But it was not just the fines with which the Commission clobbered the producers - British Steel was hit for a whopping pounds 24m - that made them reach boiling point. It was also the manner in which the news was released.
On Monday, the newspapers reported that the Commission was proposing to fine the steel producers for operating a cartel between January 1989 and January 1991, when a surprise raid on their offices first suggested there had been price fixing. There was press speculation about the size of the fines.
On Tuesday, the steel chiefs and two commissioners, including Karel Van Miert, the Commissioner for Competition, were scheduled to meet for dinner. On the menu was the issue of overcapacity. But the steel makers failed to promise the capacity cuts for which the Commission had been looking. The following day came news that they would be fined a total of pounds 79.28m, vastly more than the pounds 40,000 penalty imposed collectively on the industry before.
However, it was not until Wednesday evening that the steel makers themselves received offical notification. 'It was preceded by the Commission talking to the press,' says a British Steel spokesman. He adds that the company learned everything via the media rather than Mr Van Miert.
British Steel is not alone in reading the events of the past week as a political manoeuvre to force its hand. 'There was a bit of cage rattling the day before the dinner, in the form of unoffical leaks, then the dinner, when nothing happened, and finally a smack on the wrist in the form of fines,' says Paul Ruddell, steel analyst at NatWest Markets.
The European Commission adamantly denies this. 'Mr Van Miert stressed there were no links between the fines and the plans to restructure the industry,' said a spokeswoman.
She added that the offenders were invited to put their views at a meeting in early January 1993.
But this is at variance with reports from British Steel. It was in January 1992, the company claims, that the steel makers were invited to argue their case. In May 1992, the Commission 'indicated it had reached a decision and was expecting to take action against the companies,' according to a spokesman. 'It was all over bar the shouting.' Then, he adds, there was silence until February 1994 - 20 months after the decision was reached.
With a meeting to discuss capacity cuts due the day after the fines were announced, most industry observers believe politics has again reared its head. The Commission has always taken a close interest in steel. From 1980 to 1988, it ran a system of quotas introduced by Commissioner Etienne Davignon when the industry was judged to be in 'manifest crisis'.
The Davignon Plan encouraged the steel makers to agree quotas under the auspices of Eurofer, the trade body, to discuss markets and quotas. But the quota system was removed in mid-1988, prohibiting the steel makers from exchanging information on markets and fixing prices - according to the Commission.
However, the steel makers say they sought guidance from the industry directorates and received conflicting advice or none at all.
But the story is even more complicated. Although the Commission has ruled that the exchange of confidential information and splitting up of markets violates competiton rules, it is itself operating a sort of unoffical cartel on the steel makers' behalf.
One analyst said: 'Brussels faxes out to the steel community every month a list of guidelines for production, country by country. So Brussels is dictating how much each country is making. Within those boundaries, the steel makers must negotiate what each produces.' He said it was puzzling that the Commission should be 'hitting someone for a cartel, then orchestrating the market'.
This fixing has been effective in hardening prices over the past 18 months. Demand for steel has continued to fall while supply has remained broadly the same. Yet prices have risen by 15 to 20 per cent - although the cost of raw materials has dropped. Part of the Commission's objection, then, seems to be to control of the market being vested in others.
If the Commission has a political agenda, so do the privately owned steel makers. The industry is split roughly equally between the private producers and state-owned operations that get huge subsidies. The private steel makers understandably object to such bail-outs.
They are especially upset by a plan backed by the city of Bremen to rescue its Klockner- Werke steel mill. The mill went bust last year and - had it been closed - would have taken out about 3 million tonnes of capacity. Under pressure to cut capacity to maintain prices, the private steel makers argue against any subsidies to prop up inefficient operators.
British Steel also points to its closure of Ravenscraig in January 1992, with a loss of 1,200 jobs. John Graham, steel analyst at SG Warburg, said: 'British Steel has been one of the prime movers in cutting capacity and whiter than white on subsidies.'
This is true since privatisation in October 1989. But other analysts point out that in the early 1980s, the company received state handouts to help it sort itself out before privatisation. They say British Steel is trying to deny other companies the right to similar help.
British Steel also argues that it has built up its market share in continental Europe from 50,000 to 414,000 tonnes in 1993 - hardly consistent, it says, with a cosy cartel.
(Photograph omitted)Reuse content