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Prof. Dr.-Ing. Dieter Ameling Senior Counselor ThyssenKrupp Steel former President German Steel Federation former Chairm

European Steel in a Globalized Market. Prof. Dr.-Ing. Dieter Ameling Senior Counselor ThyssenKrupp Steel former President German Steel Federation former Chairman Steel Institute VDEh. ABM’s 63rd Annual Congress July 28 – August 1, 2008 Santos – SP - Brazil.

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Prof. Dr.-Ing. Dieter Ameling Senior Counselor ThyssenKrupp Steel former President German Steel Federation former Chairm

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  1. European Steel in a Globalized Market Prof. Dr.-Ing. Dieter Ameling Senior Counselor ThyssenKrupp Steel former President German Steel Federation former Chairman Steel Institute VDEh ABM’s 63rd Annual Congress July 28 – August 1, 2008Santos – SP - Brazil

  2. European Steel in a Globalized Market • Steel in a globalized environment • Raw materials – short and expensive • European steel industry – sustainable, innovative and competitive • Steel and the energy and climate policy of the EU • EUROFER‘s proposal to reduce the steel industries CO2-emissions worldwide

  3. Explosion of World Crude Steel Production and Continuous Casting Stahl-Zentrum 11.07.2008

  4. The European Union – 27 Member States Stahl-Zentrum 11.07.2008

  5. The Ranking of Gross Domestic Product (GDP) by Actual Prices 2006 Stahl-Zentrum 11.07.2008

  6. EU 27: No. 2 in World Crude Steel Production 11.07.2008

  7. The Top 10 Steel Producers in the EU 27, 2007 11.07.2008

  8. World Trade in Steel Excludes internal trade within the EU 25 Source: ISSB Stahl-Zentrum, 11.07.2008

  9. China No. 1 Steel Exporter EU 27 No. 1 Steel Importer Main Regional Steel Trade Flows (2007) Source: ISSB Stahl-Zentrum, 11.07.2008

  10. China: Imports and Exports Steel Mill Products up to May 2008and forecast 2008 Stahl-Zentrum 11.07.2008

  11. Total export volume : 68,3 Mill. t Asia total: 52,7 % EU 27: Chinas Export Target No. 1 outside Asia in 2007 Source: Trade Statistic German Steel Federation Stahl-Zentrum, 11.07.2008

  12. Actual Antidumping Complaints of EUROFER No. 1 against EU 27 hot dipped coated sheet imports from China Str 28Mrch08 and No. 2 EU 27 stainless cold rolled sheet imports from China, Korea, Taiwan No. 3 EU 27 wire rod imports from China and Turkey Source: official EU trade statistic (Eurostat) with own calculations Stahl-Zentrum, 11.07.2008

  13. Free or cheapened electric power supply Governmental regulation of production andexternal trade Preferential Loans and Direct Credit Subsidized freight rates Disregarding of environmental and occupational safety standards Support of individual companies Land grants Governmental support of developments of raw material sources Fiscal development aid The Influence of the Chinese Government on the Industry 11.07.2008 Stahl-Zentrum

  14. Blast Furnace in China Stahl-Zentrum Source: GEO 11/2007 11.07.2008

  15. Coking Plant in China Stahl-Zentrum Source: GEO 11/2007 11.07.2008

  16. European Steel in a Globalized Market • Steel in a globalized environment • Raw materials – short and expensive • European steel industry – sustainable, innovative and competitive • Steel and the energy and climate policy of the EU • EUROFER‘s proposal to reduce the steel industries CO2-emissions worldwide

  17. Price Development of Iron Ore and Coal 11.07.2008

  18. Overseas Iron Ore Exportsof the 10 Largest Exporting Companies in 2006 11.07.2008

  19. Worldwide turnover of all joining companies with more than 5 Billion EUR and • Rio Tinto: 22 Billion $ (2006), BHP: 39 Billion $ (2007) • b. turnover in the EU of at least two joining companies withmore than 250 Million EUR each and • Rio Tinto: 3,9 Billion $ (2006), BHP: 11 Billion $ (2007) • c. the joining companies shouldn‘t have a share of more than 2/3 of their turnover within the same member state.   () We require an intervention of Brussels to stop the mergerof BHP and Rio Tinto! Conditions for the Application of the EC Merger Regulation Stahl-Zentrum 11.07.2008

  20. Prices for Hot Metal, DRI and Scrap again on a Record High 11.07.2008

  21. Steel in a globalized environment • Raw materials – short and expensive • European steel industry – sustainable, innovative and competitive • Steel and the energy and climate policy of the EU • EUROFER‘s proposal to reduce the steel industries CO2-emissions worldwide European Steel in a Globalized Market

  22. Stahl-Zentrum 11.07.2008

  23. Indicators ofSustainableSteel Stahl-Zentrum 11.07.2008

  24. Reducing Agents Consumption of Blast Furnacesin the World, 2006 Stahl-Zentrum 11.07.2008

  25. Energy EfficiencyandCO2-Emissionsof theGerman Steel Industry Stahl-Zentrum 11.07.2008

  26. Innovations for the Future Stahl-Zentrum 11.07.2008

  27. Climate Change – Steel is the best ChoiceSteel – driver of innovations to increase efficiency of resources Stahl-Zentrum 11.07.2008

