Report from the Commission - Monitoring of Article 95 ECSC Steel aid cases, Fifteenth Report, May 2001
Date: 2001-05-02
Institutions: European Commission
Subjects: Austria, ECSC aid, Germany, Ireland, Portugal, aid to industry, control of State aid, iron and steel industry

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 2.5.2001
COM(2001) 232 final

REPORT FROM THE COMMISSION

Monitoring of Article 95 ECSC Steel aid cases, Fifteenth Report, May 2001

REPORT FROM THE COMMISSION

Monitoring of Article 95 ECSC Steel aid cases, Fifteenth Report, May 2001

Table of contents

1.

Summary........................................................................................................................ 3

2. Overview........................................................................................................................ 5

3.

4.

5.

Irish Steel, Ireland .......................................................................................................... 6

Siderurgia Nacional, Portugal......................................................................................... 7

EKO Stahl GmbH, Germany ........................................................................................ 11

6. Voest Alpine Erzberg GmbH, Austria........................................................................... 13

2

1.

SUMMARY

The Commission presents its Fifteenth Report on the Monitoring of Article 95 ECSC steel and
iron ore aid cases pursuant to its decisions of 4 April 19941, 21 December 19942 and 29
November 19953.

In accordance with the above mentioned decisions, this fifteenth report will cover the following
companies: Irish Steel, Siderurgia Nacional, EKO-Stahl and Voest Alpine Erzberg. Since most
conditions imposed by the Commission in its decisions approving the aid are already fulfilled,
only the conditions still monitored by the Commission are addressed in this report.

1.1.

Irish Steel, Ireland

Investments carried out at Irish Ispat up to 31 December 2000 did not modify the company’s
production capacities.

1.2.

Siderurgia National, Portugal

The monitoring is focused on following up the plan for installation of the electric arc furnace,
which according to a modified plan should be operational in the second semester of 2001. The
closing down of SN Serviços is scheduled for the first trimester of 2001. Legal steps for the
required reduction of workforce at SN Serviços have been taken. In order to monitor the
completion of the aided restructuring the Commission decided to continue the monitoring until
15 March 2002.

1.3.

Eko-Stahl, Germany

The only conditions still monitored by the Commission is respecting the annual capacity
limitation (1,5 million t/y as from February 2000) of the new hot-rolling mill and the using of its
production only for further processing in the company. The capacity limitation is controlled by
an electric device, the orderly functioning of which is monitored by the Commission. The
capacity limitation was respected during the monitored period.

1.4.

Voest-Alpine Erzberg, Austria

The price charged for iron ore was in line with market prices and higher than the price of
imported iron ore in the monitored period.

The decision authorises ATS 52 million aid to be granted over 2000. In 2000 ATS 35 million has
been disbursed.

1.5.

Outstanding issues from previously monitored companies.

• ILP

Investments performed in the second semester of 2000 did not modify the total production
capacity of the company for crude steel and hot rolled products.

1

2

3

Decisions No 94/257-261/ECSC (O.J. L 112, 3.5.1994, p. 52, 58, 64, 71, 77)
Decision No 94/1075/ECSC (O.J. L 386, 31.12.1994, p. 18)
Decision No 96/269/ECSC (O.J. L 94, 16.4.1996, p. 17)

3

• ACERALIA

In the second semester of 2000 the total production capacity of the company has not been
modified.

• AHV-Ensidesa Capital

Social aid paid to the company in the second semester of 2000 was in line with the approved aid.

• Acenor

Social aid paid to the company in the second semester of 2000 was in line with the approved aid.

• Freital

No increase of remaining capacity took place in the second semester of 2000.

4

2.

OVERVIEW

Company

SN

EKO

IRISH
STEEL

VAEG

Aid Article 95 ECSC

aid Steel Aid Code

Capacity reduction

Redundancies

Siderurgia Nacional, EKO Stahl, Irish Steel, Voest Alpine Erzberg

Authorized

Granted

Authorized

Granted

kt/y

Date

Kt/y

Date

Plan

Achieved

Required

Achieved

Remarks

100 %

100%

PTE 60.12
billion
€
306
(
million)

DM 900.62
million
€
(
lion)

462 mil-

IEP 38.298

100%

million
€
(
lion )

47.7 mil-

ATS 408
million
€
(
lion)

29.7 mil-

ATS 274.8
million
€
(
17.42
million)

PTE 5,925
million
€
(
29.55
million)

DM 385
million
€
(
lion)

197 mil-

PTE 2,669.16
million
€
(
lion)

12.01mil-

140

31.12.95

100% 31.12.95

1798

=

1766
98%

Redundancies
plan,
closure of blast furnace planned
for 1st quarter 2001

behind

100%

361

31.1.95

100% 28.2.95

by

650
1999

195
1999

by

by

205
1996

209
1996

by

-

-

-

-

-

-

by

84

71
2002

Redundancies ahead of
schedule.

