Andrey Kuzmin/Adobe Stack
It is often tough to discern fact from fiction, particularly when it comes to corporations and politicians.
Two developments this month in Europe raise questions about the relationship and balance of influence between major corporations and government. Are corporations reacting to markets or seeking to stimulate political action is often the question?
Following President Donald Trump’s imposition of 25% import tariffs on steel products, Europe took action to protect its domestic markets against a flood of foreign steel looking to find a new home by imposing a range of measures to monitor imports and impose safeguards.
According to the Financial Times, a European Commission official claimed the E.U. has some 52 anti-dumping and anti-subsidy measures in force on steel products, saying: “The EU reacted swiftly to the US tariffs on steel and imposed safeguard measures to protect EU industry from trade diversion.”
These measures preserve the traditional levels of imports into the E.U., ensuring fair conditions for a sector struggling with overcapacity. Even so, ArcelorMittal has said the measures are “insufficient” and announced its decision to temporarily cut production at some of its plants on the continent.
According to the Financial Times, the company said that it would idle steelmaking facilities at its Krakow site in Poland and decrease output at Asturias in Spain. In addition, it will slow down a planned increase of shipments by its Italian unit.
In total, these actions will reduce its annualized crude steelmaking production by 3 million tons — equivalent to 7% of its European output last year.
Imports are not the sole reason for the firm’s decision. The group also blamed high energy costs and increased prices for carbon credits, which polluters must use to compensate for emissions under a Brussels scheme aimed at curbing climate change. Foreign suppliers, of course, do not have to pay for carbon credits, which is another gripe of the firm; the firm would like to see a “green” tax on imports, equivalent to the carbon charges E.U. producers face, to level the playing field.
The E.U. produces 170 million tons of steel a year, yet remains heavily dependent on imports, which have the effect of dragging down market prices. As such, domestic producers frequently struggle to make a profit.
So bad had the situation got for German group ThyssenKrupp that it has been working to separate its steel and capital goods divisions for the last few years. Central to this strategy was the merger of its steel division with Tata’s European operations to create what would be the second-largest steel group in Europe after ArcelorMittal.
According to the FT, Margrethe Vestager, E.U. competition commissioner, had been taking evidence from consumers, particularly in the automotive sector, who fear the reduction in competition would give the remaining steel groups too much pricing power.
But despite working on the plan since 2017, they were scrapped last week after regulatory scrutiny from the European Commission made a deal untenable.
E.U. regulators forced ArcelorMittal to make significant divestments to gain regulatory approval for its acquisition of Italian steelmaker Ilva last year and demanded further concessions from ThyssenKrupp and Tata in return for approval.
Who wins in politically charged Brussels remains to be seen.
With the European elections due next month, there is even more intrigue and jockeying going on in the corridors of power than normal.