
In 1986, after the most serious phase of the crisis had been 
overcome, the Commission no longer saw the need to continue 
to impose this obligation on merchants. Nevertheless, it 
recommended(2 ) that merchants should follow a voluntary 
(1) Recommendation No. 1835/81/ECSC of 3rd July 1981 
Official JournaI No 
(2) Communication from 
30th July 1986 
Official JournaI No L 184 of 4th Ju 
the Comm i ss i on y 1981 
No. 86/C192/03 of 
C 192 of 30th July 1986 
VI1/13. 
discipline on price. In general, merchants followed the 
Commission's recommendation and published price lists. 
No direct Commission intervention is likely in the Immediate 
future. Nevertheless, the Commission Is prepared to 
reinforce its co-operation with merchants to facilitate 
preparations for the open market after 1992. This co­
operation is envisaged rather as (administrative and 
advisory) help in the production of statistics covering the 
sector, as well as the carrying out of studies on the 
current and future structure of distribution in Europe. 
in fact, the situation of merchants' stocks is an example of 
where this generation of statistics is necessary. In the 
Community, some millions of tonnes of rolled products exist 
in permanence in merchants' stocks. The value of these 
stocks is worthy of note, rising and falling with the level 
of demand and variations In price. At a time when prices 
are going down, merchants lose a significant 
value of their stocks with no possibility of 
for this loss by reducing costs. For this 
existence of reliable Information on merchants' 
would help the Commission to accomplish the tasks which It 
has to undertake under the provisions of Article 46 of the 
Treaty, that is, the continuous study of the market and the 
setting of Forward Programmes. part of the 
compensât i ng 
reason , t he 
stock I eve I s 
All the same, analyses and studies, particularly in view of 
the single market, will enable merchant companies to prepare 
trans-national activities. This is necessary because at the 
moment a large part of the activity of merchants is carried 
out only at national level. For the future, it is 
indispensable for merchants to create new logistics and 
marketing systems If they wish to benefit from the new 
market d i mens i on. 
TABLE VI I.1 
CHANGES IN CRUDE STEEL PRODUCTION CAPACITY IN COASTAL 
REGIONS OF SOME COUNTRIES (%) 
1980 1988 
D 8 8 
B 16 24 
UK 17 21 
F 42 53 
I 49 52 
NL 100 100 
DK 100 100 
Total 29 37 
Source: questionnaires 2.61 of 1981 and 1989. 
TABLE VI I .2 
ELECTRIC STEELWORKS' SHARE OF PRODUCTION CAPACITY 
1980 - 1988 
Ge rmany 
Be I g i um 
F r ance 
Italy 
Luxembourg 
Nether I ands 
UK 
Denma r k 
I re I and 
Greece 
Spa i n 
Por tugaI 
Total EUR 10 
EUR 12 TOTAL MPP (ml I I ion t.) 
1980 
66.9 
19.7 
32.5 
39.4 
6.4 
8.5 
28.0 
1 . 1 
0. 1 
2. 3 
202 .6 1988 
46.8 
13.9 
27.9 
37.5 
5.5 
8.0 
23.5 
0.9 
0.3 
4.5 
21 .2 
0.9 
168.8 
190.9 MPP ELEC. ST. % 
1980 
13.6 
6. 1 
15.1 
51 .0 
4.7 
34.6 
81 .8 
100 
76 
23.3 1988 
18.9 
11.0 
23.9 
49.6 
3.8 
29.0 
100.0 
100.0 
77.8 
67.8 
37.5 
26.7 
32 .6 
Source: Investment in the ECSC industries -
1981 and 1989 surveys. 
TABLE VI1.3 
PRODUCTION OF SPECIAL STEELS AND THEIR PERCENTAGE 
SHARE OF TOTAL STEEL PRODUCTION 
(mill Ion tonnes) 
EEC 
Non-alloyed ingots 
Structural steels 
Stainless and heat-
resistant steels 
High-speed steels 
CP/MS steels 
Special steels: Total 
Special steels/total steels 
(%) 1980 
(EUR 10) 
4 724 
13 126 
2 156 
61 
18 
20 086 
15.7 1988 
(EUR 10) 
4 906 
12 006 
3 289 
53 
21, 
20 275 
16.3 (EUR 12) 
5 945 
12 644 
3 715 
54 
44 
22 402 
16.4 
Source: Special steels, Special Statistical Bulletin, December 1988 
TABLE VII.4 
flTNSLMPTTfN. FKTFRNAI. TRAHR AND PECTirTICN PHR SAIJ. - Vftim PPffTrTS 
(Million tonnes) 
Liquid steel for casting, 
ingots and semi-finished 
products for sale 
Heavy sections 
Merchant bar 
Wire rod 
Sub-total: long products 
Strip and sheet < 3 ran 
Strip and sheet ^ 3 mn 
Coated sheet 
Sub-total: flat products 
Sub-total: rolled products 
Total: ECSC products 1992 
Consum­
ption 
12.7 
7.1 
20.9 
12.6 
40.6 
23.8 
19.6 
14.0 
57.4 
98.0 
110.7 Balance 
X - M 
1.2 
1.9 
1.1 
0.6 
3.6 
5.3 
0.5 
2.4 
8.2 
11.8 
13.3 1992 
Produc­
tion 
13.9 
9.0 
22.0 
13.2 
44.2 
29.1 
20.1 
16.4 
65.6 
109.8 
123.7 1995 
Consum­
ption 
13.0 
7.2 
21.2 
13.2 
41.6 
25.0 
19.8 
15.2 
60.0 
101.6 
114.6 1995 
Produc­
tion 
(A) 
14.2 
9.1 
22.3 
13.8 
45.2 
30.3 
20.3 
17.6 
68.2 
113.4 
127.6 
TABLE VII.5 
1986-199s pimjmm 
(Million tonnes) 
i. mm m 
II. H7T-R0LI.rT> STRUT.. 
"Wide and narrow strip 
Reversing-mi 11 plate 
Total: hot-rolled flat 
products 
Heavy sections 
Light sections 
Wire rod 
Total: long products 
Total: hot-rolled products 
III. OTHER FTNÏSHFD PRmrTR 
Cold-rolled sheet 
Coated sheet 1986 
125.6 
53.8 
8.6 
62.5 
8.2 
19.5 
12.6 
40.3 
102.8 
29.7 
13.3 1987 
126.6 
56.5 
8.3 
64.8 
8.3 
19.6 
12.5 
40.4 
105.2 
30.7 
14.2 1988 
138.0 
62.5 
9.0 
71.5 
9.4 
21.4 
13.1 
43.9 
115.4 
33.1 
15.0 1992 
138.6 
60.2 
9.0 
69.2 
9.0 
22.0 
13.2 
44.2 
113.4 
32.6 
16.4 1995 
143.0 
62.9 
9.1 
72.0 
9.1 
22.3 
13.8 
45.2 
117.2 
34.3 
17.6 
TABLE VII.6 
PTynrrncN CAPACITY AND PROirTTfN CP STFFJ IQQI-M 
(Million tonnes) 
I. £BJDF, STEEL 
IT. mr-Ron:m STRFJ. 
"Wide and narrow strip 
Revers ing-mi 11 plate 
Total: hot-rolled flat 
products 
Heavy sections 
Light sections 
Wire rod 
Total: long products 
Total: hot-rolled proudcts 
TTT. OTHER FTNTSHFD PROXTTS 
Cold-rolled sheet 
Coated sheet MPP 
1992-95 
186.0 
79.0 
13.9 
92.9 
14.5 
35.2 
19.8 
69.5 
162.4 
47.3 
21.5 Production 
1992 
138.6 
60.2 
9.0 
69.2 
9.0 
22.0 
13.2 
44.2 
113.4 
32.6 
16.4 Utiliza­
tion 
rate 
% 
74.5 
76.2 
64.7 
74.5 
62.1 
62.5 
66.7 
63.6 
69.8 
68.9 
76.3 Production 
1995 
143.0 
62.9 
9.1 
72.0 
9.1 
22.3 
13.8 
45.2 
117.2 
34.3 
17.6 Utiliza­
tion 
rate 
% 
76.9 
79.6 
65.5 
77.5 
62.8 
63.4 
69.7 
65.0 
72.2 
72.5 
81.9 
VIM/1. 
CHAPTER VIII 
PRICES TRENDS 
1 . GENERAL 
Steel prices have always been subject to fluctuation. This 
product which was, and still Is, the foundation of all 
European industrial activity has Inevitably been subject to 
major ups and downs In demand and production capacity this 
century. Until the 1960s the fluctuations were largely the 
consequences of the two world wars and regular economic 
cycles. However, In the last twenty years or so, the 
situation In the Community's steel market appears to have 
changed. Long periods of oversupply, caused by capacity 
increases and/or a downturn in the-economy, have followed 
periods of boom and there has been practically no 
transitional phase between the two. For Instance, the boom 
year of 1974 was followed by the recession of 1975 and a 
long period of crisis lasting from 1980 to 1987. This In 
Its turn suddenly gave way to a period of strong growth in 
the economy. 
Such abrupt alternations between cyclic phases of varying 
lengths, combined with a period of structural crisis, have 
caused prices to slump or soar much more abruptly than in 
the decades preceding this period. 
Although steel prices are subject to rules that differ from 
those for other industrial products, they have nevertheless 
reflected the various phases. 
Community steelmakers are required to publish steel prices 
in the form of price lists but there are four exceptions to 
this requirement. List prices are not applicable to seconds 
or non-comparable transactions. Also, a producer may align 
his prices on the price list of any other Community producer 
and on prices for supplies from non-Community countries. 
Since prices charged for deliveries to non-Community 
countries (other than EFTA) are not subject to the pricing 
rules laid down in the ECSC Treaty, exemption from the price 
list obligation is naturally also granted in respect of 
steel used for manufacturing products for export outside the 
Community (rebate for Indirect export). 
To enable the Commission to monitor the market situation, 
steel undertakings are required to state at regular 
intervals which price system they are applying. An analysis 
of the structure of sales shows that undertakings are making 
increasing use of the above options in order to be able to 
react quickly to changes In the market. 
VI I 1/2. 
It should also be noted that market prices do not move 
precisely In line with manufacturers' selling prices. 
Steelmakers sell part of their production directly to end 
users, but also depending on the country, some 30 to 50% to 
stockholders. Stockholders' prices are also governed by 
certain factors. These include not Just the purchasing 
price but, primarily, the level of stocks and the 
stockholders' own costs. Consequently, the prices charged 
for products sold from stock differ from those the 
stockholder pay the manufacturers during the same period. 
A general survey of steel price movements should therefore 
concentrate on prices actually charged in the market rather 
than on the price lists published by the undertakings. 
2. 1986-89:"DOWNSWINGS AND UPTURNS 
During the crisis period, when production and therefore 
supplies to the market were held down, prices for certain 
steel products were also fixed compulsorily under Article 61 
of the ECSC Treaty to ensure some degree of balance between 
prices and costs. At the end of 1985, once liberalization 
of the production quota system had begun, the crisis began 
to fade and prices started rising, the Commission abolished 
the minimum prices. 
