CORRECTED-UPDATE 2-EU unveils action plan for Europe's ailing steel sector

Wed Jun 12, 2013 5:16am EDT

(Corrects penultimate paragraph to show that Wallonia is only considering nationalisation)

* Plan is good starting point but more work needed-Eurofer

* Critics say plan fails to tackle overcapacity

By Silvia Antonioli and Philip Blenkinsop

LONDON/BRUSSELS, June 11 (Reuters) - The European Commission announced an array of recommendations on Tuesday to revive Europe's steel industry, hurt by tumbling demand and plant closures.

The "EU steel action plan" is the first comprehensive attempt by the Commission to stem a decline in the steel sector since the Davignon Plan sought to tackle an industry slump in the mid-1970s.

The plan, presented by Industry Commissioner Antonio Tajani, aims to cut red tape, boost apprenticeship schemes and innovation, create a level international playing field and study ways to lessen the burden of energy costs, which account for about 40 percent of steelmakers' operating expenses.

It says existing EU funds should be used to ease the social cost of restructuring, which has caused the loss of 40,000 jobs in recent years, including the planned closure of most facilities at ArcelorMittal in Liege, Belgium.

"The Action Plan is a good starting point, but there still is a lot of work to be done until our sector will substantially benefit from the proposals," said Gordon Moffat, director general of European steelmakers association Eurofer.

Critics said the plan lacked concrete measures and that much more decisive action would be required to save a sector afflicted by overcapacity, weak demand and tight financing.

"On the key issue of overcapacity, the report has little to offer," Wood Mackenzie steel consultant Patrick Cleary said.

Germany's steel association said the plan was vague on Europe's climate and energy policy.

Austrian steelmaker Voestalpine, while describing the plan as an important milestone, said European steel firms faced higher energy prices and rising costs for cutting greenhouse gases, with no obvious technological breakthrough.

Steelmakers say carbon emission costs could drive steel production abroad.

FALLING DEMAND, JOB CUTS

European steel demand is 27 percent below peak 2007 levels and forecast to fall even further this year. The number of jobs in the industry dropped 10 percent between 2007 and 2011.

To boost demand, the plan points to existing EU initiatives - CARS 2020 and Sustainable Construction - to help the automotive and building sectors, which make up some 40 percent of steel demand.

The Commission invited the EU member states to consider reducing or removing tariffs on energy-intensive industries to make them more competitive internationally.

The Commission will also start monitoring imports and exports of steel scrap, a measure sought by Italian steelmakers, many of which operate electric arc furnaces, which use scrap as their main raw material.

Eurofer said Europe had become the world's second-largest scrap exporter, while over 20 countries imposed export caps.

The Commission is proposing using existing EU funds to help workers who lose their jobs as a result of plant closures, a measure most steelmakers have called for.

The plan does not propose state intervention to keep local steel plants alive, a step sought by unions.

Bart Samyn, deputy general secretary of European unions federation IndustriAll, said the plan was weakened by an absence of concrete measures. The challenge now was to implement what had been agreed.

The French government last year threatened to take over the ArcelorMittal plant in eastern France after the company of Indian-born tycoon Lakshmi Mittal announced plans to close its blast furnaces.

In Belgium, the Wallonia region has said it is considering nationalising the ArcelorMittal steelworks in Liege, where most facilities are due to close.

The majority of European steelmakers oppose giving subsidies to help troubled companies survive, Eurofer President and Voestalpine Chief Executive Wolfgang Eder said in a recent interview. (Additional reporting by Maria Sheahan in Frankfurt; editing by Jane Baird and Tom Pfeiffer)