Economy Ministry working on plan to ensure competitiveness of steel

Poland is preparing to restart talks with the European Commission on the viability of its steel-industry restructuring program, which must be completed for Poland to enter the European Union. With new figures showing the industry struggling to compete with imports, negotiators will face a tough task in persuading the EC that the industry can survive in the European market. To close the accession chapter on competition, Poland must prove that its steel industry will be able to compete without subsidies after the implementation of its restructuring program. The Economy Ministry is preparing to submit the individual restructuring programs of steel mills that have relied on state intervention. "Pending a number of technical issues we will probably submit selected … steel mill restructuring programs to the European Commission next week," said Krzysztof Dąbrowski, deputy director of the Department for the Restructuring of Industry at the Economy Ministry, last week.

Poland imported 3.12 million tonnes of steel in 2001, while domestic consumption reached 6.7 million tonnes, according to figures released by the Metallurgical Chamber of Industry and Commerce (HIPH) last week. With a fall in the market share of domestic production from 63% in 2000 to 53% in 2001, the government is under pressure to reach agreement on the terms of the state aid necessary to modernize the mills and cut jobs. "It's a political decision rather than an industrial one," said Gordon Moffat, senior manager at Eurofer, the European Confederation of Iron and Steel Industries. "They have to bite the bullet and accept that restructuring involves a cost: It creates social problems and regional problems that have to be addressed by the political authorities." Nationwide, the steel industry employs around 38,000 workers. While the government approved the Economy Ministry's global steel industry restructuring program in March, it is now under the gun to close the chapter on competition, as scheduled, before the end of the EU's Spanish presidency in June. "Because this issue is connected with closing the chapter on competition the EC asked that the reports be submitted early to keep to (negotiation) deadlines, so we haven't fully examined these programs," Dąbrowski said. "We've only done a preliminary selection of the programs that we are submitting." He would not disclose if the selection process had revealed any potential problems for the negotiations in the restructuring plans. Huta Tadeusza Sendzimira, Huta Katowice, Huta Cedler and Huta Florian, which will be merged to create conglomerate Polish Steel (PHS) in early May, have already submitted their plans. Huta Częstochowa, Huta Ostrowiec, Huta Kościuszko, Huta Andrzej and Huta Szczecin are among other mills that will submit plans for EC assessment, Dąbrowski said. Prior to the talks, the EC will appoint an independent consultant to assess the viability of each program and negotiate changes.

Analysts are concerned that the steel mills' restructuring plans will be unable to account for the increased overcapacity on the global steel market caused by the imposition of U.S. steel import tariffs this month. They point to the rejection of two restructuring programs by the EC because they were based on unrealistic market forecasts of competitive pressure from imports and did not ensure the long-term competitiveness of the industry. "The difficulties that are being created by the trade situation can only increase the problems these industries face," Moffat said. "Equally, the discussions in the OECD (Organization for Economic Cooperation and Development) on greater discipline on subsidies risks increasing the pressure facing these companies. It increases the necessity for these industries to be restructured and to be placed in a situation where they are no longer receiving state aid."