At the same time world market prices began to fail, a factor 
which also had consequences for the Community market. 
Under such pressure Community undertakings had to lower 
their tariffs by temporarily granting higher rebates on 
their lists as well as rebates for certain groups of steel 
users under Article 5 of Decision No 31/53/ECSC. 
In spite of the fall In prices, the Commission did not 
consider the situation critical and therefore did not 
reintroduce minimum prices since the drop simply reflected 
that in production costs, which in turn was due to the fall 
in the dollar resulting in lower purchasing prices for raw 
materials and energy. The price decreases during this 
period were some 3.5% for iron ore, 17% for scrap, 8% for 
coal, 41% for oil and 12% for gas. The price for scrap 
during this period also gave mini mills a relative advantage 
over integrated steel mills. 
This situation prevailed for a relatively short period, and 
prices Increased again both worldwide and In the Community 
in the second half of 1987. 1988 and 1989 were years of 
strong economic growth, the benefits of which were 
particularly evident in those sectors which are large-scale 
consumers of steel such as capital investment, building and 
motor manufacturing. 
VI I 1/3. 
The expansion In world trade and the fact that manufacturers 
from different continents can offer their products for sale 
on all the world's markets mean that there are more factors 
to affect prices. Exchange rate fluctuations In 
non-Community as well as Community countries frequently have 
a very significant effect on price levels In the Community. 
3. MEDIUM-TERM PROSPECTS 
Experience has clearly shown that prices for steel products 
can no longer be relied on to remain within a certain band. 
There are many reasons for this and all of them have to be 
taken Into account If we want to assess future trends. 
The world steel market Is an open market, since there are 
now many more manufacturers world wide, and the number In 
the traditional stee I-producIng countries has Increased with 
the creation of a number of mini mills. The situation Is 
not, of course, the same In all sub-sectors. 
In a market where the number of producers Is reduced, 
undertakings with similar cost structures practice a kind of 
"price leadership". Any change in prices reflects 
variations in similar market and price conditions. By 
contrast, in a world market with numerous manufacturers 
whose variable costs differ (the present situation) every 
economic recession or even a temporary decrease in economic 
activity makes prices more unstable. 
The large proportion of a steel firm's total costs accounted 
for by fixed costs plays a major part In Its commercial 
strategy since any drop in capacity use causes a major 
increase in costs. The tendency to drop prices in order to 
maintain the utilization rate is therefore understandable. 
However, the restructuring of European steel, with the 
reduction of capacity and costs, makes It less likely that 
undertakings will try to compensate for their losses by 
increasing production to the detriment of prices. This 
danger is further decreased by the fact that there are no 
longer any operating subsidies in the Community. What is 
more, undertakings are forced to maximize their profits in 
order to keep their installations permanently up to date, 
which is absolutely essential if the Community steel 
industry is to survive. 
The Increasing tendency for large steel undertakings to 
manufacture quality products with high added value is 
indicative. Such products could help lessen the price 
fluctuations. Although these are still volume products, the 
purchasers are manufacturers of expensive goods - for 
instance, motor manufacturers who can pass on their costs to 
their customers. 
VI I 1/4 
A large proportion of the Investments being made In 
modernization Is likely to have a beneficial effect on 
costs. A particular example Is the introduction of advanced 
technology which could enable steel undertakings to charge 
relatively lower prices for their products without any 
negative effect on their margins. 
On the question of prices for steel products In general, 
owing to the greater stability of exchange rates and the 
greater convergence of the Community's economies, the 
post-1992 single market should have the effect of levelling 
out the differences between prices charged in the various 
regions of the Community. Depending on the product, there 
is at present a difference of up to 10% in these prices. 
it should also be noted that there Is already a greater 
degree of concentration In certain consumer sectors and that 
this Is likely to put pressure on prices. 
Several major characteristics therefore play 
format I on : a part In prI ce 
the existence of an open market 
the propor tI on 
fixed costs and of production costs accounted for 
trends in total costs; by 
the effort to maximize profits; 
developments in demand and market structure. 
Since In the last few years the rules for steel prices have 
changed and there has been steady progress towards 
integrated markets and closer ties between steel 
manufacturers and steel users, pricing practices are also 
changing. The price lists are Increasingly taking on the 
role of providing purchasers with Information about prices, 
which are now fixed by undertakings in the light of the 
market situation, and using the options allowed under the 
instruments based on Article 60 of the ECSC Treaty. This 
indicates that the pricing practices are growing more 
similar between steel and other Industries. 
However, despite this increasing similarity, it must not be 
forgotten that the principal aim of Article 60 is to 
prohibit discriminatory practices involving, within the 
common market, the application by a seller of dissimilar 
conditions to comparable transactions. This is a valid 
principle accepted by all sellers of industrial and consumer 
products but Is particularly important when It comes to 
products regarded as the raw materials for the production of 
Investment and consumer goods (steel, energy and other raw 
materials preprocessed for use by industry). 
VI I 1/5. 
It Is a sign of understanding of the coherence of a 
developed Industrial economy that the Community, followed by 
the EFTA countries, has introduced a non-discriminatory 
pricing policy for products which play a fundamental part in 
the development of the economy. 
PART 
FACTORS OF PRODUCTION: THE MARKET 

IX/1 
CHAPTER IX 
RAW MATERIALS 
The raw materials used In steelmaking can be subdivided as 
foI Iows: 
ferrous ores, concentrates and pellets 
fer ro-a I loys 
pig iron, foundry pig Iron and scrap 
coa I . 
1. FERROUS MINERALS 
1.1 Iron ore 
The discovery and development of new Iron-rich deposits, 
particularly In Australia and Brazil, has banished the 
spectre of a physical shortage of Iron ore In the medium and 
long term. In the short term, mine operators are actually 
capable of satisfying higher demand, because they are 
technically in a position to activate additional production 
capacities. They have to be flexible, if only because the 
steel industry itself Is subject to major fluctuations In 
production. By way of Illustration, world production of 
crude steel was of the order of 747 million tonnes In 1979; 
it dropped to 647 million tonnes In 1982 and rose again to 
780 million tonnes in 1988. Thus fluctuations of 
approximately 130 million tonnes of crude steel production 
were involved which, In the raw materials sector, had to be 
absorbed by the iron ore producers. In order to be able to 
respond at all times to demand for Iron ore, producers must 
constantly have available as large a reserve of ore as 
possible. This means that they must maintain production 
capacities active which will probably not be used for years. 
The danger this involves Is that, for lack of an adequate 
financial base, the smaller, poorer mines will have to 
close, leading to an oligopoly of the major ore-producing 
count ries. 
Forecasts of supplies of Iron ore In the future are rendered 
difficult by a number of Imponderables, such as: 
uncertainties regarding future developments In the 
production of crude steel by various processes both In 
industrialized and In developing countries (including 
requirements concerning ore quality and the development 
of specific charging); 
IX/2. 
uncertainty regarding investment morale In the mining 
sector, which Is not particularly profitable; 
development In scrap supply and demand. 
1.1.1 SuppIles of Iron ore 
World production of Iron ore reached a peak in 1988 of 
almost 1 billion tonnes. Although there was some strain on 
the market, consumer demand was more or less satisfied, with 
the exception of some aspects of product quality. However, 
this was only possible with the aid of stocks left over from 
1987 and a relatively tranquil employment situation. 
The transition from a buyer's market to a producer's market 
also had consequences for the development of ore prices. As 
these are fixed in advance for the current year, price 
levels in 1988 remained relatively stable. With some 
exceptions, consumers were even able to negotiate a 
reduction in prices compared with 1987, particularly for 
sintering fines, while prices for lump ore and pellets rose. 
Conditions in the steel Industry were fully reflected In the 
negotiations for 1989; prices rose by 10%, and by almost 
20% for lump ores and pellets. 
In addition to deposits which will have to close as they 
become exhausted, other deposits will probably close owing 
to increases in the costs of producing a market grade. On 
the other hand, the development of new mining projects will 
depend on political will, since from the purely economic 
point of view willingness to invest in the sector has 
declined considerably owing to a certain number of economic 
and political difficulties. 
Community supplies of iron ore 
The downward trend in Community supplies from Indigenous 
sources will continue in the coming years. The mines still 
working in Lorraine can continue to supply approximately 
7.5 million tonnes per annum with an iron content of around 
32% in the coming years. However, the problems afflicting 
the mines are becoming ever more acute. They concern both 
the minera IogIcaI composition of the ore (low Iron content, 
high phosphorus content, high benefIcI ation costs) and 
socio-economic aspects (aging of the labour force, lack of 
new i nvestment). 
The situation in Spain is not much different. The 
Marquesado mine in the Sierra Nevada has the best prospects 
of survival. A hematite limonite is produced from this deep 
open-cast mine and processed to yield an ore marketed with 
55% Fe. Although the alkali metal content appears to be 
relatively high (0.35%), the product, because It is a good 
basis for slag, currently finds buyers in Spain and the rest 
IX/3. 
of the Community. By contrast, when prices are low, the 
waste material (7.5 to 1) and the rail transport costs may 
put the economic viability of Marquesado in Jeopardy. 
Supplies from outside the Community 
In 1988, the Community countries imported over 146 million 
tonnes of iron ore and pellets from third countries (see 
Table IX.1). As the total volume of Iron ore transported by 
sea amounts to 400 million tonnes per annum, approximately 
36.5% of the total Is shipped to the Community. In 
considering supplies from non-Community countries, It Is 
necessary to distinguish deliveries from mines In which the 
Community Industries have a holding, M- • ' '-- •--
long-term contracts and traditional 
deliveries play a minor role. de Ii ver i es 
de I I ver I es . under 
Spot 
There has been a decline In Interest over the last few years 
in direct holdings by the Community steel Industry in mining 
operations In third countries for the purpose of security of 
supply. The more the developing countries or 
industrializing countries attempt to apply 
economic policies, the less the Community steel 
interested in direct financial involvement 
countries' mining Industry. the newly 
Independent 
i ndustry I s 
in these 
Today, the Community steel industry Is still involved, 
either wholly or In the form of holdings, In mining 
operations in four countries: Liberia, Canada, Brazil and 
India. These commitments serve to cover approximately one 
quarter of supply. However, the steel industry hesitates to 
contemplate new direct investments In the mining sector of 
non-Community countries owing to a number of factors, In 
particular the economic and political instability of the 
developing countries and certain mining legislation (e.g. 
the new Brazilian constitution). 
In future, new supply arrangements will be concluded only in 
the form of long-term delivery contracts. The steel 
industry should be aware of the dangers of such a policy of 
supply security, for such delivery contracts are generally 
concluded with undertakings possessing large, rich deposits. 
However, this leads to increased dependence, as the number 
of such rich deposits is limited. This could result In the 
market for iron ore becoming an oligopoly, which is 
certainly not in the Interests of the steel industry. 
Approximately three quarters of imported fines already come 
from only four countries, of which two, Brazil and 
Australia, Increased their share of this from 34% in 1979 to 
54% in 1988. 
IX/4. 
Community dependence on third countries Is even greater in 
the case of pellets. Of 33.5 million tonnes of pellets 
Imported, two thirds come from two countries (Brazil, 
Canada) and over 91% from four countries only (Table IX.1). 
