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Duisburg plant epitomizes Europe's steel industry woes

German engineering group ThyssenKrupp's plans to restructure its steel division have stoked fears of potential job losses and sparked labor protests. The firm's troubles mirror those of the worldwide steel industry.

Thousands of steel workers employed at ThyssenKrupp's plant in the western German town of Duisburg are concerned about their future. On Wednesday, trade union IG Metall said about 7,500 of them took part in a rally protesting against the already announced massive cost-cutting program as well as a potential merger of the plant with Indian competitor Tata Steel. 

Should the merger happen, the future of the entire heavy plate factory at the site would be in danger, says the works council.

That's because Tata Steel is better positioned with a modern heavy plate plant, located even closer to the sea, in the Netherlands. "We have technical problems," the council said, arguing that the Duisburg plant has been hamstrung by underinvestment in the past several years.

The protests by steel workers in Duisburg come at a critical time, as Germany is set to hold parliamentary elections this September. The demonstrations send a signal to political parties that the German steel sector needs political backing, not just from Berlin but also from Brussels.

Europe's steel industry sees itself as being put under increasing pressure by Chinese and US interests.

Too much steel

Most observers blame China for the excessive overcapacity afflicting the steel industry worldwide. A gigantic steel manufacturing base was set up in the Asian country in recent decades to fuel its rapid economic growth and construction boom. But the demand for steel in the world's second-biggest economy has dipped as the construction boom fritters away and the economic expansion slows down.

Watch video 02:34

China's threat to steel in Europe

Yet, a number of Chinese provinces rely on their steel mills for generating revenue as well as providing employment for millions of workers.

Slashing excess production is likely to result in job cuts, which officials fear could spark social unrest. That's why China continues to produce more steel than it consumes - and sells the surplus on the world market.

The relatively cheaper Chinese steel has been a thorn in the side of European steelmakers.

Hans Jürgen Kerkhoff, president of the German steel industry association Stahl, estimates China's overcapacity to be over 360 million tons. "It's not fair that China looks to solve its structural problems at our expense," Kerkhoff said.

The World Trade Organization (WTO) has ruled in favor of the EU in the dispute with China over steel exports and allowed Brussels to impose penalties. But Kerkhoff is not content with the ruling. "European trade instruments must be urgently overhauled and modernized," he said, noting that a corresponding agreement in Brussels would take too long to agree upon.

Trump and the US steel industry

Authorities in the US have better tools at their disposal to tackle the issue, argued Kerkhoff. "The procedures are quicker and the penalties are higher," he said. It's not just Chinese steel exporters who get caught in the crosshairs, however. Even European ones face the same conditions. US President Donald Trump also accuses these firms of dumping.

Elektroofen im Edelstahlwerk Shanghai im Baosteel (SMS Group)

Many blame China for the overcapacity plaguing the steel industry worldwide

Since the end of March, US authorities have imposed heavy tolls on German heavy plate producers Dillinger and Salzgitter. "It's unfair," says the business association Stahl. "The US administration has not adhered to the standard calculation methods used by the WTO."

In March, the authorities decided to impose an anti-dumping duty of 22.9 percent on the Salzgitter Group's future plate deliveries to the US market.

These provisional penalties have had the effect of paralyzing the export of this sort of steel to the US.

The US authorities are set to present their final report on May 15. Should they stick to their current assessment, it would then be up to the EU to decide whether or not to lodge a complaint at the WTO.

Daunting challenge

As in all cases involving dumping, to tackle the problem requires confronting the underlying issue of overcapacity, which requires closure of steel plants. But the big question is where should they be closed - in the US, China or Europe?

It seems unlikely that any closures would occur in the US where the industry finds itself under the special protection of the new President Trump.

Watch video 04:59

The EU steel industry and cheap imports

The Chinese government has said it would decommission a number of steel mills. But a study conducted by Greenpeace, an environmental think tank, came to an opposite conclusion, stating that instead of a reduction in the production volume to the tune of up to 150 million tons last year, there was actually an increase in the quantity produced. 

It was particularly the case in regions surrounding the capital Beijing, a city beset by smog-related problems and their ill-effects on public health.

In Europe, too, steel workers are doubling down to protect their jobs. They organized protests in Brussels at the start of the year demanding a relaxation in the trade with emissions certificates, and now they took to the streets in Duisburg to secure the future of their plant.

The number of working hours at the plant has already been reduced, says Ismael Sahin, a worker. For the past two years, he has been working only 31 hours per week and earning a monthly income that is 140 euros lower than his previous pay.

My housing rent, though, keeps increasing, he laments. The 53-year-old, who has four daughters, points out that his entire family depends on his job at the Duisburg plant. The thought of ThyssenKrupp closing down its factory now scares him. Given my age, I doubt it would be easy for me to find a new job, he says.  

 

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