News Global Market CBAM 1029 04 December 2024
The EU should support steelmakers, make sure CBAM is effective, and solve the import problem
The decisions made by Brussels over the next 12 months will determine the future size and shape of the European steel industry. This opinion was expressed by Lakshmi Mittal, Executive Chairman of ArcelorMittal, in an op-ed for the Financial Times.
He noted that there are significant investments in the green transition that are waiting to be activated when political clarity is achieved. If the right decisions are made, Europe can be at the forefront of technology for the next 50 years.
In his opinion, if Europe really wants to support its industry, it needs to address the political landscape together to create an enabling environment that will allow European steelmakers to decarbonize and prosper.
Lakshmi Mittal reminded that 7 years ago he advocated the introduction of a carbon border tax to level the playing field for European industrialists. However, the Executive Chairman of ArcelorMittal states that the CBAM in its current form is not adequately developed. And if it is not significantly strengthened, a critical mechanism that would allow Europe to achieve the stated goal of “decarbonization and industrialization at the same time” will fail.
Currently, Mittal notes, the European steel industry is in a difficult position due to the costs of decarbonization and significant overcapacity, especially in China, which has led to an increase in imports.
“Since the financial crisis, steel production in Europe has fallen by almost a third, and the number of jobs has dropped by a quarter. Demand has not recovered to pre-Covid-19 levels, which, combined with high energy costs and rising imports, has resulted in margins remaining at levels last seen during the pandemic,” he notes.
Lakshmi Mittal explains that the negative impact on profitability comes at a time when the industry has to make final decisions on costly decarbonization projects, investing in technologies that are not cost-effective (e.g., green hydrogen).
Mittal expressed his belief that Europe can maintain a competitive and innovative steel industry by addressing policy issues together. The lack of clarity on EU regulatory procedures explains ArcelorMittal’s decision to postpone final investment decisions on green projects.
ArcelorMittal’s executive chairman believes that the first challenge is to urgently address the import problem.
“Intervention is needed to make European steel better protected, as in the US and Brazil, where this industry is considered strategic. Extraordinary trade measures would be the first powerful signal to solve this problem,” he said.
Secondly, Europe needs to make sure that CBAM actually achieves its goals. Lakshmi Mittal mentioned Mario Draghi’s report, which outlined the risks to the success of the mechanism. In particular, the CBAM should not allow steel imports from countries that circumvent climate protection by selling steel products from several “clean” plants to Europe, while steel with higher emissions is sold domestically and outside the EU.
As GMK Center reported earlier, the entry into force of the European CBAM in 2026 will lead to losses for the Ukrainian economy, which is traditionally export-oriented. In 2026-2030, total export losses could exceed $4.6 billion (over 5 years), according to a recent study by GMK Center. Ukraine is joining a long-term European trend of green transition. However, it is important for the war-affected country’s economy to get an exemption from the CBAM.