1.1.2 The supply of blast furnace ore 
The supply of rich ore, In sufficient quantities and at 
attractive prices, has speeded the closure of mines 
producing low-grade, uneconomic ores with, to make matters 
worse, high phosphorus content and high energy consumption. 
In future, rich or enriched ores will be preferred as 
furnace charge. Although there may be differences in 
specific cases, the steel industry will generally tend to 
buy ore of stable chemical composition and physical 
behaviour meeting narrow specifications. 
The integrated plants must, of 
their own mines. As there Is 
configuration In the case of 
necessary to use additives, i 
self-fluxing sinter or pellet, 
cost prices and the price of 
therefore necessary to establish 
more economic to beneflclate the 
them more expensive, or to use 
blast furnace. course, take supplies from 
no such thing as the ideal 
most raw materials, it Is 
e. products facilitating a 
This may affect both the 
charge materials. It Is 
the extent to which it is 
raw materials, which makes 
more energy inputs In the 
As a result, the question of charging Is a difficult Issue 
for every blast furnace operator. With regard to the 
specific charging of lump ore, there are differences from 
one factory to another ranging from zero to 25%. This 
figure will probably remain at about 10% until the second 
half of the 1990s in the Community. 
With account taken of production and 
charge of lump ore and pellets in the 
24.5% in 1988. impor ts , the tota I 
Community was about 
An important factor when pellets are used is the silica 
content, both In the ore and the binder. Trials are under 
way to reduce it; If they produce positive results, the 
charging of pellets will become more attractive. 
As fines are in abundant supply, sinter will remain the most 
important raw material for the Community In future. 
However, its use will probably decline In the context of 
rationalization In the blast furnace sector and 
environmental protection requirements. In 
plants still had sintering capacity of 146.2 
with capacity utilization running at 76% 
153.4 million tonnes In 1986). In 1989 
amounted to only 143.6 million tonnes 
continuation of this trend Is therefore not 1 987 , Commun i ty 
m i I I I on tonnes, 
(compared with 
this capac i ty 
per annum. A 
excIuded. 
IX/5. 
1.1.3 New Iron ore projects 
Every producer country and every Iron ore producer can at 
any moment be confronted with economic or socio-political 
problems, so that total security of supply for consumers Is 
not possible. It is therefore worth examining the 
alternatives available in this field. 
No major iron deposits have been found since the 
discovery of the Carajas mine In Brazil In 1967. The 
Earth's surface has been increasingly studied, so that 
it is unlikely that new deposits of an equivalent size 
and quality will be found in future. For this reason, 
it would be advisable for the Community steel Industry 
to participate actively in mining projects under 
discussion but not yet in operation, in particular since 
the best projects are located within the Community's 
direct sphere of interest. This concerns projects that 
have been on the drawing board for decades: Mifergui in 
Guinea and Fa I erne in Senegal. 
private sector is represented in 
in Liberia. The Bong Mining Co., a 
Italian steelmakers, extract an 
beneficiated and consumed in the 
pellets In the operators' plants 
deposit will soon be exhausted, 
(Bong Peak) is being opened up 
the EDF and the EIB. Thus the 
the Bong mine can be extended until the year I n West Africa, the 
i ron ore mining on I y 
syndicate of German and 
itabiritic ore which Is 
form of concentrates or 
in Europe. As the main 
its "eastern" extension 
with financial aid from 
life of 
2007. 
From 1964, the LiberIan-AmerIcan-Swedish Minerals 
Company (Lamco) had extracted a high-grade Iron ore In 
the Nimba mountains In Liberia which was transported to 
the port of Buchanan by a private railway belonging to 
Lamco and the Liberian Government. Mining activities 
ceased on 29 July 1989 because the parts of the mine 
with ore rich in iron and low In phosphorus were 
exhausted. Lamco's concession contract provides that 
the entire infrastructure including the railway line and 
port be handed over to the Liberian Government on 
cessation of viable operations. Consequently, since the 
adjoining parts of the Nimba mine still contain ore, 
i.e. Tokadeh with 24 million tonnes of grade 62% Fe and 
0.08% P, and over 100 million tonnes of grade 50% Fe, 
Gangra with over 100 million tonnes of grade 54% Fe, 
Yeulliton with approximately 100 million tonnes of grade 
53% Fe, the Liberian Government has announced its 
Intention of developing these resources Itself. 
However, in order to do this, it must first of all find 
the necessary finance, operators and above all customers 
willing to purchase such a low-grade ore with 
excessively high contents of phosphorus, silica and 
a I um i na. 
IX/6. 
Apart from this, the Lamco deposit Is still being worked 
on Guinean territory In the Nimba mountains, where until 
now approximately 600 million tonnes of high-grade ore 
in the Mifergui concession (Guinean Iron Mines Company) 
could not be exploited for various political and 
economic reasons. 
According to a recent study, between 7.5 and 9 million 
tonnes per annum can be extracted provided that the 
Lamco Installations, Including the rolling stock, the 
railway line and the port of Buchanan, can be used; the 
Investment costs in this case would amount to between 
US$ 200 and 250 ml I I Ion. 
Bong for its part would also like to beneflclate In its 
Installations the remaining Lamco reserves. However, to 
do so, It would be necessary to build a rail link of 
some 105 kilometres. The port of shipment in this case 
for ore from the "Western Area" would be Monrovia. 
The Falemé deposit is situated In the south east of 
Senegal, approximately 700 kilometres from Dakar. In 
1975, the Mlferso - East Senegal Iron Mining Company -
was set up with the Republic of Senegal (28%), the BRGM 
(24%), Krupp I ndustrIeanIagen (24%) and Kanematsu Gosho 
(24%) as partners. In October 1989, Mlferso emerged 
from the study phase and become a project undertaking. 
The three largest ore bodies contain at least 
360 million tonnes of extractable ore. A product of 
grade 62.5% Fe can be obtained by simple washing. The 
fact that almost half concerns lump ore - which is 
comparable with the good Australian lump ores - is an 
additional plus point. 
If the reaction of the market is positive, Miferso would 
be able to produce some 7.5 million tonnes per annum 
from 1,995, of which the lump ore would tend to be 
shipped to the Community and the fine ore to Japan. 
1.1.4 Cone I us i on 
Assuming that the business cycle for steel Is normal, at 
least in the medium term, consumers can be supplied with a 
sufficient quantity of good high-grade ore. The development 
of new production capacities in Australia and Brazil broadly 
makes up for the mines which will probably have to be closed 
because of exhaustion or for quality reasons. The new 
M'Haoudat project in Mauritania should be mentioned, whose 
lump ores should replace those at Kedia d'ldjil, another 
mine which will be exhausted soon. 
As already Indicated, 
requirements in respect 
closure of the leaner there Is a risk that consumer 
of ore quality will lead to the 
deposits and thus to a producer 
IX/7. 
oligopoly; this is ail the more likely In that there is 
clearly little prospect of finding new deposits which can 
meet the ideal requirements of blast furnace operators. 
in addition, some of the countries supplying the Community 
with good ores will one day probably be confronted with 
economic or socio-political problems. It Is therefore 
possible that deliveries from these countries will be 
temporarily suspended. One way of guaranteeing supplies 
would be to lower the requirements as to the quality of the 
basic materials. In such a case, the blast furnaces would 
have to contemplate pretreatment of ores. This would have 
the advantage, In addition to putting an end to costly new 
exploration schemes and the related problems, of being able 
to continue working some mines currently in danger of 
closure, which In turn would contribute to a diversification 
of resources and origins. 
2. FERRO-ALLOYS 
2 •1 Other ore-based raw materials for ferro-alloys 
The other metal raw materials used in steelmaking - In 
particular to produce fine and special steels - are ores 
containing manganese, chromium, nickel, cobalt, vanadium, 
niobium, tantalum or tungsten. The Community is totally 
dependent on imports from third countries for practically 
all of these metals. The supply situation did improve 
slightly, at least in the chromium, nickel and tungsten 
sectors, following the accession of Greece, Portugal and 
Spain. Furthermore, in addition to the known mines, there 
are several regions In these countries where there is a 
possibility of finding new deposits. The Commission sent a 
communication to the Council as early as 1975 on the supply 
situation in the Community regarding Indigenous raw 
materials. On various occasions between 1982 and 1986, 
Parliament drew attention to the importance of raw material 
exploration and exploitation in the Community. However, it 
was not until 1988 that the Council of Ministers for 
Industry, at its meeting of 13 December, asked the 
Commission to prepare a study on mining in the Community, to 
analyse the results and, If possible, to present proposals 
on a Community mining policy. At its meeting of 
21 June 1989, the Council approved a corresponding 
communication drafted by the Commission. 
The Community, Including the overseas territories, merely 
has deposits of nickel and chromium in New Caledonia and 
Greece, and tin/tungsten mines in Spain and Portugal, France 
and the UK. The nickel producers in Greece and the tungsten 
producers face strong competition from non-Community 
countries mainly for reasons of viability. 
IX/8 
In the absence of Indigenous production, Community 
dependence on third countries, apart from secondary raw 
materials, is of the order of: 
65-70% for n i eke I, 
90% for chromium, 
70-80% for tungsten 
The Mediterranean countries In particular offer favourable 
preconditions for the exploration of 
is rich in ultrabasic rocks 
parent rock for chromite. 
Kozani and Domokos which new deposits. Greece 
of the type considered to be 
Apart from the areas around 
is.uz.ani aiiu uumu^us wiiivn are already being explored for 
chromium, there are a number of minera IogIcaI pointers which 
have not yet been assessed in detail. 
Manganese ores were worked In the past In Eastern Macedonia. 
As the deposits were not completely exhausted - there are 
still about 9 million tonnes of viable ore - they could be 
reactivated. If research was to confirm these data, or even 
establish the presence of further ores, Chalcidlce could 
become a source - If only a modest one - of manganese for 
the Commun Ity. 
Similar considerations apply to Spain. Good manganese ores 
were worked until the 1960s at Solovlejo in the south west 
of Spain. Research Is under way to establish the viability 
of renewing operations. 
Several tungsten deposits in the Iberian Peninsula, France 
and the United Kingdom have been known for some time. 
Unfortunately, mining activities had to cease owing to 
abundant supplies from non-Community countries. Only the 
Panasqueira mine in Portugal Is still in operation. As a 
result, Community dependence on third countries has 
increased from about 60% In the middle of the decade to 
about 70-80% today. However, particularly In Spain and 
Portugal, careful prospecting will still reveal new 
depos its. 
Irrespective of searches within the Community, the steel 
industry - and also the ferro-alloy Industry - should not 
fail to secure its supply of alloying elements by means of 
contracts with the mining companies in third countries, 
Including the acquisition of holdings In mining operations. 
This can take the form of direct cooperation - e.g. in the 
form of Joint ventures - or the Community could provide 
support using the financial means provided by the Treaties. 
2.2 Market structures and outlook 
The North-South transfer which can be observed in the steel 
sector has also occurred in the ferro-alloy Industry. There 
are a number of reasons for this: 
IX/9 
the discovery of large, rich deposits In the developing 
countrles 
the presence of massive energy resources 
cheap labour 
less stringent environmental protection requirements In 
many cases 
a favourable exchange rate against the dollar in 
countries with high rates of inflation. 
