The global financial crisis and industrial changes in the European metal sectors Judith Kirton-Darling Industrial Policy

1. The global financial crisis and industrial changes in the European metal sectorsJudith Kirton-DarlingIndustrial Policy Advisor, EMF-FEM-EMB

2. 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

3. Impact of collapse in demand from main steel consumers Residential permits are falling in the OECD region 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

4. 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 Global Steel Market Situation and Outlook

5. Plummeting stock prices

6. Global Steel Market Situation and Outlook Steel production cuts by region for 2008Q4 (‘000 tonnes) 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)

7. Reduced production Source: Syndex

8. 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 Impact on European metalworkers

9. 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. EMF demands in context of reduced production

10. 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 Obama’s stimulus package and threat of steel trade war Need for resolution of dumping – advantages in upturn EMF view on recovery packages

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