5

3.

IRISH STEEL, IRELAND

The Commission decided on 7 February 1996 (Commission Decision 96/315/ECSC)4 to approve
aid under Article 95 ECSC linked to the sale of Irish Steel Ltd (ISL) to Ispat International
amounting to a maximum of IRL£ 38.298 million5, serving various purposes toward the
restructuring of Irish Steel (for details see the previous monitoring reports).

Under the terms of the decision the aid was approved subject to various conditions (for details see
previous monitoring reports). The Irish authorities submitted on 16th March 2001 the eleventh
monitoring report in accordance with the Commission's decision. This report included a set of
financial data and ratios in line with the Annex to that decision.

At present, the only remaining condition to be monitored is the five years production capacity
freeze up to the end of May 2001. Investments carried out by Irish Ispat Ltd. in 2000 did not
modify the company’s production capacities and related to replacement, maintenance, improving
productivity of the plant and improving reliability of data.

4

5

€

OJ L 121 of 21/5/1996, p. 6
1

= IRL 0,7876.

6

4.

SIDERURGIA NACIONAL, PORTUGAL

4.1.

Introduction

On 12 April 1994 the Commission approved6 PTE 60.12 billion7 aid to the Portuguese
public steel undertaking Siderurgia Nacional under Article 95 of the ECSC Treaty (see
details in the previous monitoring reports).

This aid was paid in 1994 and 1995.

In September 1994 the Commission approved under the Fifth Steel Aid Code:8

–

–

PTE 4 925 million in social aid,

PTE 1 000 million in aid for environmental protection.

By the end of 2000, social aid amounting to PTE 2 669.16 million has been paid. The
remaining social aid and the environmental aid may still be disbursed.

Authorisation of the aid was subject to several conditions. The following conditions are
still monitored by the Commission :

–

–

replacement of
(outstanding),

the blast

furnace at Seixal by an electric arc furnace

total workforce to be reduced by 1798 employees by the end of 1996 (delayed),

The present report covers developments up to 31 December 2000 on the basis of
information provided by the Portuguese Government in its fifteenth monitoring report,
which was submitted on 16 March 2001. The present report concentrates on the
conditions still monitored by the Commission.

4.2.

Investments

SN Longos – Electric arc furnace

Under the initial restructuring plan (PERG), the blast furnace was to be replaced by an
electric arc furnace by the beginning of 1996. The Portuguese Government’s decision to
privatise the operating companies immediately, which was not envisaged by the initial
restructuring plan, and the approach taken by the authorities of leaving the final
investment decision to the new private shareholders in SN Longos have led to a
five-year delay in installation of the electric arc furnace (cf. previous reports).

6

7

8

€

OJ L 112, 3.5.1994, p. 52.
1
OJ C 390, 31.12.1994, p. 18.

= 200,482 PTE. Total amount 299 million

€

.

7

The revised timetable for the completion of the investment is as follows:

Civil construction works

Installing the equipment

Start of operations

Furnace fully operational

2nd semester 2001; partially in
process

2nd and 3rd quarters 2001

4th quarter 2001

1st trimester 2002

The Commission is following the progress of the plan step by step. It needs to be
stressed that when the derogation was granted under Article 95 of the ECSC Treaty,
replacement of the blast furnace by an electric arc furnace was regarded as a key feature
of the necessary industrial restructuring of Siderurgia Nacional.

The restructuring cannot therefore be regarded as complete until that investment has
been carried out. Although there is currently no indication that the delay will make it
necessary to grant further aid to SN Serviços, the Commission has to monitor the
completion of the aided restructuring.

On 15 October 1998 the Commission therefore already decided to extend the
monitoring period till at least 15 September 2000. The investment in the electric arc
furnace is planned to be completed by the end of the first semester of 2001. Considering
the need for a sufficient safety margin as delays may occur in such types of investment,
the Commission has decided to continue the monitoring period till 15 March 20029.

