Paris, 7 December 2016
New steel industry dynamics as a result of production overcapacity in China’s steel industry, and the need to ensure steel can play a key role in a world increasingly focussed on sustainability and a more circular economy, are driving important change and innovation within ArcelorMittal Europe.
These were the two main themes addressed at ArcelorMittal’s annual media day for European journalists, with a number of senior executives at the world’s leading steel and mining company speaking at the event in Paris.
The speakers gave their perspectives on what the two themes covered mean for ArcelorMittal’s European operations, for research and development at ArcelorMittal, and for greater environmental sustainability both at ArcelorMittal and across the steel industry.
The issue of China’s steelmaking overcapacity has deeply affected the profitability of the steel industry in recent years and put the issue of fair trade high on the political agenda.
David Clarke, ArcelorMittal’s head of strategy and chief technology officer, put the issue into a European perspective:
“In 2009, China exported two million tonnes of finished steel to Europe; in 2015 this rose to nine million tonnes. Europe is roughly a 150 million tonne market – still around 25% below pre-financial crisis levels - and apparent steel consumption is currently growing at around 1% a year. So in effect, we are seeing the demand increase in Europe being swallowed up by increased levels of imports, with European steelmakers struggling to benefit from the mild increases in demand”.
Speaking about the company’s response to the tough operating environment, Mr Clarke said:
“We have focussed very hard this year on matters that we can control, strengthening our balance sheet and outlining a new five-year strategic plan that will ensure we can prosper and deliver sustainable profitability in any market environment. We are making good progress which has been reflected in the company’s improved results across the year but until the issue of overcapacity in China is fixed we have to be very focussed on improving the competitiveness of our business and being active when it comes to unfair trade.“
Geert Van Poelvoorde, CEO ArcelorMittal Europe – Flat Products, echoed these comments saying, “We have put all our efforts into improving the competitiveness of our business so that we can have a sustainable steel-making operation in Europe – and we are making good progress.” He then outlined the three fundamental challenges the European steel industry is facing, namely:
- European Union legislation regarding the treatment of non-market economies, principally China
- The need for the European Union to modernise its trade defence instruments
- The European Union’s Emissions Trading System.
He spoke about the progress that has been made to improve the European steel industry’s prospects and tackle these three challenges in the past year, recalling the steel industry’s difficult end to 2015:
“Exactly a year ago, I was chairing a crisis meeting in my capacity as president of Eurofer. We were at one of the darkest points in the steel industry. A year on, we’re in a better place – for the short-term outlook at least. This improvement is partly due to the effect of trade defence actions taken by the European Commission, which have helped to protect our business against unfair imports.”
Mr Van Poelvoorde also acknowledged the industry-wide effort to put steel on the agenda and “fight for the future”. But he stressed that on the issue of trade modernisation, there was still a need for more progress.
“There is no doubt we have seen important progress this year and I am grateful to the European Commission for the seriousness with which they have addressed this matter. We are not quite yet there though - Europe’s procedure for investigating cases of alleged dumping is much slower than in the rest of the world and the dumping duties that are being imposed, are too low. We would also like to see progress in these two areas.
He said however that his biggest concern today relates to the method the EU is prescribing in order to have a low carbon economy, the Emissions Trading System. “This is the toughest challenge we face”, he said, explaining that the system doesn’t take into account the realities of the steel-making industry having been designed for the energy sector, which is a regional market.
“At a fundamental level it doesn’t work for the steel industry, which is a global industry. If European producers have to pay this carbon tax but producers elsewhere exporting into Europe don’t, then it puts European producers at a competitive disadvantage. It also doesn’t acknowledge the chemistry of steelmaking. Even if all our operations were powered by wind turbines, we’d still be omitting significant levels of CO2, because the majority of our CO2 emissions are created when iron ore is made into iron during the steelmaking process. This is an inescapable chemical reality.
“We understand the importance of addressing climate change and we are committed to doing our best to reduce emissions. From a European perspective, I can tell you that reducing our carbon emissions is business-critical. But we strongly believe that the ETS in its current form does not achieve its aim of incentivising steel companies to reduce emissions and could have damaging and detrimental effects for the European steel industry”.
Van Poelvoorde underlined that the reason ArcelorMittal Europe and the steel industry as a whole is asking for changes to both trade defence and carbon legislation, is in order to have a global level playing field:
“As an industry, we have absolutely nothing against competition – we welcome it. Here in Europe, we have very efficient operations that are globally competitive. But we have to speak out against legislation that we know will put the European industry at a competitive disadvantage with players from other regions because ultimately this could have an impact on jobs and the economy more broadly. We have made progress this past year in getting our voice better heard, but there is much work still to do in ensuring the steel industry faces a level playing -field and appropriate regulatory environment.
Mr Greg Ludkovksy, the company’s head of research and development, and Mr Alan Knight, head of corporate responsibility, then spoke about the importance of recognising the significant contribution ArcelorMittal and the steel industry is making to a more sustainable economy through the products it is making and its natural alignment with the circular economy.
Mr Ludkovsky spoke about sustainability as a catalyst for change, both in terms of the technology within its steel mills and the products created for customers. He spoke of the “transformational opportunity” represented by a major project for the construction industry that ArcelorMittal is rolling out in 2017. Steel in Modern Construction, through its first case study on office building, will lower the environmental impact of a building by one fifth compared with the baseline, while also demonstrating steel versatility and offering cost savings in a number of ways, principally through the use of light weighting and high-strength steels. “The importance of these types of innovations whether in construction or for other market segments like automotive clearly show that steel can be the solution to the climate challenge,” he said. “These are driving significant reduction in emissions across the life cycle of different products”.
Mr Knight, detailed how steel plays a key role in the circular economy – at a time when the European Union is debating its Circular Economy Package which includes revised legislative proposals on waste – and spoke about a number of projects at ArcelorMittal that are using waste created during the steelmaking process, from turning steelmaking slag into agricultural fertiliser, to making bioethanol to fuel aeroplanes from waste gases created during the steelmaking process: “Sustainability, and specifically the role that steel is playing in the circular economy, are resulting in the creation of new business models and pan-industry collaborations that are potential game-changers”, he said. “At ArcelorMittal we are active in being involved in a number of different partnerships that look to more fully utilise and exploit the potential from re-using by-products and waste gases – we are fully supportive of the concept of carbon capture and utilisation and convinced this offers important long-term opportunity for the reduction of CO2.
Concluding the event, Van Poelvoorde reminded journalists that Europe “in many ways is a great place to make steel – the fact that ArcelorMittal Europe employs more than 83,000 people in the EU28 is testament to this. And I am convinced that with the right legislative framework, the steel industry in Europe can continue to prosper and support European goals in areas such as the circular economy and even climate change”.
To read Geert Van Poelvoorde’s full speech, click here