Tata Steel favours EU funds to soften impact of plant closures
Resource from: Reuters Likes:189
May 20,2013
(Reuters) - Tata Steel (TISC.NS), the second largest steel producer in Europe, supports proposals to use EU funds to soften the blow of steel plant closures, regional chief executive Karl-Ulrich Köhler said.
A prolonged contraction in steel demand has led many producers to seek cuts in capacity, only to face political opposition to a rapid restructuring.
But the European Commission's vice president for industry and enterprise, Antonio Tajani, is drafting an action plan which includes proposals to draw on some EU funds to help workers who lose their jobs as a result of plant closures.
"Tajani has in mind to use some of the European structural funds. In the end you might help the people who are impacted and we have to help the companies," Köhler said in an interview on the sidelines of a conference organised by the EU steel body Eurofer.
Opposition from labour unions and the potentially high social costs are slowing the restructuring process, prolonging the pain for loss-making producers.
Indian steel tycoon Lakshmi Mittal, the biggest shareholder in ArcelorMittal (ISPA.AS), ran into a political storm in France last year over plans to permanently close the two blast furnaces at its plant at Florange.
But Köhler said the industry will not give up on cutting the industry's overcapacity.
"This will certainly go on, this is not hard to predict, as long as demand doesn't recover, because it has led us to a place where we can't remain very long," he said, adding that steel demand in Europe is about 30 percent below its 2008 level whereas in the United States it is only about 10 percent below pre-crisis levels.
Tata Steel itself said this week it will book a $1.6 billion impairment charge in results for the year that ended on March 31 due to the weak economic and market conditions in Europe, its main market.
Köhler also doubted that there could be a recovery this year as normally market conditions tend to worsen as the year goes on.
NO SUBSIDY PLEASE
In the last few weeks discussions have taken place between the industry and politicians over whether to subsidise the industry or impose export or import duties on steel and steel raw materials, but Köhler said he was firmly opposed to subsidies, as distinct from the EU giving structural aid to help workers laid off.
The Italian industry for example has asked the EU to impose an environmental export duty on scrap, a key steelmaking ingredient.
Köhler said he was in favour of monitoring trade tightly to make sure no dumping or unfair trading practice took place but, although the temptation to route public money into the sector was "just huge" at the moment, he strongly opposed any other type of public interference.
"Interventionism is not our language, we don't appreciate distortion of competition," he said.
"If you start to put such a tax or duty on scrap, how far are you from putting it on steel? We are against protective duties because they deteriorate the free trade and gives the right to other people to do so."
The regional head of Tata Steel, which has more than half of its production in Europe, in the UK and the Netherlands, also expressed his concerns about unattainable targets the EU was imposing on the steel industry for cuts in carbon emissions.
Should the EU not moderate its expectations it will push a large part of the steel industry abroad, he said.
(Reuters)
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