In addition, the developing countries have made good 
progress in assimilating and utilizing new technologies over 
the last few years - often with the aid of European 
technical advisers and capital - so that the argument that 
the industrialized countries have better know-how has lost 
weight, at least for the standard products. 
Finally, countries with mining resources are 
wishing to beneflclate their own low-cost raw 
transforming them into ferro-alloys with high 
It can be conceded from the Community point 
this reasoning is partially correct, even If 
strong reservations regarding cheap labour or 
protection. Cost prices depend above all on Just Ifled in 
mater i a I s by 
va Iue added . 
of v I ew that 
there may be 
env I ronmentaI 
the pr i ce and 
quality of raw materials, the price of energy and Its 
utilization (Including recovery) and the quality of the 
finished product required. For this reason, the three 
parameters of raw materials, energy and know-how are always 
va I id. 
By contrast, close cooperation between the steel Industry 
and producers of ferro-alloys Is essential to Improve the 
quality of certain special alloys. There is no such 
cooperation with most ferro-alloy producers from 
non-Community countries. For them, It Is mass production of 
alloys that is profitable, unless they dominate certain 
sectors (e.g. for niobium ores and their processing). On 
the other hand, for the manufacture of certain ferro-alloys 
it is better to mix ores of different origins. In this 
case, the best location for the ferro-alloy industry is 
doubtless one close to the consumers. 
With the increasing production of special steels, the 
ferro-alloy Industry has - with a few exceptions - been 
experiencing an unparalleled boom since 1987. As a result, 
and following the Increase in prices, new production 
capacities have been created in a number of countries and 
others are being built or planned. Overcapacity in the 
ferro-alloy Industry is a distinct possibility If there 
should be a drop in production of special steels. 
In 1978, 60 companies with 76 plants were still producing 
ferro-alloys In the territory of the present Community (12 
countries). This figure also includes companies - whether 
or not integrated - producing high-carbon ferromanganese 
(ECSC product). Ten years on, there were only 44 companies 
with 60 plants. These figures include three new companies 
IX/10. 
with one plant each, so that a total of 19 companies with 29 
plants have disappeared during that period. However, in the 
case of most of the surviving producers, the product range 
has changed. In addition, these changes were frequently 
linked to streamlining of production capacities, sometimes 
involving a transfer of production from one alloy to 
another, depending on demand and the product price. 
Table IX.2 shows the development of production capacities 
for the more common alloys. 
it shows that actual production capacities for ferrosI I I con, 
ferrochromIum and high-carbon ferromanganese have diminished 
substantially. While this is due In the case of 
ferrosl I Icon and ferrochromIum to problems of production 
costs, availability of raw materials or regional location of 
companies, the decline in high-carbon ferromanganese Is due 
above all to excess blast furnace production capacity. The 
ratio of capacity to consumption has diminished practically 
everywhere while there has been no decline in crude steel 
production. Part of the drop in consumption In ferrosl I icon 
and high-carbon fer romanganese can be made good by the 
increase in s I I Icomanganese consumption. 
At the beginning of the 1980s, ferrochromIum and to a lesser 
extent ferromanganese consumption tended towards a 
higher-carbon product; this trend has recently been 
reversed. It therefore appears that the "more noble" alloys 
are regaining a share of the market that they lost some 
year s ago. 
The decline In specific consumption per tonne of steel 
produced and the substitution of cheaper for more expensive 
alloys form part of steel policy. The ferro-alloy Industry 
must take this into account and draw Its own conclusions. 
Between 1978 and 1988, the volume produced fell from 
2 million to 1.7 million tonnes and the size of the labour 
force was reduced from 20 000 to about 13 000. 
For the purpose of Increasing production capacities, it is 
important also to consider the origin of the raw material, 
particularly in the case of metals such as chromium, 
vanadium or manganese. Increased demand would eventually 
lead to competition for resources, not only In the 
ferro-alloy sector but also in raw materials. 
3. PIG IRON AND FOUNDRY PIG IRON 
For supply reasons, pig Iron and foundry pig iron can be 
v i ewed together. 
Apart from scrap, pig Iron is the most important direct raw 
material for both the steel industry and the foundry 
i ndust ry. 
IX/11 . 
the grain size of 
I ron at the Iowest 
of the charge Is All the above considerations regarding 
Iron ore concern the production of pig 
possible cost. The iron content 
Increasing, while the quantity of Iron ore and In particular 
of coke charged Is declining. The specific charge of raw 
materials per tonne of pig iron is therefore constantly 
dec I i n i ng. 
In the Community, pig iron Is produced In coke blast 
furnaces, which are naturally upstream of steelworks In the 
manufacturing process. In 1988, some 93.7 million tonnes of 
pig iron (including blast furnace Spiegel iron and 
ferromanganese) were produced. By contrast, . production 
capacity amounts to 124 million tonnes. Since pig iron 
production Is directly linked to crude steel production, 
closure of pig Iron capacities will doubtless be inevitable 
in the context of continued restructuring of the steel 
sector . 
Consumption of pig iron by the Community steel Industry 
amounted to about 90.6 million tonnes In 1988. Given that 
production of crude steel was 137.4 million tonnes, this 
corresponds to a specific consumption of 660 kg per tonne of 
crude steel. It is probable that this relationship will 
remain valid until 1995. 
Of course, the steelworks and casting works can alter the 
relative proportions of pig iron and scrap in the charge 
depending on the prices of these raw materials and of 
energy. If the supply of good quality scrap is shrinking -
particularly scrap that must be free of zinc and other 
impurities - and scrap prices are rising as a result, it is 
possible, If price differences narrow, to replace scrap by 
pig i ron. 
As already indicated, the foundry industry is also a pig 
iron consumer, but on a much more modest scale than the 
steel industry. In 1988, the Community foundry industry 
consumed the fol lowing to produce 9.4 mi I I ion tonnes of 
product s : 
2.6 million tonnes of pig iron 
6.6 million tonnes of scrap 
1.4 million tonnes of recuperated 
t rend) , and 
341 000 tonnes of ferro-alloys. pig Iron (downward 
When 5 344 000 tonnes of recycled scrap Is added - which 
must not be taken Into account for the primary raw material 
balances - the total raw material requirements amount to 
16.2 million tonnes, representing a yield of 58%. 
Since, with the exception of the integrated plants, the 
Community foundry industry does not produce pig Iron, it 
must obtain supplies either from Community pig iron 
producers or from those of third countries. The foundry pig 
IX/12. 
iron charge must have a special chemical composition and 
quality, with hematite pig Iron accounting for two thirds of 
consumption and spheroidal graphite cast Iron and pig Iron 
for steelworks accounting for the remainder. 
in theory, the foundries are also able to use prereduced ore 
pellets or sponge iron. However, the excessively large 
quantities of slag are still an Inseparable drawback. 
n view of existing production overcapacities, the 
blast furnace Industry is capable - and will 
In future - of supplying the casting 
pig iron, the tatter obtains 
from third countries for Even i f , 
Commun Ity 
cont I nue to be so 
Industry with the necessary 
approximately 40% of Its supplies 
economic reasons. 
Deliveries on the Community market In 1988 were as follows: 
1988: Supply of the Community market with foundry pig Iron 
(all grades) 
('000 tonnes) 
Community deliveries 
Canada 
Braz i I 
South Africa 
(old contracts expiring) 
Norway 
Other non-Community countries 
(mainly COMECON) 1 162 
236 
234 
21 
19 
123 
1 795 65% 
13% 
13% 
1% 
1% 
7% 
100% 
Deliveries of 
ar rangements. pig iron from Brazil are limited by bilateral 
Norway is present again on the Community market following 
the creation of a titanium extraction plant at Tyssedal. 
Finally, In spite of quantitative restrictions, some 
centrally planned economies are attempting, owing to 
shortage of foreign exchange, to maintain, or expand, their 
share of the Community market, In particular where the 
quantitative restrictions are due to fall in 1993. 
SCRAP 
Scrap is a secondary raw material. As it is made up of 
terlal from several production sectors, its physical 
-•--* ... _ and tnus its quality - is waste ma 
and chem i caI compos 11 ion 
extremely variable, 
uniformity provided, 
blast furnaces. IX/13. 
Consequently, It cannot offer the 
for example, by the liquid metal from 
On the other hand, it can be easily stored and transported, 
which makes It a typical trading commodity. Its market is 
unrestricted and the price varies depending on supply and 
demand. It is indicative that 70% of the scrap consumed in 
the Community is handled by dealers, and 35% of deliveries 
come from other Member States. The scrap is used in the 
manufacture of 40% of Community steel; It makes up about 
100% of the charge In electric furnaces and, on average, 20% 
of the charge in oxygen converters. 
Its availability, quality and price are therefore variables 
which may have a decisive role for the future of the 
Community steel Industry, in particular the electric 
steelmaking process. 
4 . 1 Supp I y 
Scrap, as a raw material for the steel Industry, Is obtained 
from : 
scrap arisings in the various stages of steel production 
scrap arisings In manufacturing industry 
recovery of steel from obsolete equipment. 
Scrap arisings In the steel Industry 
Steelmaking generates scrap at various points of the 
production chain. The nature and age of plant and the 
structure of the products and their quality generate a 
greater or smaller quantity of scrap, and determine 
differences in internal scrap production In the steel 
industry in the various countries. 
Technical innovations have reduced the amount of scrap 
arisings, but the most Important development has been the 
introduction of continuous casting for the processing of 
liquid steel Into semi-finished products. Continuous 
casting produces some 10% less scrap than the Ingot cycle, 
i.e. a reduction of 100 kg/t. 
As a resu It of all 
steel industry now 
This fIgure shouId 
continuous casting 
situated at around 
re I at IveI y modest. these innovations, internal scrap in the 
amounts to only 12% of steel production. 
decline further, as the Introduction of 
is not yet complete-, the limit value is 
10%, so that the available margins are 
IX/14 
Scrap arisings In manufacturing Industry 
Scrap production in the industries consuming steel as a raw 
material depends, firstly, on their activities and, 
secondly, on their ability to make maximum use of the steel 
product. The motor industry is an eloquent example: 
computer-aided vehicle design has helped reduce scrap 
arisings from 30% to 15%; at the same time, the increase In 
the average weight of the vehicles produced has offset this 
trend. While the quantity of this scrap should not be 
subject to major fluctuations (barring fundamental changes 
in the industries, e.g. plastic cars), there are likely to 
be some modifications in quality. The consumer industries 
are increasingly specifying coated products, or the products 
contain alloying elements, which frequently represents a 
pollutant factor and adversely affects the quality of the 
scrap. However, these "pollutant" scrap grades can easily 
be identified and segregated at the point of production, 
with the result that the real effect Is a quantitative 
reduction in the production of good quality scrap. 
Scrap from obsolete equipment 
Every steel product which ends its useful Industrial life 
and/or becomes obsolete Is destined for the scrapyard. The 
variety is enormous, ranging from tin cans to the metal 
structure of a factory and large ocean liners. 