4.3.

Evolution of workforce

Reduction of the workforce is lagging behind the initial plan. This delay affects only
SN Serviços and will therefore have no impact on the viability of the privatised
companies. Portugal and SN Serviços informed the Commission that for technical
reasons10 SN Serviços decided to cease its activities in the first trimester of 2001, thus
before the new electric arc furnace to be installed by SN Longos at Seixal enters into
operation. The company intends to proceed to the layoff of staff in this period. In 2000,
the company initiated the legal steps necessary to reduce workforce. The delay in
implementing the initial plan concerned altogether 33 workers as at the end of 2000.

9

10

SG (2001) D/285564 of 31.01.2001
cf. 14th Monitoring Report

8

The following table shows the evolution of the workforce and the forecasts:

1999

2000

2001*

SN Longos + Lusosider

SN Serviços

Total workforce

710

878

1588

Planned total workforce

1410

Deviation from plan

178

648

795

1443

1410

33

590

44**

634

1410

-776

*Expected reduction during the year 2001

**Workers needed for dismantling the installations

SN Longos is likely to increase its workforce once the new electric arc furnace is put
into service, so that the total workforce of the privatised companies will increase
slightly after the closure of the blast furnace. The initial target of 1 410 employees set
by the restructuring plan is expected to be achieved at latest during 2001 after closure of
the blast furnace.

Financing of redundancies:

Nature

Number of
workers

Art 56
ECSC

State (Art 56
ECSC)

Company1

Total

Costs in PTE million

Early retirement

974

265.42

265.42

36.3

567.14

1993 -

Redundancy2

652

306.7

306.7

2884.34

3497.85

1999 *

Other

Total

106

1732

572.12

572.12

2920.64

4065.09

2000

Early retirement

120

28.83

28.83

-

57.66

Redundancy2

Other

Total

3.61

3.61

110.56

117.78

18

5

143

32.44

32.44

110.56

175.44

*
1

2

For details on the period 1993 - 1999 see previous Reports.
In accordance with Article 4(1) of the Fifth (until 1996 included) respectively the Sixth
Steel Aid Code (as from 1997), a contribution from the State defrays 50% of these costs.
Through mutual agreement (negotiated redundancy).

In 2000, PTE 259.6 million in social aid authorised under Article 4 of the Sixth Steel
Aid Code was disbursed.

9

4.4.

Sales

The sales of billets on the Portuguese market by SN Serviços go exclusively to
SN Longos. Prices for these products are fixed on normal market conditions for a period
of three months. Residual steel production is sold on the market against market prices
(Metal Bulletin spot prices). The average prices achieved by the different product
groups were given in the monitoring report. The Commission has compared these prices
with the average market prices and considers them to be within the normal range.

4.5.

Financial performance

SN Serviços

According to the Portuguese authorities,
underway, has meant
information required concerning the balance sheet and the profit and loss accounts11.

the closure of the enterprise, currently
it was not possible to present by 15 March 2001 the

that

It results, however, from the provisional information provided on 19 April that losses in
2000 would amount to PTE 7 271 million.

The Commission regrets that the Portuguese authorities did not comply with their
reporting obligation in time. It intends to include in its next monitoring report the
definitive figures for 2000 as well as the figures for the first half of 2001.

4.6.

Aid

The aid authorised under Article 95 of the ECSC Treaty has been paid in six instalments
between March 1994 and June 1995 as explained in the fourth monitoring report. The
environmental aid approved under Article 3 of the Fifth Steel Aid Code has not so far
been paid. The use of the social aid approved under Article 4(1) of the Fifth,
respectively the Sixth Steel Aid Code is explained above under 4.3 (financing of
redundancies).

11

According to the Portuguese authorities, this delay is due to the ongoing process of closure and to the
requirements resulting from the audit in this final phase of the firm's existence. Moreover, difficulties have
also arisen due to the early retirement of staff in the financial department, which has evidently put a strain
on the remaining human resources who must accomplish the necessary work.

10

5.

EKO STAHL GMBH, GERMANY

5.1.

Introduction

On 21 December 1994 the Commission authorised12 DEM 900.62 million 13 aid to
EKO Stahl GmbH under Article 95 of the ECSC Treaty (see details in the previous
monitoring reports).

On 21 December 1994 the Commission further approved14 regional investment aid of
DEM 385 million15 under Article 5 of the Fifth Steel Aid Code.

