The global financial crisis and industrial changes in the European metal sectors Judith KirtonDarlin

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The global financial crisis and industrial
changes in the European metal sectors Judith
Kirton-DarlingIndustrial Policy Advisor,
EMF-FEM-EMB
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Financial crisis hits the real economy

• Rapid fall in industrial production alongside
  fall in consumer confidence, especially consumer
  goods
• Automotive
• White Goods
• ICT products
• impact on supply chain steel and non-ferrous
  metals, transport vehicles/shipbuilding
• Intensified by the boom and high prices for
  steel and raw materials
• Aerospace slightly different picture

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Residential permits are falling in the OECD region
Impact of collapse in demand from main steel
consumers
Tighter bank lending is affecting global
construction activity (sector accounting for more
than 40 of world steel consumption)
Source OECD 2008
Sharply falling demand in automotive sector
Source ACEA 2009
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Global Steel Market Situation and Outlook

• Global growth 2002- 2007 averaged 4.6 per year,
  the highest sustained rate observed since the
  early 1970s.
• Downturn started in August 2008 intensified by
  prospects of global recession
• The financial crisis is currently having a severe
  impact on steel
• The steel market downturn that began in the
  summer of 2008 has gained considerable momentum
  over the past few weeks, driven by further
  deterioration in world economic prospects.
• Steel demand, production, and prices have
  plummeted, and demand for key raw materials such
  as iron ore, ferrous scrap, and coal has
  weakened.
• Increasing risk of trade friction through trade
  policy measures

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Plummeting stock prices
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Steel production cuts by region for 2008Q4 (000
tonnes)
Global Steel Market Situation and Outlook
Against an intensifying steel market downturn,
steel producers have reacted quickly by massively
cutting production, bringing global capacity
utilisation rate significantly down (estimated
63 only for Q4 08)
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Reduced production
Source Syndex
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Impact on European metalworkers

• Widespread use of labour market mechanisms across
  the metal/manufacturing sectors
• short-time, chômage partiel, etc. (recent study
  by ETUI)
• Most aiming to maintain skills for upturn
• Announced lay-offs structural change?
• ArcelorMittal November 2008 (9000/6000)
• Corus January 2009 (3500)
• Many maintaining their dividend payments in the
  coming weeks

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EMF demands in context of reduced production

• Need for dialogue with EMF, unions and shop
  stewards with a view to guaranteeing the
  following
• to retain the current workforce in order to be
  prepared for the recovery in demand
• to commit to negotiated solutions and no
  compulsory redundancies
• to compensate for loss of salary in case of
  temporary lay-offs/short-time
• to compensate workers fairly for productivity
  gains achieved by the group
• to maintain the skills, knowledge and human
  capital of the group, including replacing
  retiring workers with new staff and maintaining
  apprenticeships
• to use periods of lower production to invest in
  workers education and training to ensure
  long-term employment security
• to use periods of lower production to invest in
  renovation and upgrading of machinery and
  production facilities, to maintain the viability
  of sites, in cooperation with subcontracting
  companies and
• to develop clear industrial plans for the
  de-mothballing of industrial sites and blast
  furnaces.

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EMF view on recovery packages

• Danger of economic nationalism national recovery
  plans main focus on automotive industry
• French proposals automotive and steel
• Swedish proposals - automotive
• Urgent need for more European coordination on the
  proposals to stimulate the real economy
• Purchasing power vs. subsidising companies?
• Extending globally
• Obamas stimulus package and threat of steel
  trade war
• Need for resolution of dumping advantages in
  upturn

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What impact on trade?
EU-27 imports of finished products(all
qualities, thousand tonnes per month)
Source Eurofer