On 1 May 2004, 10 new members states joined the European Union. This development will substantially impact companies in the steel and steel products industries operating in the enlarged EU market. Our thought leadership paper examines the following:
- the current structure and performance of the industries, focusing especially on those in the new member states;
- how the enlargement process has already affected companies in the industries; and
- key opportunities and challenges facing companies in the industries.
Anticipated rapid growth in consumer markets (for example, automotive ) and infrastructure (construction) presents a substantial opportunity for Western producers looking to increase investments or sales in the region, although challenges still remain.
Key messages from the report include the following:
- Sourcing. As companies look to increase the quality of raw materials they may look further afield to world markets, rather than local central and eastern European markets. High bulk material transport costs could make this an expensive shift.
- EU trade agreements. EU entry makes accession countries subject to overall EU trade agreements. Although existing quotas on steel imported into the EU from Russia, Ukraine, and Kazakhstan have been raised to reflect the increased production in the new EU-25, near neighbours may be vulnerable to large increases in imports, especially if companies in Russia and the Ukraine look to reduce transport costs by shifting exports to countries closer to home.
- Environmental legislation presents a huge compliance challenge, but substantial EU funding is available to assist.
- Technical issues. Enlargement will raise technical issues around laws/social security for companies operating in the region. Listed companies in the accession territories will also need to use from January 2005.
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