Steel industry comes clean over new image

Date: 04/12/1997

By Chris Johnstone

THE president of the UK Steel Association would clearly like to dwell on the industry's transformation over the past 15 years into a lean and profitable player with good 'green' credentials.

"We are trying to encourage people to see the steel industry in a new light. Most people think of it as smokestack and dirty. We would like them to think of it as clean and a good place to work. We are making a big effort on the environment front," says Brian Clayton.

The association represents around 90% of the UK's steelmakers and feels it has a success story to tell.

Unfortunately, however, Clayton's trip to Brussels last week focused on more mundane matters: a visit to Competition Commissioner Karel van Miert to voice worries about the revival package for Belgian steelmaker Clabecq and a meeting with officials from the Commission's foreign trade directorate-general over Polish barriers to steel imports.

The steel sector's recent history, which appears punctuated by landmark aid decisions, is almost behind it, but there are still some loose ends to tie up.

"On aid cases, it is a lot calmer than it was. The sale of many formerly state-owned steel companies into private hands has helped with that," says Clayton, although he adds: "We will still raise issues when appropriate."

In that context, the president and his policy director, Ian Rodgers, confronted Van Miert with their latest worries about Clabecq, the Belgian steelmaker which has been salvaged from the scrapheap by private Italian-Swiss company Duferco and the Walloon regional government.

The Commission recently ruled that the 25% stake being taken in the company by the regional government was not a state aid, but rather the action of an ordinary investor. However, some Belgian banks appear to be getting cold feet about the credit lines which Clabecq thought it had been promised.

"We want to check whether any inducements are being offered to banks which might add up to state aid," says Clayton.

The duo also pushed Van Miert for sectoral competition rules for the steel industry once the current European Coal and Steel Community Treaty (ECSC) framework expires in 2002. In theory, though not so much in recent practice, the ECSC regulations are tougher than the Commission's general competition rules. The ECSC regulations ban all subsidies, whereas the Treaty of Rome only outlaws those which distort competition, says Rodgers, adding: "We would like these tougher terms to be taken up in new sectoral rules."

Another prime concern for the association is the long-running problem of the Polish government's refusal to bring down its import barriers to steel from the EU, even though it has been badgered to live up to the terms of its association agreement with the Union for the last couple of years.

"The Poles promised to dismantle their import tariffs, but they have reneged on that. They are also supposed to take on board EU-style competition rules and massively restructure their industry," says Clayton.

The Polish question is more one of principle than a practical problem for the UK association. Massive over capacity in the Polish steel industry means western producers are not missing out on export opportunities. What rankles is that the Poles are clearly dodging their commitments, fuelling fears that if they are not disciplined, others will follow. "What Poland is allowed to do today, Slovakia might try tomorrow," says Clayton. "There is a lot of surplus capacity in the former Soviet Union and across most of central and eastern Europe."

So far, such surpluses have not been sucked into the UK in spite of the strength of the pound. Clayton says that the British steel industry is maintaining the levels of its output, although companies have been forced to cut their profit margins.

The high level of the pound has helped convince most of the association's members that the UK should take part in the single currency, although the body as a whole has still to take a formal position.

"We would like to see it pegged at around 2.50 deutschemarks to the pound," says Clayton. The pound was trading at over 2.90 marks to the pound last week.

Perhaps the biggest problem for the steelmakers has emerged from the Commission itself in the form of Internal Market Commissioner Mario Monti's plans for a harmonisation of excise duties on different types of energy. The proposed measure would impose duties for the first time on gas, electricity and coal. Energy accounts for around 20% of steelmakers' overall costs.

Clayton prefers to describe Monti's harmonisation as an energy tax. "There are so many qualifications and loopholes that it will not harmonise at all," he protests, adding: "The tax will not work, so let's forget it."

Interview with Brian Clayton, President of the UK Steel Association.