EC demands more output cuts for steel rescue plan

THE European Commission said yesterday that its rescue plan for the steel industry will be contingent on steel makers reducing their production by a further 4-5 million tonnes over the next three years.

Martin Bangemann, the EC's industrial affairs commissioner, has approved a restructuring plan that the Commission will present to EC industry ministers next Thursday.

The production cuts already offered by European steel makers are not enough to counter the European market's worst crisis for a decade, caused by recession, a restructuring in the 1980s that did not go far enough and increased exports from Eastern Europe. Prices have fallen 30 per cent since 1990 and there is little hope of improvement until 1995.

The EC's special steel envoy, Fernand Braun, will make a second tour of Europe's 70 or so biggest steel producers in an effort to persuade them to trim capacity further. After his first discussions with the industry at the end of last year, Mr Braun concluded that over-production across the Community was running at 30 million tonnes of crude steel and 20 million tonnes of flat-rolled products.

The industry told Mr Braun that it planned capacity cuts of 28.5 million tonnes of crude steel and 17.9 million tonnes of rolled product, but that only a third of those reductions could be guaranteed from closures deemed 'certain' or 'probable'.

Mr Bangemann said yesterday: 'We think the Braun figures have to be supplemented by 4-5 million tonnes.' Asked whether industry would be prepared to make a further sacrifice, he said: 'The crisis is so very great at the moment that I think so.'

The EC, drawing on funding established under the rules of the European Coal and Steel Community (ECSC), is prepared to pay pounds 192m on top of pounds 168m already pledged to cover the social costs incurred in cutting upwards of 50,000 jobs across the Community. Member states are expected to match that amount, bringing the total to pounds 720m.

If the industry ministers do not accept the Commission's package and producers cannot be persuaded to make it work, the alternative is to declare the industry in 'manifest crisis', in which case the Community can impose production quotas.

This was the situation everyone was striving to avoid, Mr Bangemann said, adding: 'We want to safeguard a strong and competitive industry. We are not talking about dirigisme or cartelisation.'

The Commission hopes to see its package approved next Thursday, finalised by May and put into effect by September. Plants will then be closed and merged over the next three years.

Karel van Miert, the competition commissioner, said it was important that the approach was balanced and that the Commission's state-aid policy was applied 'with all rigidity'. Industry itself, he said, was anxious to ensure that national subsidies could not be used to support 'dinasaurs'.

The Commission's package provides for negotiations with Eastern European producers to limit imports into the Community and prevent the Commission from having to impose further anti- dumping measures.

Mr Bangemann said the measures did not amount to greater EC protectionism in the face of a looming trade war with the US over steel imports. 'We would be more than happy to be treated by the Americans as we have treated the East Europeans,' he said.