Every country has a current or potential reserve of this 
scrap which Is linked to the average life of the steel 
consumed (about 15 years In the Community), the level of 
consumption, the national Industrial tradition and external 
trade in steel products. 
The largest reserves are located In the highly 
industrialized countries with their high per-caplta 
consumption of steel, but the development of indirect 
exports (e.g. exports of Japanese cars) has transferred a 
significant volume of potential scrap to other countries, 
usually less developed. The size of the reserve Is growing 
in the main steel importing countries, i.e. countries in 
which consumption exceeds production. This group includes 
several developing countries and the USA. The USA, which 
also has a very high per-capita consumption, has the largest 
reserve in the world. This category of scrap covers 50% of 
Community requirements. 
The real problem of this scrap 
prevents proper quality control. is its variety, which 
4.2 Co I IectI on 
As a result of technological improvements, Internal scrap 
from steelmaking currently covers 20% of scrap requirements, 
down from 30% ten years ago. As internal foundry scrap has 
IX/15. 
remained stable at around 10%, 70% of requirements have to 
be covered by purchased scrap. As about 25% of this Is 
supplied by scrap from the manufacturing Industries, scrap 
from obsolete steel products will gradually have to fill the 
gap. 
The development of the structure of collected scrap shows a 
downward trend In the production of good quality scrap 
(internal steelmaking scrap and manufacturing scrap). The 
effects of this trend were already evident at the beginning 
of 1984 in the form of market tensions and, occasionally, a 
lack of good quality scrap. It is Important to note In this 
connection that the Increasing trends in the steel Industry 
towards the production of high-quality steel - particularly 
the long products from electric furnaces - creates growing 
demand for good quality scrap. 
The greatest change In the scrap sector has occurred In the 
structure of collection. Traditionally a collecting, 
storage and dealing activity, It has now become an 
Industrial activity in the full sense of the term; in 
addition, scrap "production centres" are emerging, capable 
of supplying the steel Industry with a specific product 
adapted to every application. In the preparation of the raw 
material, the scrap sector is keeping step with the 
qualitative progress of the client steel Industry (electric 
steel -mak I ng ) . 
This structural change obviously poses some problems, 
whether In relations between scrap suppliers and the steel 
industry or with regard to Investment. 
The industrial path on which the scrap sector Is embarked 
(which implies increasing investment) involves greater 
rigidity in the formation of prices, a substantial 
proportion of which is made up of amortization costs. This 
implies that the interplay of supply and demand between 
suppliers and users (which led to extraordinary price 
fluctuations over the last twenty years) Is now restricted 
by the Increase in fixed costs and Investment requirements 
in the scrap sector. 
By the same token, the sector is confronted with 
environmental problems, more specifically the pollution 
prevention laws and regulations which are no longer properly 
adapted to the development of this activity. Scrap 
continues to be regarded by the lawmakers as waste and is 
therefore included in the body of legislation covering ail 
sorts of materials, including non-recyclable products. The 
concept of scrap as an Industrial raw material Is only 
slowly gaining ground in the difficult terrain of 
environmental protection. 
IX/16. 
4.3 Demand 
The demand for scrap depends on the activity of electric 
steelworks, oxygen steelworks and foundries. 
Electric steelmaking seems to have levelled off at about 33% 
of total steelmaking capacity, the remaining 67% being 
accounted for by oxygen converters. 
Theoretically, greatly varying amounts of scrap can be used 
In oxygen steelworks. However, from a strictly technical 
point of view, increasing the scrap charge produces a better 
conversion by using the exothermic reaction heat for fusion, 
and keeps the molten mass near to optimum temperature. 
in practice, the scrap charge may vary between 10 and 30%, 
but the actual figure is determined above all by the 
availability of scrap and its price. Japan, an importer of 
scrap, uses on average 11% compared with the United States 
with more than 30%. In the EEC the level is about 22%. 
By contrast, electric furnaces use at least 95% scrap as raw 
material because It is readily available at lower price 
levels than pig iron and prereduced products. 
Scrap consumption In steelmaking therefore depends on the 
scale of use of electric furnaces and on the percentage of 
scrap used in oxygen converters. 
For foundries, scrap accounts for about 75% of raw material 
requirements, of which 45% is Internal foundry scrap, 30% 
being bought on the market. 
4.4 Projected scrap demand and requirements 
On the basis of the trends of demand and structures 
described in the previous chapters, we can try to calculate 
the medium-term scrap requirements. The basic assumptions 
are : 
that steel production will stay at similar levels as 
today ; 
that the share of electric steelworks will remain 
constant at about 33%; 
that Internal scrap In steelmaking could fall slightly 
following the increasing Introduction of continuous 
cast i ng. 
IX/17 
The calculation produces the following figures: 
Scrap requirements in 1992 
(mill ion t) 
Steel product I on 
of which el ectr I c 
Scrap requirements 
of which: internal scrap 
purchased scrap 
Foundry purchases 
TotaI requ i rement 138.0 
46.0 
64.0 
15.0 
49.0 
5.0 
54.0 
Quantitatively, these requirements can be satisfied easily 
by Community resources. 
On the other hand, the quality requirements will pose a 
problem, as already mentioned in the preceding paragraphs, 
it is in this area that the Commission will be able to 
introduce a policy to promote Investments to Improve the 
quality of scrap, using Its own (in particular financial) 
resources, and addressed in equal measure to both 
steelmakers and scrap dealers. 
The shift among the latter towards an 
of scrap processors must be encouraged. industrial structure 
4.5 Scrap and the environment 
As far as legal criteria and regulations are concerned, 
scrap currently falls Into the category of products 
considered as "waste". Although this is correct from an 
etymological point of view, It does bring with it a series 
of negative consequences because of the fact that, in 
Community as well as In national legislation, the term 
implies specific treatment, given the fight against 
poI IutI on . 
Whilst it Is true that stocking scrap may constitute an 
attack on the environment, this does not in Itself imply 
pollution. Additionally, scrap is a raw material which can 
be recycled almost without any pollutant prior treatment. 
As it is an essential raw material for the European steel 
industry, It Is even possible to envisage environmental 
regulations which positively encourage the collection of 
scrap, thus having a doubly positive effect, on the 
environment itself as well as on steel industry supply. 
IX/18. 
5. COAL 
Steel production involves enormous amounts of energy, 
Irrespective of the techniques used. Of the various steel 
production processes, this section will concentrate on those 
which are based mainly on coal, which means two of the main 
techniques used In the steel Industry: 
the blast furnace, converting pig iron into crude steel;, 
the processes of direct reduction based on coal. 
In addition to a brief description of the energy aspects of 
these techniques and an analysis of energy consumption and 
fuel substitution over the last three decades, we offer an 
assessment of the medium-term trends up to 1995. 
5. 1 The blast furnace process 
The traditional method of making steel In Europe Is the 
blast furnace, which produces pig Iron and consumes large 
amounts of energy. Of the various processes for converting 
pig Iron Into crude steel, only the oxygen process Is still 
in use today, the electric furnace being initially confined 
to us i ng scrap. 
An examination of the blast furnace's energy consumption 
reveals two main features: 
firstly, energy consumption per tonne of pig iron 
produced has decreased substantially over the last 
thirty years-, 
secondly, the composition of fuels consumed by the steel 
industry has changed considerably as a function of 
relative energy prices. 
Energy consumption fell everywhere from 30 GJ/t of pig Iron 
in 1960 to some 18-19 GJ/t In 1988: this Is a drop in 
specific consumption of more than one third. Although 
indispensable for the process, coke consumption was also cut 
by 40% to some 510 kg/t in 1988. However, coke Is still the 
main source of energy for pig iron production. In addition 
to coke, other fuels such as oil, coal and gas are used In 
the blast furnace process to varying extents, depending 
mainly on the relative energy prices. With the low oil 
prices of the 1960s and up to 1973, heavy fuel oil injection 
became more and more common. Oil consumption peaked at 
52 kg/t of pig iron in 1973. In 1985 - when oil prices were 
still high - consumption fell to only 6 kg/t, while coke 
consumption increased temporarily. In spite of the drop In 
oil prices in recent years, there has been only a limited 
return to the use of oil. Today Instead of using more oil, 
IX/19. 
coal dust Is commonly Injected Into blast furnaces. In 1988 
coal Injection reached a record level of 40 kg/t of pig Iron 
compared with only 15 kg/t three years before. 
Among the advantages of using injection coal in blast 
furnaces - the greater choice of coal grades which can be 
used, lower fuel costs, Improved blast furnace performance -
the most important compared with coking coal demand Is the 
fact that one tonne of Injection coal represents more than 
one tonne of coking coal. As coaI Injection increases 
(about 100 kg/t of pig iron or often more have been shown to 
be perfectly feasible), a marked decline In coking coal 
demand is to be expected. Another way of reducing coke 
costs is to use large quantities of gas for high-temperature 
melting. However, gas consumption statistics indicate that 
so far the steel Industry has not resorted to this method of 
cutting coke costs to any great extent, no doubt as a result 
of the rather high natural gas prices compared with coal and 
coke . 
The trend In the coming years Is likely to be a continuation 
of the developments in the past. In view of its high energy 
costs, the steel industry will continue to use 
higher-efficiency energy. In addition, with steel 
production remaining at best constant, and a slight increase 
in the share of electric furnaces, pig iron production will 
fall and, as a result, will centre on the most efficient 
blast furnaces, unless new and more profitable blast 
furnaces are built to replace the older ones. Even for 
existing blast furnaces, there are new methods of cutting 
energy consumption, such as using reduced pellets, Improving 
the grain size of the sinter or the pellets, or reducing the 
slag voIume. 
As to the composition of fuels, coal dust Injection is 
expected to Increase from almost 4 mt In 1988 to 6 mt In 
1990 (estimate by CEPCEO, the Western European Coal 
Producers' Association). This represents almost 70 kg/t of 
pig iron. Since it has been established that coal 
consumption rates of 100 kg are perfectly feasible, the 
steel Industry could consume some 7 to 8 Mt of coal In 1995. 
Coke consumption Is expected to be about 35 to 37 Mt , I.e. 
about 10 Mt less than today, while the use of oil will 
continue to be limited. 
5 • 2 The direct reduction process based on coal 
In addition to tho traditional process based on blast 
furnaces, there are a number of fairly recently developed 
techniques for the direct reduction of Iron ore. These 
processes (including the Japanese pig Iron reduction process 
and the European COREX system) completely eliminate the need 
for coke by direct reduction based on coal. 
IX/20. 
In particular, the COREX system, which has started up 
successively on an Industrial scale in South Africa, has the 
following main advantages: it is a clean coal technology 
and is very flexible, especially as regards the choice of 
coal grades, and operates at a fairly low cost. 
However, in the Community as In other Industrialized areas, 
the classic set-up of steelworks based on furnaces should, 
in general, continue to prevail In the next few years, and 
only a gradual shift towards the Introduction of small 
steelworks using electric furnaces and direct reduction 
processes can be expected. Coke and coal will therefore 
continue to be the main fuels In steelmaking. 
