WRITTEN QUESTION E-3834/98

by Paul Rübig (PPE) to the Commission

(22 December 1998)

Subject: Impact of international financial turmoil on the European steel market - industrial policy

The international steel trade faces new challenges; three major regions of the world - Russia, South-East Asia and Latin America - are facing economic problems. The consequences of this are twofold: the shift in traditional trade flows has led to massive increases in imports into Europe, with a 520 % rise in imports from Asia and a 109 % rise in imports from the USA in 1998, and the concentration of markets has resulted in a fall in European exports, exacerbated by a tendency towards regional protectionism. European steel producers have so far coped successfully with this development. What is now needed above all is some prospect of an industrial policy for this sector.

What information is the Commission gathering for the European framework for the steel industry and its structures? How can the competitiveness of the steel sector be improved?

Answer given by Mr Bangemann on behalf of the Commission

(29 January 1999)

The Commission shares the Honourable Member's view of the seriousness of the situation in the said three regions, whose economic difficulties are all the graver in that they first occurred one after the other, then compounded one another and their repercussions have been sudden - so that the sectors most affected (especially the steel industry) have to act quickly to adapt to the new circumstances.

In particular, the sharp drop in demand in South-East Asia (traditionally an importer of steel products) and the dramatic slow-down in economic growth in other Asiatic countries have, together with Russia's economic crisis, resulted in a surplus of steel products on the world market. This has led, as of early 1998, to major distortions of international trade, precipitating dramatic price reductions.

The markets in question are important outlets for European steel producers, which are going to suffer direct and indirect consequences in the form both of more imported products on their domestic (Community) markets and more competition on other export markets.

In addition, the likelihood of a drop in activity by user sectors in 1999, as a result of a general economic slow-down, would suggest a weakening of demand for steel on the Community market. In other words, both internal and external factor are going to impact industrial sectors in the Community generally and, in particular, steel companies, which are going to have to meet new challenges in order to adapt still further to the new situation - through major reductions in costs and major increases in productivity, and through the development of new products (enhancing the competitiveness of steel products).

The steps which the European authorities can take to support the steel industry during this difficult phase are very restricted, being limited to promoting improvements in the framework conditions within which the European steel industry operates. Proposals to this end will be set out in a communication which the Commission is currently drawing up for discussion by the 29 April 1999 Industry Council and with the ECSC Consultative Committee and Parliament.