Advertisement
YOU ARE HERE: LAT HomeCollections

Market Focus : Rivals Test Mettle of EC Steel Industry : Low-priced imports from Eastern Europe are fueling a crisis, forcing production cutbacks and layoffs in a sensitive sector.

March 16, 1993|TYLER MARSHALL and JOEL HAVEMANN | TIMES STAFF WRITERS

DUESSELDORF, Germany — For many of those who dreamed of a Europe united and free during the bitter Cold War years, the realities of the post-Communist era are proving a bittersweet harvest.

Western Europeans have watched with growing concern the mix of problems ranging from restless populations to virulent nationalism that percolate in the former Communist East, threatening the comfortable affluence they have so long enjoyed.

Now it is low-priced, unwanted imports from Eastern Europe that have surfaced as a problem, undercutting costlier goods produced within the European Community.

And nowhere is this phenomenon more acute than in steel, where a sudden influx of Eastern European products at bargain-basement prices is playing a key role in tipping the EC's politically sensitive steel industry into one of its worst-ever crises.

"Cheap material coming in from Poland and Czechoslovakia (sic) is devastating us," said Uwe Jens, a German Social Democrat member of Parliament from the Ruhr region. "It's the straw that's broken the camel's back."

Amid recession and a series of other structural factors in addition to the new influx of low-priced eastern products, Western Europe's steel producers are suddenly staring at a survival formula that calls for shedding nearly 20% of the region's capacity and 50,000 or more of the industry's 370,000 jobs.

"The situation has never been more dramatic," Gerhard Cromme, chairman of Germany's giant Krupp-Hoesch Stahl AG, told the news weekly Der Spiegel earlier this month. "The European steel industry has been hit by a decline in volume and prices of a size never before experienced."

For Western Europe's beleaguered governments, already struggling through a malaise of recession, scandal and increasingly impatient electorates, the steel industry's woes constitute a potentially dangerous additional piece of bad news.

Like farmers, European steelworkers carry political clout far greater than their numbers. And as the layoffs come, they seem ready to use it.

Residents of this rich, Mercedes-surplus city on the edge of the Ruhr region heard the message clearly in recent days as thousands of angry steelworkers marched through central streets that both steel industry executive boards and the North-Rhine Westphalia state government have traditionally called home.

The demonstrations came in the wake of Krupp's announcement last Wednesday that plans to shut down one of its oldest mills in the region and streamline a second would mean the loss of 4,500 jobs by the end of the year.

"The German constitution says that power flows from the people, and we're about to remind politicians of that," vowed one of those affected by the cuts.

The country's large metalworkers union, IG Metall, says it hopes to draw as many as 75,000 people on a two-day march from the Ruhr to Bonn later this month as part of its strategy to pressure the federal government to act.

But as protesters gathered before the state Parliament building near the city center, blocking traffic and denouncing the state's political leaders, German Economics Minister Guenter Rexrodt spoke the hard reality farther south in Bonn: The government is powerless to halt the closures, and the only certainty is that these job losses will not be the last.

Thyssen Stahl AG, the largest steelmaker in Germany and Europe, has already said it will cut 7,000 of its 41,000-strong work force by September of next year, while another German producer, Kloeckner-Werke, hovers on the brink of bankruptcy.

The picture is similar in other Western European countries as crashing prices and tumbling volume drive steelmakers deeper into the red.

Ruprecht Vondran, president of the German Steel Federal, estimated that EC producers had suffered $6.7 billion in lost earnings over the past two years because of these factors.

Sputtering Western economies and the end of Germany's post-unification boom are only part of the pressure forcing the industry to shrink.

Other, longer-term factors are also at work affecting steel producers throughout the industrialized world, including the gradual replacement of steel products by plastics and the shrinkage of export markets as African and Asian nations become low-cost competitors instead of customers.

On top of this, two other developments add to Western Europe's misery.

The Clinton Administration's Jan. 27 decision to slap preliminary anti-dumping duties on steel imported from 19 countries, including seven from the EC, has effectively severed the community from one of its key export markets.

While the duties affect only about half of the roughly 5 million tons that EC steelmakers sell annually to the United States, the move has scared off other manufacturers. In the process, it has increased the oversupply in Europe.

"Very few mills in Europe are exporting to the States, and that means there is more steel on the European market," said Christine Sharp, a steel specialist with MEPS Europe, a British consulting firm.

Advertisement
Los Angeles Times Articles
|
|
|