Furthermore, the product of the direct reduction processes, 
sponge Iron, could also be used In electric furnaces to 
replace very high-quality scrap, which is becoming ever 
scarcer. Consequently, In the coming years more coal could 
be used outside blast furnaces without a simultaneous fall 
in coke consumption as scrap Is possibly replaced. 
The steel production process itself involves more or less 
energy depending on the technology used. Electric furnaces 
consume large amounts of energy. By contrast, the energy 
balance of the oxygen process is quite favourable. However, 
with the exception of some R&D work, coal is not normally 
used directly to make steel Itself. 
5 . 3 Medium-term prospects 
As regards the future market for coal used In steelmaking, 
the CIF Europe prices for coking coal are predicted to rise 
by Wharton Econometrics Forecasting Associates, In 1987 
dollars to about $75 per tonne in 1992 and some $76 per 
tonne in 1995, compared with an average of $51 per tonne in 
1987. This increase overestimates the future rise in prices 
in that the coal market was depressed in 1987 and 
consequently prices were low. Nevertheless, the import 
prices for coking coal In the Community Increased by $3 per 
tonne last year. Although the fuel costs for blast furnace 
steel production should rise despite some efficiency gains, 
the increase in coke prices of some 5% per year in real 
terms up to 1995 wl I I not make the use of coke in 
steelmaking uncompetitive, since In the early 1980s, coking 
coal prices in 1987 dollars were even higher than those 
forecast for 1995. 
The prices for coke and coking coal produced in the 
Community and supplied to the steel industry are broadly at 
the same level as world market prices, so that In principle 
the difference between import prices and production costs is 
at present covered by state aids. 
IX/21. 
On average, the price of steam coal Is expected to Inc 
slightly less sharply than the price of coking 
However, some recent technological developments should 
to somewhat increased prices for those steam coal g 
which are used In metallurgy. In particular, the marke 
this friable coking coal, which some years ago was only 
to produce steam, is now greatly Influenced by the va 
technological improvements In coke production. This co 
now processed by being mixed with high-grade tradit 
coking coal to obtain a high-quality coke. In addi 
this coal is also used for coal dust injection. 
ult, the gap between the price of very high-quality 
I and traditional coking coal can be expected to nar res 
coa rease 
coa I . 
I ead 
rades 
t for 
used 
r I ous 
al is 
iona I 
t Ion , 
As a 
steam 
row. 
At present more than 50% of the coking coal supplied to the 
steel industry is produced in the Community. Reliance on 
the subsidized production of Community coal should decrease 
in the next few years when It Is probable 
for supplies to the steel Industry will be 
of Community coal In supplying the steel 
largely on state aid. This scheme will be 
and will disappear at the end of 
2064/86/ECSC). that state aids 
cut. The share 
industry depends 
rev Ised In 1990 
1993 (Dec I s ion 
Coking coal imports are traditionally based on deliveries 
from the USA, which account for some 60% of supplies. At 
present almost 30% is supplied by Australia. Less than 1% 
of coking coal imports come from non-OECD sources, mainly 
Poland and the USSR. 
In any case, no shortage of coal Is to be feared In the 
coming years and prices are forecast to stay at a reasonable 
level . 
TABLE IX.1 
IMPORTS INTO THF FFC FRCM NON-MEMBER STATES OF SINTER. PELLETS AND BRIQUETTES 
(a) 10 Member States 
(b) 12 Member States 
Source : Euros tat Count ry 
Brazi1 
Canada 
Liberia 
Norway 
Swe den 
Australia 
South Africa 
Others 
Total 1979(a) 
mi 11 ion 
t % 
4,20 
3,91 
3,01 
2,07 
1,20 
0,32 
0,25 
0,25 
15,31 27,4 
25,5 
19,7 
13,5 
6,5 
2,1 
1,6 
-1983(a) 
mi 11i on 
t % 
3,77 
2,88 
1,59 
2,63 
1 ,20 
0,19 
12,26 30,75 
23,49 
12,97 
21,45 
9,8 
1,55 
-1986(b) 
mi 11i on 
t % 
14,21 
7,86 
5,24 
1,85 
3,86 
1,07 
0,57 
0,01 
34,76 40,88 
22,61 
15,07 
5,32 
11,1 
3,08 
1 ,64 
0,28 
-1988(b) 
mi 11 ion 
t % 
16,09 
5,85 
4,25 
1,54 
4,36 
0,50 
0,07 
0,79 
33,45 48,10 
17,49 
12,71 
4,60 
13,03 
1 ,50 
0,21 
2,36 
-
TABLE IX.1A 
IMPORTS OF FTNES AND CONCENTRATES FRCM NON-MEMBER STATES 
(a) 10 Member States 
(b) 12 Member States 
Source : Eu r o s t a t 1979(a) 
Country 
mi 11i on 
t % 
Brazil 26.54 
Sweden 18.41 
Canada 14.84 
Liberia 11.50 
Australia 11.29 
South Africa 8.46 
Mauretania 7.38 
Venezuela 5.76 
Norway 1.67 
Algeria 1.28 
Spain 1.27 
India 0.34 
Others 1.40 
Total 110.04 24.12 
16.73 
13.50 
10.50 
10.26 
7.67 
6.71 
5.23 
1.52 
1.16 
1.15 
0.31 
1.27 
-1983(a) 
mi 11i on 
t % 
21.95 
7.21 
9.37 
10.86 
12.06 
2.93 
6.05 
3.44 
1 .80 
1.13 
1 .46 
0.41 
1.31 
79.98 27.44 
9.01 
11.70 
13.58 
15.08 
3.66 
7.56 
4.30 
2.25 
1.41 
1.83 
0.51 
1 .64 
-1986(b) 
mi 11i on 
t % 
22.70 
7.94 
9.44 
6.44 
14.28 
2.30 
7.51 
6.27 
1.01 
0.27 
(1.75) 
1.57 
1.07 
80.80 28.09 
9.83 
11.68 
7.97 
17.67 
2.85 
9.29 
7.76 
1.25 
1 .94 
1 .32 
-1988(b) 
mi 11 ion 
t % 
35.64 
5.90 
11.38 
10.08 
25.17 
5.39 
8.32 
6.03 
2.40 
1 .43 
0.56 
112.30 31 .74 
5.25 
10.13 
8.98 
22.41 
4.80 
7.41 
5.37 
2.14 
1 .27 
0.50 
-
TABLE IX.2 
PRODUCTION CAPACITIES AND CONSUMPTION OF SOME COvMON ALLOYS 
FERROSILICON 
SILICON METAL 
FERROCHROMIUM 
he + charge 
refined and over-refined 
FERRCMANGANESE 
hSL 
refined and over-refined 
SILICOMANGANESE 
including the capacities 
for FeMn 1 .m. c . 19' 
EFFECTIVE 
CAPACITY 
450 
160 
270 
100 
1300 
150 
280 78 
CAPACITY 
CONSUMPTION 
450 = 88 % 
510 
160 - 123 % 
130 
270 - 54 % 
500 
100 - 50 % 
200 
1300 - 140 % 
930 
150 - 116 % 
129 
280 - 70 % 
400 191 
EFFECTIVE 
CAPACITY 
250 
160 
195 
55 
815 
300 
280 ?8 
CAPACITY 
CONSUMPTION 
250 - 50 % 
505 
160 = 76 % 
210 
195 - 23 % 
840 
£5. - 78 % 
70 
815 « 107 % 
760 
300 = 143 % 
210 
280 = 62 % 
450 
Source : Ferro-alloy industry liaison committee 
X/1 . 
CHAPTER X 
EMPLOYMENT: TRENDS AND PROSPECTS 
1. INTRODUCTION 
The restructuring of the steel Industry was based on a 
review of all the economic and technical factors that govern 
the life of an industry. Capacity reduction was accompanied 
by a thoroughgoing rationalization of the remaining plants 
and their management. New techniques were systematically 
introduced which further boosted the higher productivity 
that had already resulted from the reorganization of the 
under tak i ngs. 
This transformation of the Industry was fully In line with 
the Community's policy objectives but, although It had the 
desired effect, it has also had extremely serious 
consequences for employment. 
The Commission advocated exceptional social measures from 
the outset of the crisis - at the same time as it proposed 
the industrial measures. This was necessary to ensure that 
restructuring could take place in a controlled fashion and 
that the legitimate Interests of all concerned could be 
taken into account and the sacrifices equitably shared. 
It is indicative of the importance the Commission attaches 
to the employment problem that this chapter tries to 
pinpoint all the aspects which enter into an assessment of 
the problem. Although most of the restructuring between 
1980 and 1986 meant the closure and rationalization of 
undertakings, much still remains to be done in respect of 
capacity management, the drive towards greater productivity 
and, possibly, restructuring at company level. 
This means that social measures have to be continued, albeit 
in a form adapted to new needs - particularly the sort of 
training that will be required as a result of changes yet to 
come In the sector. The phase of massive capacity closures 
is now over. What remains is mainly rationalization, 
changes In production techniques and, possibly, the 
relocation of certain production processes. 
We should therefore study the outcome of previous measures, 
learn from the results and prepare for further action in 
this field. 
2. PAST TRENDS 
(a) The following are some of the more important facts about 
employment in the Community's steel industry over the past 
decade : 
X/2. 
The sector went through a long period of massive job 
losses, particularly In 1980 and 1981 when the annual 
rate of losses exceeded 10% and net departures from the 
Industry in each of the two years exceeded 120 000, 
which meant that over 230 000 persons left the industry 
during that period. Between 1981 and 1987 Jobs were 
lost at an annual average rate of around 6.5% but this 
then slowed down to 4% by the end of 1988 (Table X.1). 
The national steel Industries conducted their 
restructuring at different rates, and over different 
periods. For Instance, Job losses were spread over a 
period in the Federal Republic of Germany, were 
particularly abrupt in the United Kingdom and came 
relatively late In Italy (Table X.2). 
The structure of departures changed during this period 
of manpower redundancy policies. Whereas in 1980 
redundancies and termination of employment was 3.5 times 
higher than retirement and early retirement, In 1984 
there were 2.5 times more retirement than redundancies 
or voluntarily termination of employment (Table V.3). 
(b) The period from 1985 to 1990 was still dominated by the 
need to manage the flow of departures from steel caused by 
the restructuring suddenly Imposed on the industry in the 
preceding period. But the way the employment problem was 
managed - directed primarily at the redeployment of surplus 
staff - involved changes in the use of the measures 
available, a factor which makes this a pivotal period. 
Man power reductIons Initially this meant mass Ive 
job-shedding, which reached a peak In 1980 (Table X.4) but 
increasingly early retirement was used. in the last five 
years this has accounted for the largest share of departures 
but should account for relatively fewer by 1995. Although 
socially more acceptable, despite the cost, early retirement 
can only be used for those In the eligible age brackets 
unless the age of eligibility Is lowered again. This is 
unlikely for both financial and social reasons. 
Reduction of working hours: Used to differing degrees in 
the EEC countries, this technique has come to be applied in 
different ways. 
* Short-time working is still used in Italy but not at all 
in some countries (such as France) and less and less in 
others (like Belgium and the Federal Republic of 
Germany) (Table X.5). 