Authorisation of the aid was subject to several conditions. The following conditions
are still monitored by the Commission:

–

–

the new hot-rolling mill to reach a capacity of 900 kt/y by the end of 1997 and
to be kept at that level until the end of January 2000. As from February 2000,
the company is allowed to increase the capacity of this mill to 1.5 mio
tonnes/year until the end of January 2005 (monitored),

the output of the new hot-rolling mill to be used only for further processing in
the company’s own cold-rolling facilities (so far observed).

The present report covers developments up to 31 December 2000 on the basis of the
information provided by the German Government in its report submitted to the
Commission on 15 March 2001.

5.2.

Capacity limitation

Limitation of the capacity of the new hot-rolling mill to 900 kt/y up until the end of
January 2000 and thereafter to 1.5 million t/y up until the end of January 2005 is
guaranteed by an electronic device that makes it technically impossible to exceed
those ceilings. This technical solution was accepted in principle by the Commission
in early 1996. For further details on the system, see the fifth monitoring report. The
system has operated reliably and the records of the quantities produced have been
regularly submitted to the Commission.

The authorised capacity increase as from February 2000 posed technical problems to
the company as the electronic device is adjusted for the capacity year, which runs
from July to June. On 15 March 1999 the Commission therefore agreed to a proposal
from the German authorities that the production from July 1999 until July 2000
would be counted using the average production of the two thresholds which results in
a yearly capacity of 1.150 million t for the capacity year July 1999 - June 200016.
The machine has been adapted accordingly on 1 July 1999 and has been adjusted to
1.5 million t/y by 1 July 2000.

12

13

14

15

16

= 1,95 DEM. Total amount 462 million

€

OJ L 386, 31.12.1994, p. 18.
1
OJ C 18, 17.1.1997, p. 7
€
197 million
details see 13th Report.

€

11

5.3.

Production of the hot-rolling mill

Hot-rolled strip produced in the hot-rolling mill
cold-rolling mill.

is used exclusively in the

The production of hot rolled strip amounted to 749 600 tonnes in the second half of
2000 and 1 340 900 tonnes in the whole year.

12

6.

VOEST ALPINE ERZBERG GMBH, AUSTRIA

6.1.

Introduction

On 29 November 1995 the Commission approved17 state aid to Voest Alpine Erzberg
GmbH (VAEG) to enable it to close down its mining operations gradually up to the
year 2002. Approved aid amounts to ATS 272 million to cover operating losses over
the period 1995-2002 and ATS 136 million18 to cover the costs of closing down
mines safely and in an environmentally friendly manner.

Authorisation of the aid was subject inter alia to the following conditions:

–

–

–

the annual aid ceilings and the production ceiling as given in the table above
were not to be exceeded (so far observed; cf. 6.2.2.1 below),

the amount of operating aid was not
production costs and revenues (so far observed),

to exceed the difference between

the price charged for iron ore was to be in line with market prices and was not
to be lower than the price of imported iron ore (so far observed).

This report covers developments up to 31 December 2000 on the basis of information
provided by Austria in its eleventh monitoring report, which was submitted, in line
with the Commission’s request, on 14 March 2001.

6.2.

New monitoring report

6.2.1.

The company

The company Voest Alpine Erzberg Gesellschaft mbH (VAEG) is held by ÖIA
Bergbauholding Aktiengesellschaft, which in turn belongs to Österreichische
lndustrieholding Aktiengesellschaft, an industrial holding company wholly owned by
the Austrian State. VAEG is involved in the mining of low-density iron ore (~32 %
Fe). The company has only one client, Voest Alpine Stahl AG (VASA), which was
privatised in the autumn of 1995.

6.2.2. Operating aid

6.2.2.1. Production and sales

In the year 2000 VAEG produced 860 000 tonnes of iron ore with an average content
of 33.6% Fe and 1.026 million tonnes of low grade products which VASA can use
for the blast furnace burden (Möllerzusatzmaterial). These quantities were sold and
delivered to VASA. The above mentioned 860 000 tonnes exceed in 9 000 tonnes the
ceiling for 200019. According to the Austrian authorities, this small surplus consisted
in a security margin for the event that, due to the poor quality of the ore, not all the

17

18

19

€

OJ L 94, 16.4.1996, p. 17
1
Cf. 14th Report page 16

= ATS 13,7603. ATS 272 million = 19,76 million

€

; ATS 136 million = 9,88 million

€

13

quantities delivered would be accepted by VASA. The Austrian authorities have
committed to deduct this surplus from the authorised ceiling for 2001.

