The commission said the terms of the Belgian state’s investments in a number of arms of the Deferco group between 2006 and 2011 would not have been accepted by any private investor, and thus distorted competition and violated Europe’s state aid laws.
Margrethe Vestager, commissioner in charge of competition policy, said: “Steelmakers across the EU are struggling with worldwide overcapacity and strong imports – the response to this challenge must be to improve the sectors long-term global competitiveness.
“This is why EU countries and the commission have put in place strict safeguards against state aid to rescue and restructure steel companies in difficulty. This avoids harmful subsidy races between EU countries and uncontrolled state aid in one EU country that can unfairly put at risk thousands of jobs across the EU.”
Two days ago it was announced that a further 1,000 jobs would be lost at a UK steel plant that laid off thousands of workers last autumn. Europe as a whole has lost some 85,000 steel jobs since 2008.
In the view of overcapacity problems in the industry, the commission said EU state aid rules only allow fostering long-term competitiveness and efficiency of steel manufacturing, not the support of manufacturers in difficulty.
In October 2013, the commission opened an investigation into the financing of several companies in the Duferco group by the Belgian Foreign Strategic Investments Holding, controlled by the authorities of the Belgian region of Wallonia. The FSIH was created in 2003 with the express purpose of investing in steel companies.
The commission said that the FSIH repeatedly granted funding to a number of beneficiaries within the Dufergo group, including: Duferco’s group holding company; a steel subsidiary called Duferco Industrial Investment; and two joint ventures with the FSIH known as Duferco Salvage Investments Holding and Defurco Long Products.
EU state aid rules do not allow public support for the rescue and restructuring of steel companies in difficulty, nor can it provide a selective advantage to its recipients over competitors who receive no subsidised funding.
Public investments that are made on terms acceptable to a private investor operating under normal market conditions are not deemed state aid, however the commission concluded that no private investor would have exclusively invested in one single group and one single sector, with the aim of supporting steel production in one region, as the FSIH did.
FSIH’s investments were therefore deemed state aid, and illegal because they artificially boosted the companies’ revenues and postponed “difficult yet necessary capacity adjustments in the Walloon steel industry”.
“Despite the illegal state aid to Duferco the company has now withdrawn almost all business activities from Belgium. The case shows that state aid to artificially keep steel manufacturers afloat that are not viable seriously distorts competition and only delays their exit from the market at the cost of taxpayers,” Vestager noted.
The commission also announced today that it is to open an investigation into Italian state support for steel producer Ilva is in line with state aid rules.