The technique generally used until 1985 as a means of 
counteracting the decline in employment in steel has 
been to reduce working hours generally. At the same 
X/3. 
time the question of maintaining the same level of wages 
for less time worked has been settled in different ways 
in different countries (Table X.6). 
* Part-time working has been little used in steel compared 
with other industries, possibly because steel employs 
fewer women. In Luxembourg It is possible to combine it 
with a temporary Job In another undertaking. 
Retraining and re-empIoyment policies: These have come to 
play an increasingly Important part and there is a general 
trend towards solutions which promote reemployment of 
manpower. At the same time incentives to mobility, both 
geographical and occupational, have been increased. Where 
mobility Is concerned, steelworkers continued 
from older and more developed policies than 
the rest of the economy: removal and 
grants and Interest-free loans. Nevertheless 
there are still major obstacles to geographical mobility 
such as the loss of the network of family and friends and 
the problem of settling the spouse and children In the new 
environment. Except in the United Kingdom, where 
geographical mobility seems to be a major plank in 
government strategy, such mobility will therefore probably 
remain limited. In occupational mobility, the key question 
is the training to enable employees to adjust to Job changes 
in steel or to find other employment In another sector. 
This concern has been more systematically faced In steel 
than in many other Industries and has been dealt with by 
setting up training schemes to ensure the better 
redeployment of manpower. As a result, more recently there 
has been more movement of manpower both out of the industry 
(external redeployment) and within the Industry (transfers). geographIcaI 
to benef I t 
wor ker s in 
rese11 I ement 
PROSPECTS FOR 1995 
An analysis of past trends shows that manpower policy 
objectives have changed. Whilst restructuring and social 
protection remain firmly entrenched, redeployment policies 
have steadily gained in importance, making simple 
redundancies relatively less common. 
This change has gone hand In hand with others In steel 
Industry working conditions caused partly by changes in the 
industry and partly by the general situation. 
Trends in the steel industry in wages, working hours and 
jobs - and therefore the way in which production is 
organized - have resulted in some loss of the relative 
advantages that steel had over other industries and also 
suggest that the organization of production is changing. 
3.1. X/4. 
Erosion of advantages linked with earlier methods of 
organizing production 
Mastering the crisis of surplus capacity entailed a major 
reduction In the workforce together with an alignment of the 
conditions of employment of those remaining In the Industry 
on conditions elsewhere. Closing this gap eroded certain 
advantages enjoyed by steelworkers, as other industries 
caught up and national measures were introduced. 
(a) Wages : Compared with other Industries, wages, 
particularly for "blue-collar" workers, are still higher 
than the average for Industry as a whole. There Is 
therefore still a positive "wage differential" In steel. 
Nevertheless, between 1975 and 1985 this differential was 
eroded - the more sharply in that during this period average 
skill levels in the industry rose and working hours fell 
overall more than in other Industries. Therefore, although 
gross hourly wages are still higher than In other Industries 
and since 1980 have again tended to rise faster, the fact 
remains that the general pressure on social security 
contributions and trends in working hours Is 
result in a lower net monthly remuneration for 
skill. Maintaining the wage differential is a 
factor for labour which should not be overlooked 
wage earners are being asked to make a special 
regards adjustment, training and mobility. I Ikely to 
any given 
mot i vat Ing 
just when 
effort as 
Against this background a policy of wage Incentives covering 
not just wage levels but also work content and career 
prospects can be consistent with the rapid staffing 
adjustments demanded by both technology conditions 
(rationalization within undertakings) and macroeconomics 
(worldwide overcapacity, greater competition). 
(b) Reorganization of working hours: This heading covers 
two contradictory purposes: on the one hand, to absorb 
excess manpower in steel undertakings by reorganizing the 
entire production process; and on the other, to take 
advantage of shorter working hours to avoid redundancies. 
This leaves very little margin for manoeuvre and depends in 
the last analysis on training and reskilling since the 
resulting productivity gains may make it possible to reduce 
working hours. Yet It is difficult to advocate better use 
of plant and equipment in a production context where 
overcapacity persists. On the other hand, modulating 
working hours within the year to meet seasonal demand could 
be compatible with reducing the total hours worked per year. 
However, minimum rules would have to be negotiated to avoid 
distortions in competition and adverse social repercussions. 
ret I rement at 55 is (c) Age-based measures: Early 
predominant throughout the steel industry, with an 
increasing tendency to reduce this to 50 years, giving 
"relative" advantage of 5 to 10 years over 
Any further reduction in the steel workers a 
ordinary retirement 
X/5. 
retirement age, or making 50 years standard throughout 
steel, would therefore cause a distortion between steel and 
other industries, all the less acceptable as the conditions 
which gave rise to this policy In the steel industry have 
now spread to other sectors (shipbuilding, textiles, etc.). 
On the other hand we may expect the advantages now enjoyed 
by steelworkers to spread gradually to other areas as 
general pension schemes are aligned on the standards applied 
in steel. Here too, It Is likely that the relative age 
advantage for early retirement in steel will be no more than 
maintained or even reduced as the Incentives to ever earlier 
departure are causing many problems (pension costs, 
resulting Inflexibility In staff management, lower 
acceptance both by society and by the Individual). 
It will therefore become more and more difficult to arrange 
the departure of workers from the Industry through early 
retirement under attractive conditions and at the same time 
foster mobility, be It out of or within an undertaking, by 
providing the training for change. 
3.2 Emergence of new methods of work organization 
consequences for Jobs and the 
Everyone agrees that 
Industry has already 
s tee I worker's Job, and technological change In the steel 
altered the very nature of the 
now demands different skills. But, a ice i nvi RCI o jwu, auu nun uoiuaiiuo VJIIIOIGIII o r>. I I I ^ . oui,, 
over and above this, the whole production process is tending 
to change and Is thereby fundamentally altering Job 
requirements in the Industry. 
(a) Internal factors of change 
Three factors 
dec i s Ive role have played, and will continue to play, a 
n the qualitative changes in employment: 
Technological innovation in production, particularly the 
general Introduction of continuous casting, have 
increasingly changed steel into a process and 
"continuous flow" Industry, with fewer processing stages 
and less idle time between stages. At the same time, 
these stages are being integrated, with central 
coordination to regulate the whole movement. 
This whole movement is increasingly determined by 
market. The start-up and planning of production 
determined at the warehouses for finished products 
the message 
i mpor tance 
organ i zat ion 
d i ff i cultles 
compe t i tI on. t rave I s back to 
of the product 
of product I on Is the steeI works. 
In determ i nIng 
largely due to the 
is 
and 
The 
the 
the 
of market Ing and to the greater 
X/6 
This product-based approach becomes a line of thrust for 
reorganizing the production system, using production 
management methods which guarantee downstream 
steerage-way and a dynamic approach to cost formation 
and product characteristics (quality analysis). 
The expansion of computerized systems and the ever 
closer links between systems {production control, stock 
management and maintenance, personnel management, 
research and development) have encouraged these changes 
whilst at the same time creating new constraints as 
regards work and Job organization. 
(b ) External factors of change 
As opposed to the internal factors, the external factors are 
not directly linked with changes in steel production 
processes but to demographic, social and societal changes 
which mainly affect the Job supply characteristics In the 
i ndust r y . 
We are currently witnessing a general 
level of education in the workforce. rise In the average 
There are also more further training courses, more temporary 
work and more sandwich-type training and work schemes, all 
of which is tending to standardize the conditions under 
which young people enter the labour market. 
In a wider context, studies of the behaviour and values of 
young people seem to Indicate a levelling in their attitudes 
to work . 
(c ) Consequences for the components of the labour factor in 
steel and their management by the Industry 
From the industry's point of view, the workforce can be 
divided Into two groups to each of which different policies 
are app lied. 
The first group comprises wage earners leaving or entering 
the industry and brings with it the question of how to 
manage the entry and departure flows in the steel Industry. 
Departures; early retirement, redeployment in other 
industries or unemployment. Where the last two 
categories are concerned it would seem that, in a 
context in which it Is generally difficult to find a new 
job, the main problem is to slot measures specific to 
the steel industry Into a given regional environment or 
into the different countries' general re-employment or 
Job creation Incentive schemes. Because the steel 
crisis has been so long-IastIng, massive and frequently 
of a regional nature, it has laid a certain 
responsibility upon the sector, but In the long run 
X/7. 
there is the danger that sectoral policies may be seen 
as distortions to the labour market or even as between 
under tak i ngs. 
Early retirement has the advantage of being relatively 
acceptable to society at large but It brings with It 
many long-term problems: workers who at an increasingly 
early age feel they have lived their lives and are 
"useless" to society or undertakings which may lose a 
skilled workforce. 
New entrants: In spite of new reau Irements, 
particularly for more highly skilled workers, 
restructuring has had the result of limiting the number 
of new workers entering the steel industry. These new 
manpower requirements have put undertakings on the spot 
and, where their Internal adjustment policies do not 
solve the problem, they are reacting with policies of 
recruiting, taking on casual labour or putting work out 
to contract. 
The second group comprises those who stay. There will 
probably be further cuts In the workforce together with many 
qualitative changes such as: 
shorter and more straightforward careers-, 
a levelling out of the skills required for different 
jobs ; 
a simpler wage structure with narrower 
d i f ferent i a I s ; 
greater integration combined with a simplified 
management structure; 
higher qualifications with more stress laid on 
social skills, i.e. capacity for responsibility, 
sense of initiative, ability to work in a team and 
to commun i cate. 
For undertakings, the new problem they will have to 
solve may be expressed as follows: How to manufacture as 
economically as possible with a smaller workforce that 
is as highly qualified and integrated as possible. 
At t he same t I me a 
organ Izat i on wI I I d number of 
sappear : the old features of work 
routine work (both manual and manual machine 
operat I on) ; 
certain traditional occupational characteristics 
(like the ability to perform narrow subtasks 
correctly and at speed). 
This means that a whole series of layers and filters 
between the shop floor and management will tend to 
disappear. There will be fewer middle management layers 
as many control and coordination functions as well as 
increasing powers of decision are mechanized and 
X/8. 
automated. Overall, the general direction Is towards a 
certain merging of the characteristics of the work done 
by blue-collar workers, technicians and office workers. 
Against this background the concept of competence 
becomes decisive since it combines occupational skills 
(ability to carry out a function) and social skills 
(ability to communicate and sense of initiative). 
3.3 Need to modify supporting policies 
In a context of further job-shedding combined with new 
requirements, there is even greater need to encourage 
Internal and external mobility. 
Training therefore comes to occupy a central position as a 
primary means of matching workforce skills to Job 
requirements. Regarded increasingly as an investment, 
training is the subject of forward planning and Is seen In 
conjunction with the new methods of work organization. 
In practice, when training measures are adopted this Is 
always associated with a reorganization of the workplace, 
though to an extent that varies from one undertaking to the 
next. 
In this way the Industry has moved from a defensive attitude 
of ad hoc adjustment to "spontaneous" market factors, in 
which training served to upgrade skills after the event, to 
an attitude of anticipating medium-term needs. 
At the same time training is Increasingly provided for all 
categories of workers, or at least for those likely to 
remain in the undertaking. 
