(2004/C 88 E/0279)

WRITTEN QUESTION P-1028/04

by Nicole Thomas-Mauro (UEN) to the Commission

(26 March 2004)

Subject:   Tension in the steel markets

There is currently extreme tension in the steel markets, where tariffs are rising. If the major placers of orders enjoy one-year contracts, and are, for the moment at least, unaffected by these increases, smaller enterprises are being directly penalised. European companies can no longer apply themselves due to a lack of available raw materials. Companies in Champagne-Ardenne, for example, are reeling under the pressure and are no longer able to honour their commitments to their clients. They are announcing that in a few weeks' time, they will no longer be able to produce, and certain companies have already taken steps to make their staff technically unemployed.

The real reasons for these rises are claimed to be linked to purchases by China, which alone accounts for 70 % of the world market. The representatives of the industry's professional federations or of the building sector are much more nuanced in their assessment, however. While nobody disputes the reality of Chinese growth, nor pressure on the prices of raw materials (iron ore, scrap iron, coke) and even the cost of sea transport, many buyers are speaking about the building of Arcelor's margins, (the world No 1), which is profiting from the situation after a period of crisis.

What solutions can be devised to prevent the multiple repercussions of this price rise, and above all, how is the risk of penury to be tackled, should the current situation persist?

Is limiting scrap iron exports from the producer countries, particularly those of Central Europe, so as to bring the quantities of raw material available and the demand for steel back into balance, a possibility?

Answer given by Mr Liikanen on behalf of the Commission

(15 April 2004)

The Commission is closely monitoring developments on the world markets for steel and the raw materials necessary for its production. It is studying in particular the impact of the increasing demand for these products in Asia on the Community market and prices. In fact, a large part of the difficulties currently faced by the Community market is linked to China's spectacular industrial development and its growing need for source materials, which has led to tension on the market and a sharp increase in world prices.

The EU is a major producer and exporter of steel and scrap and for the moment supplies of these two products do not pose any problems. However, with the present strong growth in demand and rising world prices, all operators are required to carefully balance their purchases and stocks in order to minimise the impact of increased financial exposure on business activity. The steel producer Arcelor is faced with this need as are all the other operators in the production and distribution sector. Of these, however, small businesses have less ability to negotiate in comparison with the big buyers of large quantities.

The Commission agrees with the Honourable Member's cautious and balanced view of the present situation. The Community market is currently experiencing strong pressure on prices rather than a problem of product availability. In general, the operators have been able to pass the price increases on to their customers, which has allowed them to maintain their standard of competitiveness, whilst waiting for the current pressure on prices to ease off. Over the last few weeks we have seen a significant slowdown in Asian demand, which has had an immediate impact on world prices. Without drawing premature conclusions at this stage, these are nevertheless encouraging signs.

The Commission would assure the Honourable Member of its commitment to continue closely monitoring developments on the markets for steel and its raw materials, using all means available to it to make sure that world trade in these products is being conducted in accordance with the rules on open and fair competition.