EU applicants call for time on steel reform steel

Date: 12/11/1998

By Chris Johnstone

APPLICANT countries are poised to deliver a raft of reports to the European Commission in the coming months outlining how long their steel industries will need to adjust to the rigours of EU membership.

The reports will be closely scrutinised by European steel producers, which are calling for a strict link to be made between further government aid and capacity cuts as the steel industry world-wide faces a catastrophic slump in prices.

Commission officials also want applicant countries to take account of the depressed outlook for the industry since the effects of the Asian crisis began to bite.

Nearly all central and eastern European countries, apart from Slovakia which has privatised its companies, are asking the Commission for more time to shake up their steel industries before strict Union rules on state subsidies and competition are applied.

They have already been given five years to begin adjusting the sector under their accession agreements with the Union.

Poland's steel industry, the biggest in the region, is the most advanced in putting forward its case for exemptions. Warsaw will deliver viability reports on the restructuring of its plants next month, after the Commission asked it to focus on individual firms' performance to facilitate evaluation of the country's overall restructuring plans.

The main focus of the viability reports will be the country's two biggest firms, Huta Sendzimira and Huta Katowice, which account for 60&percent; of the country's production. Commission officials hope the reports will shed light on how much government help is still being given to the sector. Poland claims that there are no direct subsidies, although indirect aid such as government guarantees for loans and investments are available.

The two plants are earmarked for sale in Poland's 1999 privatisation programme, with bidders from the West already lining up. Austria's VA Stahl and the Netherlands' Hoogovens have signalled their intention to bid for Sendzimira and many within the industry believe that British Steel is likely to make an offer.

The Czech Republic will be asked to report next month on how far its restructuring has progressed. Although Prague has sold off some of its steel companies, questions have been raised about the degree to which the government has distanced itself since some of the buyers have been state-owned banks.

Romania, Bulgaria and Hungary are all expected to submit their restructuring reports in the first six months of next year.

Romania's slowness in putting together a programme has already been criticised by the Commission. Its report on the country's progress towards meeting the terms for EU membership highlighted “a lack of political will to close down non-viable companies and to reduce the number of companies in line with capacity requirements”.

Bulgaria's steel sector is in crisis, with three of its biggest firms - Kremikovtsi Ad, Stomana Ad and Promet Ad - all complaining of massive imports of dumped steel from Ukraine and Russia. The firms used to export around 80&percent; of their production.

Compared with the other applicants, Hungary has a relatively small steel sector, with production totalling just 2 million tonnes a year. Most of that has already been sold off to the private sector.