Cost burden of EU policies putting 'strategic' industries in jeopardy

Retaining Europe's industries offers the greatest potential for growth, jobs and sustainability, argues Gerd Götz.

Despite growing demand across key markets and continuous environmental leadership, the EU's aluminium production base is on a sharp decline. The freshly released 2012 sustainable development indicators (SDI) of the aluminium industry in Europe are mirroring the undesired reality that the sum of all EU regulations is heavily impacting the competitiveness of this sector.

During a European Aluminium Association (EAA) conference on November 27, participants called for urgent measures to turn around the downward spiral.

Europe's aluminium primary production capacity has declined by over a third since 2007, semi-fabrication has not yet recovered to pre-crisis levels, and the (world leading) EU recycling industry is increasingly being exposed to 'scrap leakage' to third countries.

As a result, a sector which is recognised as a key enabler of EU efforts in sustainability and resource efficiency, ranging from light weighting and decarbonised transport to energy-efficient buildings, waste saving packaging, endless recyclability and more, is being exposed to unacceptable import dependency.

Furthermore, the recent cumulative cost assessment of the impact of EU policies on the aluminium industry's competitiveness led by the European commission and produced by the Centre for European Policy Studies concluded that EU plants which are fully exposed to EU regulatory costs have become the least competitive globally, while assets operating under pre-existing long-term contracts remain among the most economically viable. The cost impact of EU policies on our industry bears no equivalent across the world.

To address these major issues the aluminium industry is urging policy-makers to reduce the competitiveness gap caused by EU regulations and has just presented an agenda for action, establishing concrete policy actions necessary to halt the decline.

Our agenda for action calls for the alignment of EU industrial, energy and climate policies and for competitiveness checks to form part of the impact assessment of new EU rules. We also ask for special consideration under climate and energy policies, as their cost effect on our industry is not only exceptionally high - like other energy intensive sectors - but also exceptionally unsustainable as there are no opportunities to pass on costs to the consumer as aluminium is priced on the global market through the London metal exchange.

Failing to implement these measures will lead to further plant closures. Today aluminium production is a global industry facing worldwide competition. Europe stands everything to lose if it does not urgently address production conditions. Jobs will move outside our borders and Europe will become even more dependent on imports for a strategic material that is essential to many innovative and sustainable products, such as energy neutral buildings or electric cars.

Likewise, losses in production will further affect entire industry clusters at regional level and threaten many downstream facilities and SMEs that benefit from the proximity and expertise of local suppliers.

In 2013 Europe’s import dependency on aluminium reached 50 per cent for the first time. How many strategic sectors can we afford to be dependent on?

Lastly, our industry is essential for Europe to achieve its sustainability targets. Our SDI report shows that since the 1990s, the aluminium industry has achieved massive improvements.

Aluminium is a strategic material for the future and is full of potential. The industry producing it is a key contributor to Europe's economic, industrial and sustainability targets. Yet, the cost burden of EU policies puts this contribution in jeopardy.

Now that the European commission has gathered all the facts, we count on the council and the European parliament to close the competitiveness gap, our agenda for action can guide them.