This massive requirement for training has resulted In an 
expansion of training facilities and schemes which can be 
used more flexibly and a change in their content, which 
includes an Increasingly large "social skills" component. 
These trends, common to many industries, will become more 
marked by 1995. Nevertheless, steel poses a special problem 
since a very large proportion of its workers possess skills 
that are directly linked with their present Jobs. But from 
now on steel will be manufactured and processed increasingly 
by small, highly skilled and highly integrated teams. There 
will be much greater need for initial wide-ranging and 
multi-skill training followed by continuous training 
schemes. More effort will therefore have to go into 
vocational training, both at the initial and the further 
training stages. Forecasts of the number of employees 
needed should therefore take Into consideration the number 
undergoing training at any one time. 
X/9. 
Thus the accompanying social policies are being concentrated 
more on the question of the qualitative adaptation of the 
workforce to employment, and this in the context of the 
pursuit of the quantitative reduction In jobs. 
The sharing of the burden Implied In this necessary effort 
can be fixed as a function of today's national differences, 
but also of the objectives fixed for 1995. The ECSC for its 
part, participates, within the framework of Article 56 of 
the ECSC Treaty, In the expenses linked to the 
rehabilitation of employees whose jobs are affected as a 
consequence of measures of definitive cessation, reduction, 
or changing of activity. A new framework of Intervention, 
which sets a ceiling on expenses and harmonises ECSC 
intervention, has been set up. In it are defined the levels 
at which the Commission intervenes in 5 standard situations 
(early retirement, unemployment, training, internal 
resettlement, and external redeployment). 
Meanwhile, the question of the possible modification of the 
field of application of Article 56 could be put, in view of 
the new economic and social context which is being seen. In 
fact, Insofar as It Is thought that social accompanying 
policies, for which Article 56 constitutes the legal basis 
for ECSC intervention, are the indIspensibIe corollary to 
the industrial changes underway In the steel industry, they 
must be able to meet the new requirements stemming from the 
processes of restructuring and modernisation In this sector. 
800.000 
700.000 
600.000 
500.000 
400.000 
300.000 TABLE X.1 : TOTAL NUMBERS EMPLOYED IN THE STEEL INDUSTRY (EUR 9 then EUR 12) 
(Source : EUROSTAT) 
784 
1975 76 77 78 79 80 81 82 83 84 85 86 87 88 89 
TABLE X.2: RATE OF DECREASE IN NUMBERS EMPLOYED. BY COUNTRY (%) 
1976/75 -3.0 - 4,9 0 -2,9 - 1,2 -12.5 0.9 - 2,3 - 2,2 - 6,2 
1977/76 - 2,3 - 7,0 0 - 2,8 - 3,6 0 0,5 - 9,1 - 3,4 0,4 
1978/77 - 6,0 - 9,3 0 - 4,3 - 9,1 0 - 1.1 - 13.5 - 11,2 - 5,6 
1979/78 - 2.9 - 0.9 0 - 0.6 - 8.0 0 1,7 3,9 - 2.3 - 4.7 
1980/79 - 6,3 - 3.1 - 7,6 - 1,4 - 9,1 - 2,7 2,7 - 4,0 0.2 - 17,7 
1981/80 -10.6 - 5.5 - 22,2 - 4,4 - 11,8 - 14,4 - 2,2 - 13,2 - 0,6 - 28,0 
1982/81 - 6,3 - 3,6 - 12,4 - 5,6 - 3,5 11,5 - 4,5 - 3.9 - 2.1 - 14,7 
1983/82 - 7,4 - 6,3 - 10.8 - 6,8 - 4,3 - 3,1 - 3,9 - 6,7 - 3.9 - 17,8 
1984/83 - 6,8 - 4.2 5,2 - 7.3 - 6,0 6,0 - 9,4 1,9 - 4.8 - 7.5 
1985/84 - 5.7 - 8.2 4.3 - 2.8 - 7.3 - 7.8 - 13.0 - 2.5 0,8 - 2.5 
1986/85 - 5.0 - 8.4 5 - 2,7 - 10,9 - 11,2 - 3,0 1,0 0 - 6,2 3,9 
1987/86 -7,5 -11.2 - 9.3 -7,16 -12,7 8.6 - 5,6 - 7.4 - 0,5 - 3,2 -6,5 -9,1 -2.4 
1988/87 -5.4 - 2.0 - 2,9 -4,6 - 12,0 5,0 - 5,7 - 7,4 - 2,0 0,3 - 1.4 -8,6 -3.8 
1989/88 -3,5 - 1.2 -0,4 8,2 - 3,4 - 4.7 - 2.9 - 1,2 -14,7 -13,0 
Source: EUROS.AT 
TABLE X.3: CHANGES IN THF STRUCTURE OF DEPARTURES 
(EUR 9 and EUR 12) 
Total Redundanc i e s Te rminat i on 
of contract Re t i red Early 
Re t i rement Othe rs 
1980 
1981 
1982 
1983 
1984 
1985 
1986 EUR 9 
EUR 12 
1987 EUR 9 
EUR 12 
1988 EUR 9 
EUR 12 133.362 
97.025 
76.452 
72.734 
77.020 
64.264 
66.869 
73.714 
61.099 
69.676 
55.270 
62.594 46.859 
67.102 
19.598 
33.^70 
11 .285 
20.762 
10.607 
18.$78 
5.046 
11.307 
5.637 
11.407 
5.395 
5.821 
7.128 
7.538 
2.880 
3.045 20.243 
14.372 
9.477 
7.771 
6.261 
5.770 18.552 
21 .181 
19.533 
20.279 
29.234 
17.854 
22.073 
25.587 
14.535 
19.141 
13.242 
16.256 14.721 
19.760 
16.897 
17.706 
27.550 
16.210 
20.280 
23.261 
12.720 
16.260 
11 .428 
13.812 37.866 
29.430 
27.904 
25.100 
29.006 
27.552 
26.331 
28.617 
27.399 
30.311 
26.528 
29.892 
(l) Included in "Others 
TAW F. X.4: ENTRY AND DEPARTURE FLOWS (EEC 9 and 12l 
Entrants Departures Net departures 
1980 59.257 133.362 74.105 
1981 47.902 97.025 49.123 
1982 41.497 76.452 34.995 
1983 38.259 72.734 34.475 
1984 43.519 77.020 33.501 
1985 39.842 64.264 24.422 
1986 (EEC 9) 38.377 66.869 28.492 
(EEC 12) 41.180 73.714 32.534 
1987 (EEC 9) 31.143 61.099 29.956 
(EEC 12) 34.524 69.676 35.152 
1988 (EEC 9) 41.538 55.270 13.732 
(EEC 12) 45.202 62.594 17.392 
Source: EUROSTAT 
ANZHAL DER KURZARBAITCR 
NLMBER OF SH3RT TIME WORKERS TABLE X.S 
NCMBRE DES OXMEURS PARTIELS 
NLMERI DI OPERAI IN CASSA INTEGRAZIONE 
FUER SPANIEN : KEIN NACH\EISS \0*HANDEN 
FOR SPAIN : FIGURES NOT AVAILABLE 
POUR L'ESPAGNE : DONNEES NON DISPONIBLES 
PER LA SPAGNE : DATI NON DISPONIBILI 
Source : EUROSTAT EUR 
BR 
DEUTSCHLAND 
FRANCE 
ITALIA 
BELGIQUE 
LUXEMBOURG 
UNITED KINGDOM 1987 
1988 
1989 
1987 
1988 
1989 
1987 
1988 
1989 
1987 
1988 
1989 
1987 
1988 
1989 
1987 
1988 
1989 
1987 
1988 
1989 31802 
8280 
4348 
18936 
1505 
1068 
2394 
15 
0 
6620 
4754 
2830 
2894 
1655 
450 
346 
351 
0 
612 
0 
0 19751 
7520 
5018 
8556 
901 
1170 
2927 
15 
0 
5371 
4982 
3458 
2487 
1285 
390 
355 
337 
0 
55 
0 
0 14896 
6730 
5293 
5735 
465 
1170 
1230 
10 
0 
5715 
4779 
3833 
1824 
1160 
290 
267 
316 
0 
135 
0 
0 16713 
6561 
4591 
7533 
304 
1006 
370 
10 
0 
5712 
4777 
3285 
2436 
1180 
300 
449 
290 
0 
213 
0 
0 17499 
6989 
4661 
2995 
417 
1010 
7194 
10 
0 
4325 
5227 
3291 
2448 
1054 
360 
452 
281 
0 
85 
0 
0 10549 
6415 
4562 
4541 
102 
1067 
15 
10 
0 
4307 
5109 
3155 
1227 
950 
340 
459 
244 
0 
0 
0 
0 12623 
5216 
4792 
4699 
133 
1173 
228 
10 
213 
5586 
4447 
3206 
1655 
410 
200 
455 
216 
0 
0 
0 
0 12920 
5115 
7481 
5585 
334 
1154 
141 
0 
0 
5811 
3934 
6127 
920 
650 
200 
463 
197 
0 
0 
0 
0 16186 
5682 
6222 
7648 
467 
1126 
225 
0 
0 
6665 
3588 
4926 
1200 
440 
170 
448 
187 
0 
0 
0 
0 13150 
5348 
11487 
5709 
1436 
1244 
15 
0 
0 
5940 
3102 
10093 
1080 
630 
150 
406 
180 
0 
0 
0 
0 10487 
4874 
4547 
1231 
1198 
15 
0 
0 
4392 
2993 
. 4584 
1085 
475 
310 
448 
175 
0 
0 
0 8655 
5966 
1810 
1164 
1211 
101 
0 
4647 
4325 
6158 
1760 
305 
531 
337 
172 
0 
0 15436 
6143 
6525 
705 
1133 
1238 
7 
5424 
4335 
4579 
1751 
850 
308 
406 
246 
92 
0 annual 
I II III IV V VI VII VIII IX X XI XII average 
TABLE X.6 
Anzahl der wegen Kurzarbeit nicht 
gelefsteten Stunden - Working hours lost due to reduction 
of working time - Heures de travail effective­
ment perdues pour réduction de 
la durée de travaiI 
1986 
1987 
1988 
1989 
1989.07 
1989.08 
1989.09 
1989.10 
1989.11 
1989.12 
1990.01 
1990.02 11 415 
9 626 
7 173 
604 
949 
808 
1 195 11 275 
9 583 
7 173 
604 
949 
808 
1 195 1 427 
787 
262 
146 
6 
11 
5 
12 
5 
46 
12 
12 2 946 
2 320 
819 
1 708 
141 
168 
147 
163 
144 
131 
70 
115 140 
43 
10 143 
166 
27 
0 0 
0 0 
0 0 
0 0 
0 0 6 104 
5 647 
5 620 
7 222 
457 
770 
656 
1 020 
737 
631 542 
616 
421 
0 
0 
0 
0 
0 
0 
0 113 
47 
14 
0 
0 
0 
0 
Source : EUROSTAT 




ISSN 0254-1475 
COM(90) 201 final 
DOCUMENTS 
EN 13 
Catalogue number : CB-CO-90-199-EN-C 
ISBN 92-77-60088-8 
Office for Official Publications of the European Communities 
L-2985 Luxembourg