  28. Climate Change – Steel is the best ChoiceSteel – driver of innovations to increase efficiency of resources Stahl-Zentrum 11.07.2008

  29. European Steel in a Globalized Market • Steel in a globalized environment • Raw materials – short and expensive • European steel industry – sustainable, innovative and competitive • Steel and the energy and climate policy of the EU • EUROFER‘s proposal to reduce the steel industries CO2-emissions worldwide

  30. The plan calls for a: „These targets are very ambitious: today 8.5% of energy is renewable. To achieve a 20% share by 2020 will require major efforts across all sectors of the economy and by all Member States.“ 2005 is the new basis for all calculations within the framework of this package. 20% increase in energy efficiency 20% reduction in greenhouse gas (GHG) emissions 20% share of renewables in overall EU energy consumption by 2020 10% biofuel component in vehicle fuel by 2020 Renewable Energy and Climate Change Packageof the European Commission of 23.01.08: Stahl-Zentrum 30.01.2008

  31. GHG Target: -20% compared to 1990 -14% compared to 2005 EU ETS -21% compared to 2005 Non ETS sectors -10% compared to 2005 27 Member State targets, stretching from -20% to +20% Source: European Commission, DG Environment 11.07.2008

  32. The Energy and Climate Package drastically Reduces the Crude Steel Production within the EU • -21 % CO2 reduction from 2005 to 2020 • Specific CO2-emissions could decrease from 1.7 to 1.56 t CO2/t steel • Compared to expected steel production in 2020 of 236 Mt this would only allow a reduced steel production of 168.3 Mt •  = -67.7 Mt = -28.7 % Steel Stahl-Zentrum 11.07.2008

  33. The Energy and Climate Package of the European Commissionof 23.01.08 Drives the Industry Away • For the energy-intensive industries sufficient allowances are indispensable to prevent relocation to outside Europe: • The needed certificates have to be allocated free of charge. The foreseen auctioning would lead to a massive loss in international competitiveness. • A general sectoral CO2 reduction target of 21 % cannot be fulfilled by the steel industry. The energy-intensive industries are characterised by process related emissions. Today, they are working at the minimum level. • Further electricity price increases through auctioning obligation for power producers cannot be borne in the international competition. • Industry needs investment certainty. Clear decisions must be made. Otherwise investments would be stopped, which would result in a lack of competitiveness as well. Stahl-Zentrum 11.07.2008

  34. The Global Energy Related CO2 Emissions are further IncreasingThe Measures of EU 27 without any realistic Effect Stahl-Zentrum 11.07.2008

  35. CO2 Emissions Trading in the European Union –Does it make Sense? Stahl-Zentrum 11.07.2008

  36. European Steel in a Globalized Market • Steel in a globalized environment • Raw materials – short and expensive • European steel industry – sustainable, innovative and competitive • Steel and the energy and climate policy of the EU • EUROFER‘s proposal to reduce the steel industries CO2-emissions worldwide

  37. Disadvantages of the Existing Emissions Trading System • Absolute caps are equivalent to caps on production and lead to relocations to outside the EU. • The reduction targets are set „top down“ and are not consistent with technological reduction potentials. • Because the emissions trading directive does only refer to direct emissions the reduction potentials of the steel industry are not addressed adequately. • The pricing-in of allowances which were allocated free of charge as well as auctioning lead to inadequate increases of electricity prices. Stahl-Zentrum 11.07.2008

  38. Main Characteristics of the Baseline and CreditSystem • An ETS tailor-made for the steel industry. • Emissions are determined in an integrated way taking into consideration all stages of production. Inputs like coke or electricity or credits resulting from using by-products do also count. • The average amount of European emissions serves as a basis for the allocation of allowances. • The scheme brings about continuous improvement in terms of efficiency: The average amount of European emissions serving as a reference for allocation, incentives for emission cuts are created what directly impacts on the average emissions amount ("moving target"). • Ex-post-allocation taking account of the production quantity instead of absolute emissions ceilings. Stahl-Zentrum 11.07.2008

  39. Facts about the Emissions Trading System for Steel Stahl-Zentrum 11.07.2008

  40. Advantages of the Baseline and Credit System • Existing technological reduction potentials, but also the limits concerning process emissions are regarded. • The system results in continuing efficiency improvements because the orientation to the emission average gives incentives to reduce emissions. This influences the emission baseline („moving target“). • Production growth is not constrained. The baseline and credit emissions trading system targets only at efficiency. • No incentives for relocations of production to outside the EU. • The system is more attractive for states outside the EU and their steel industry. Stahl-Zentrum 11.07.2008

  41. European Steel in a Globalized Market Summary • The world steel production continuous to grow. • EU 27: No. 2 in world crude steel production • China became the No. 1 steel exporter in 2007. • Raw materials remain short and expensive. • European steel industry – sustainable, innovative and competitive • The Energy and climate package of the European Commission of 23.01.08 drives the industry out of Europe. • The only solution is a sectoral approach. Stahl-Zentrum 11.07.2008

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