6.2.2.2. Production costs

In 2000, the production costs for iron ore and the low grade product, including
closure and rehabilitation operations, stood at ATS 130.77. A detailed overview of
production costs is given in the Annex.

6.2.2.3. Pricing

The standard-grade iron ore was sold at ATS 139.50 (
standard price has been set in November 1999 for the whole of 2000.

10.14) per tonne. This

€

The low-grade material (Möllerzusatzmaterial) was sold at ATS 82.15 (
tonne, fixed on the basis of the market price for lime gravel (Kalkschotter).

€

5.97) per

for

price

average

The
(Möllerzusatzmaterial) results in ATS 105.20 (
of transport to VASA/Linz, the price charged was ATS 684.14 (
Fe.

low-grade material
7.95) per tonne. Including the costs
€
49.72) per tonne

deliveries

iron
€

and

ore

of

The information submitted by Austria in its eleventh report confirm the information
given by Voest Alpine Rohstoffbeschaffungs GmbH, a subsidiary of Voest-Alpine
Stahl AG responsible for the purchase of raw material, that the above price per tonne
Fe for iron ore is higher than the comparable price it has to pay for imported iron ore.

It may therefore be concluded that the prices charged in the second semester of 2000
were not lower than required under Article 2 of the Commission’s Decision of
29 November 1995.

6.2.2.4. Operating aid

The total losses incurred by VAEG in 2000 were ATS –46.88 million (
million).

€

-3.41

Of the total losses sustained in this period, ATS 11.5 million related to closure
operations. Further details on losses are given in the Annex.

In 2000, ATS 24 million has been disbursed as operating aid while the amount
authorised by the Commission for this year is ATS 30 million.

6.2.3. Closure aid

In 2000, ATS 11 million has been disbursed as closure aid while the amount
authorised by the Commission for this year is ATS 22 million.

14

.

6.2.4.

Aid payments in relation to aid authorised

.

Total aid

Operating aid

Closure aid

(ATS million) Authorised

Paid

Authorised

Paid

Authorised

1995-1999*

254

239.8

196

35

2000

2001

2002

52

52

50

30

26

20

187

24

58

22

26

30

Paid

52.8

11

Total

408

274.8

272

211

136

63.8

* For details on the period 1995 - 1999 see previous Reports

6.2.5.

Evolution of workforce

The plan for reducing the workforce is as follows:

Workforce

1995

1996

1997

1998

1999

2000

2001

2002

Production

280

Closure operations

6

Total

286

276

10

286

273

13

286

273

13

286

254

20

274

242

20

262

210

31

241

181

34

215

Departing from the original plan the total workforce was reduced to 202 in 2000.
Reduction of workforce is therefore ahead of plan.

15

ANNEX

Comparison of production costs and revenues, year 2000

Iron ore

Low-grade product

Closure and
securing

Production
(tonnes)

860 500 t

1 025 700 t

Total

1 886 200 t

Costs

(ATS 000’)

(ATS/tonne)

(ATS 000’)

(ATS/tonne)

(ATS 000’)

(ATS 000’)

(ATS/tonne)

Production

26 583

Extraction

41 272

Processing

49 727

Quality control

5 479

Transport

5 990

30.89

47.96

57.79

6.37

6.96

21 233

21 540

15 386

4 103

6 667

20.70

21.00

15.00

4.00

6.50

47 816

62 812

65 113

9 582

12 657

25.35

33.30

34.52

5.08

6.71

Overheads

12 907

15.00

15 386

15,00

28 293

15.00

Cost related to
exhausted
parts of mine

Closure (tech-
nical and so-
cial measures)

Total cost of
sales

7 545

8.77

7 545

4.00

12 847

12 847

6.81

149 503

173.74

84 315

82.20

12 847

246 665

130.77

Revenues:

Iron ore

Low grade product

Sales (tonnes)

860 500 t

1 025 700 t

Selling price

120 040

139.50/t

84 315

82.20/t

Deduction for
difference
in
quality

- 5 902

Total

1 886 200 t

204 355

- 5 902

Total

114 138

84 315

198 453

105,21/t

Difference

Operating
result

Aid

-35 365

24 000

-12 847

-48 212

11.000

35 000

16