The shutdown of blast furnace A in Gijón from the 28th and for a period of three months, announced on Thursday by the multinational steel company ArcelorMittal – and which will mean a drop in pig iron production of more than 25% compared to current levels of activity, with the consequent effect on other plants in the Asturian manufacturing complex, is only the beginning of a chain of cancellations and adjustment measures that the world leader in steel has begun to undertake in various European countries.
On Friday, it announced similar measures at its German plants in Bremen, Hamburg, Duisburg and Einsenhüttendtadt, as well as at the Dunkerque (France) manufacturing complex, and new announcements of cuts are expected on Tuesday that will affect at least its Florange facilities, in the French region of Lorraine, with 2,000 employees.
The multinational said that the adaptation plan to the difficult economic situation of the European steel sector will be applied in its “flat steel plants in the northern half of France” and that, after the communication on Friday to the Dunkirk unions of the specific measures For this manufacturing site, there will be upcoming meetings with the social and economic committees of the rest of the affected flat product factories in the northern half of the country to announce the adjustment that will be adopted in each of them.
Asturias
In the case of Asturias, it is also known that the shutdown of one of the two blast furnaces in Gijón (the only two in Spain) will fundamentally affect the Avilés steelworks and the flat products division (including the thick plate mill in Gijón ), while Veriña’s long products area (rail and wire rod), with its activity already reduced in recent times, but with orders in force, could avoid the effects of the furnace shutdown.
In Germany, on the other hand, the measures will affect, among other facilities, both one of the blast furnaces of the Bremen flat steel complex and the direct reduced iron facility (DRI) of the Hamburg long products factory. This plant had already reduced its activity by 80% due to energy costs.
The social and economic committee (CES) of the Florange steel complex, in the Fensch valley, has been convened for the day after tomorrow on an extraordinary basis and it is expected that its management will communicate the plans for its facilities to the union representation at that meeting. The CGT union and its general secretary at the Florange plant, Lionel Burriello, have already announced their refusal to make sacrifices.
ArcelorMittal has seven factories and other flat products facilities in the northern half of the country, dependent on the subsidiary ArcelorMittal France: Dunkerque, Mardyck, Desvres, Montataire, Florange, Mouzon and Basse-Indre, as well as an administrative and commercial center in Saint Dennis. The company suggested that all of them may have to take production cuts.
It is unknown whether the subsidiary that operates in the southern half of the country (ArcelorMittal Méditerranée), and which has two factories, will take similar measures or not. There is also speculation that the company could make similar decisions in other countries, such as Eastern Europe.
Causes
In both France and Germany, the company has invoked as causes of the adjustments the adverse factors that had already been denounced days ago by the European steel employers’ association (Eurofer), which predicted a possible “moderate recession” in the sector. It is a perverse combination of falling orders and apparent consumption of steel that affects the European steel sector, the continuity and increase in the entry of non-EU products at low prices and which are not obliged to bear the costs of CO2 emission, the high cost of these carbon credits and the crazy rise in energy prices in the EU, which threatens to worsen once Russia did not reopen the Nord Strem I gas pipeline yesterday after the three-day stoppage that the Russian gas company Gazprom attributed to maintenance needs. The decision points to a purpose of definitively canceling the main tube supplying Russian gas to Europe and through which it flows directly to Germany.
To undertake the adjustments, the company ArcelorMittal France alleged “the sharp slowdown in demand in the steel markets” and “the rise in energy and CO2 costs”, which “is degrading our competitiveness against imports from outside Europe, as well as European exports” outside the area.
The German subsidiary ArcelorMittal Germany resorted to the same arguments, warning that “continued high CO2 costs in steel production make EU safeguard measures ineffective.” The emission rights, which were quoted at 33.4 euros per ton of CO2 in January 2021, are now paid at 79.3 euros.
Energy
ArcelorMittal Hamburg CEO Uwe Braun said on Friday that “the extreme price of gas and electricity makes it impossible for us to continue to operate profitably.” And Reiner Blaschek, CEO of AcelorMittal Germany and head of the Bremen plant, argued that “with a tenfold increase in gas and electricity prices, we are no longer competitive in a market that is 25% supplied by imports”. The German government will apply a tax on gas from October, which, according to Blaschek, will make everything even more difficult.
Of the three countries in which ArcelorMittal has announced production cuts and facility stoppages, Spain is the only one in which the company does not mention the cost of energy, although it does mention CO2 as the cause of the decision to stop facilities. Sources from the multinational explained that the determining factor in Spain “is not so much energy”, even though it continues to be very expensive, as “the market situation”, with the drop in demand and the simultaneous entry of imports. And they argued that at this time, and for the purposes of competitiveness, the energy cost is beginning to be more burdensome in other countries with which the Asturias plants compete.
The cost of electricity and gas, although high, has been decoupled in Spain from the European reference (the Dutch TTF) and, in general, the Iberian price (Midgas) moves below.
Electricity, and after the approval of the “Iberian exception”, has reached maximum levels in the wholesale market, but well below those in force in other European countries, even when the Spanish price includes compensation to power plants combined cycle for the difference between the recognized cost of gas (which has been limited by political intervention as a source for electricity generation) and its real price on the market. Even so, the megawatt will be paid today in Spain at 192.4 euros compared to 242.7 in Germany, 257.5 in the United Kingdom, 322.7 in France and 395.2 in Italy, which shows that the “Iberian exception ” is alleviating the situation in comparative terms.
The Spanish employers’ association of energy-intensive industries (AEGE) estimated in its latest bulletin that the average cost of a megawatt for the electro-intense industry until August 30 is 287.3 euros, above France (198.26) but for once first below Germany (405.1 euros).
Fade asks the EU for measures and MEP Susana Solís demands to modify the market
The EU expects Russia to respect gas supply contracts (including supply via the Nord Stream I gas pipeline), but is prepared to “react” to the challenge if it does not, said European Commission Economy Minister Paolo Gentiloni. The President of the European Council, Charles Michel, expressed himself in the same vein. Meanwhile, national demands are growing for the Commission to intervene in the energy market and stop the escalation of prices. Yesterday the President of the Spanish Government, Pedro Sánchez, did so to apply the reform that his Government has been asking the EU for a year, and also the Italian Head of State, Sergio Mattarella, who demanded an urgent response from Europe . The Asturian employers’ association (FADE) called for pressure on the EU to apply the “border adjustment” that makes imports of extra-community steel that does not meet environmental standards more expensive, prolong free emission rights and accelerate the approval of decarbonization projects and the provision of European funds to accompany such investments. ArcelorMittal intends to invest 1,000 million in Asturias for this purpose and aspires to attract 500 million European funds for this project. The Asturian MEP for Ciudadanos Susana Solís pointed out that “modifying the European electricity market is a necessity, not a whim”. “The decoupling of gas from the price of energy is an unavoidable measure, but you have to see how with a magnifying glass. My proposal points to a temporary decoupling that is activated when the price of gas reaches exceptionally high levels. “For the European electricity market to adjust to the times, it must respect”, she said, “that gas loses weight in price and that renewables are not affected. And in this scenario, the commitment to nuclear energy is evident. All European countries, and especially Spain, must extend the useful life of their plants to the maximum.