Ian Swales, the Liberal Democrat MP for Redcar, has already watched one steel plant close in his constituency in the North-east, and he never wants to see it again.
It felt like a funeral, he said, when plunging demand led the Redcar blast furnace to shut its doors in 2010. The memory has left Mr Swales questioning his own party’s fight against global warming, as European policy on climate change threatens steel towns across the region.
European Union leaders expect to reach a deal in October on climate and energy goals for 2030, and regulators are recommending a 40 per cent cut in carbon dioxide emissions. Steel producers say that will drive up costs for heavy industry, threatening almost two centuries of steel-making in Europe and as many as 350,000 jobs.
“I’m concerned this is heavy-boot regulation that will drive many steel mills to the wall,” said Mr Swales, whose party has called on EU governments to back the emission cuts. “I understand the green stance and broadly support it, but we need to inject a note of realism about the consequences.”
While Europe is advancing its efforts to curb climate change, other large emitters, notably China, are lagging behind. That will make EU steel less competitive and drive customers to competitors in Asia and other emerging markets with weaker regulations, according to Wolfgang Eder, the chief executive officer of Voestalpine, Austria’s biggest steel maker.
“Over the next 15 years, a major part of Europe’s steelmaking capacity will have to be closed down,” Mr Eder said.
While emissions policies will raise the cost of steel making, environmental groups say they are needed to combat global warming and that Europe should take the lead in reducing industrial pollution.
“We can’t dodge this bullet – we have to bite it,” Alastair Harper, the head of politics at Britain’s Green Alliance, an environmental group, said: “The reality is that we will risk all our economies if we’re not ready to take on the challenge.”
The EU heads of government have set an October deadline for a political deal on climate and energy policy. The bloc’s 28 members are divided on a proposal from the European Commission, the EU’s regulatory arm, to accelerate the pace of carbon cuts. Germany has argued for deeper reductions while Poland has urged caution, citing the lack of a global deal.
The United Nations is organising global climate talks that are expected to lead to a binding emissions treaty next year.
The EU’s key climate tool is a cap-and-trade system that imposes emissions limits on about 12,000 utilities, manufacturers and other emitters. The cuts would be measured against 1990 levels.
Under the system, polluters buy permits to offset actual emissions. Steel and aluminium producers receive a certain amount of free permits to help them compete against rivals in countries with weaker restrictions.
Tougher pollution limits will hit a steel industry already in retreat. Production fell to 165 million tons last year from 210 million tons in 2007 as sales shifted to cheaper regions, and plants across Europe have been shuttered. That’s a threat to steel towns that have depended on the industry, some for more than a century.
ArcelorMittal, Europe’s biggest producer, has closed plants in Belgium and France and rendered furnaces in Germany, Luxembourg, Poland and Spain idle. The cuts have sparked riots, strikes and even kidnappings.
In 2011, Belgian steel workers held ArcelorMittal executives hostage in their offices for more than 48 hours as they battled to stop the shutdown of blast furnaces in Liege. In 2009, during the height of the financial crisis, groups of protesters clashed with riot police as they tried to storm the company’s Luxembourg headquarters during a shareholders’ meeting.
The Redcar blast furnace that shut down in 2010 was later sold and reopened in 2012.
Should the steel industry be forced to leave Europe, carmakers and machinery shops will follow, risking more than 20 million jobs, said Mr Eder, who was formerly president of the European steel lobby group Eurofer.
“Steel is a strategic product,” he said. “If steel is not produced in Europe any more, in the long run no cars will be produced in Europe.”
The end of the iron age: Miners in a hole
Goldman Sachs this week warned that iron and steel prices might not recover from recent lows for a decade, declaring 2014 “the end of the iron age” after years of rising prices as miners struggled to catch up with surging demand.
Commodities giants such as Rio Tinto, BHP Billiton and Vale have increased output from low-cost sites this year, hoping that higher volumes will offset falling iron ore prices and prompt a shake-out of less competitive mines.
At the same time, demand from China – which buys up about two-thirds of so-called seaborne iron ore – has eased.
The resulting global glut of iron core has seen seaborne prices fall by nearly 40 per cent so far this year.
Analysts at the American investment bank reckon the global surplus will more than triple to 163 million tons in 2015 from 52 million tons this year. By 2018, they believe it could hit 334 million tons.Reuse content