Annexes to COM(2000)261 - Monitoring of Article 95 ECSC steel aid cases, thirteenth report, May 2000

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dossier COM(2000)261 - Monitoring of Article 95 ECSC steel aid cases, thirteenth report, May 2000.
document COM(2000)261 EN
date May  3, 2000
agreement (negotiated redundancy).

3 These figures do not correspond to the net reduction in the workforce given in the previous table because the companies have hired some new employees.

In 1999 PTE 52.97 million in social aid authorised under Article 4 of the Fifth Steel Aid Code was disbursed.

IV. Sales

The sales of billets on the Portuguese market by SN Serviços go exclusively to SN Longos. Prices for these products are fixed on normal market conditions for a period of three months. Residual steel production is sold on the market against market prices (Metal Bulletin spot prices). The average prices achieved by the different product groups were given in the monitoring report. The Commission has compared these prices with the average market prices and considers them to be within the normal range.

V. Financial performance

SN Serviços

The Portuguese authorities provided a full set of financial data and financial ratios in line with the Annex to the Commission's Decision. As set out in the 12th Report, SN Serviços suffered during the first half year of 1999 from the general collapse of steel prices. The large part of the losses were accrued during this period. Steel prices considerably improved as from the second half year of 1999 [8] and SN Serviços was able to realise a positive cash-flow in the second half year of 1999. Its price arrangements with SN Longos (price fixed for 3 months, see above), implying that market prices are followed at a distance, did not allow SN Serviços to profit immediately from market price improvements. The company hopes to return to profitability in 2000.

[8] Price movement in line with steel market development, see the Commission's Forward Programme for Steel for the year 2000, OJ C 27/2 of 29.1.2000.

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VI. Aid

The aid authorised under Article 95 of the ECSC Treaty has been paid in six instalments between March 1994 and June 1995 as explained in the fourth monitoring report. The environmental aid approved under Article 3 of the Fifth Steel Aid Code has not so far been paid. The use of the social aid approved under Article 4(1) of the Fifth Steel Aid Code is explained above under II.3 (financing of redundancies).


EKO Stahl GmbH, Germany

I. Introduction

On 21 December 1994 the Commission authorised [9] DEM 900.62 million [10]aid to EKO Stahl GmbH under Article 95 of the ECSC Treaty (see details in the previous monitoring report).

[9] OJ L 386, 31.12.1994, p. 18.

[10] DEM 1 million = ECU 511 299.72 (1.1.1999).

On 21 December 1994 the Commission further approved [11] regional investment aid of DEM 385 million under Article 5 of the Fifth Steel Aid Code.

[11] OJ C 18, 17.1.1997, p. 7.

Authorisation of the aid was subject to several conditions. The following conditions are still monitored by the Commission:

- the new hot-rolling mill to reach a capacity of 900 kt/y by the end of 1997 and to be kept at that level until the end of January 2000. As from February 2000, the company is allowed to increase the capacity of this mill to 1,5 mio tonnes/year until the end of January 2005 (monitored, see II),

- the output of the new hot-rolling mill to be used only for further processing in the company's own cold-rolling facilities (so far observed).

The present report covers developments up to 29 February 2000 on the basis of the information provided by the German Government in its report submitted to the Commission on 15 March 2000. The present report concentrates on the two conditions still monitored by the Commission.

II. Capacity limitation

Limitation of the capacity of the new hot-rolling mill to 900 kt/y up until the end of January 2000 and thereafter to 1.5 million t/y up until the end of January 2005 is guaranteed by an electronic device that makes it technically impossible to exceed those ceilings. This technical solution was accepted in principle by the Commission in early 1996. For further details on the system, see the fifth monitoring report. The system has operated reliably and the records of the quantities produced have been regularly submitted to the Commission.

The authorised capacity increase as from February 2000 posed technical problems to the company as the electronic device is adjusted for the capacity year, which runs from July to June.

On 15 March 1999 the Commission therefore agreed to a proposal from the German authorities that the production from July 1999 until July 2000 will be counted using the average production of the two thresholds which results in a yearly capacity of 1,150 million t for the capacity year July 1999 - June 2000 [12]. The machine has been adapted accordingly on 1 July 1999 and will be adjusted to 1,5 million t/y on 1 July 2000.

[12] Calculated as follows: (7/12 x 900 = 525) + (5/12 x 1,5 = 625) = 1,150.

III. Production of the new hot-rolling mill

Hot-rolled strip produced in the new hot-rolling mill is used exclusively in the cold-rolling mill.

The production of hot rolled strip amounted to 775,026 tonnes in the period 1 July 1999 - 29 February 2000. For the period 1 March - 1 July 2000 the authorised residual production is 374,974 tonnes.

Voest Alpine Erzberg GmbH, Austria

I. Introduction

On 29 November 1995 the Commission approved [13] state aid to Voest Alpine Erzberg GmbH (VAEG) to enable it to close down its mining operations gradually up to the year 2002. Approved aid amounts to ATS 272 million [14] to cover operating losses over the period 1995-2002 and ATS 136 million to cover the costs of closing down mines safely and in an environmentally friendly manner.

[13] OJ L 94, 16.4.1996, p. 17.

[14] ATS 1 million = ECU 72,672.00 (1.1.1999).

The following annual ceilings were approved for the different types of aid are indicated below in the table under point 4.

Authorisation of the aid was subject inter alia to the following conditions:

- the annual aid ceilings and the production ceiling as given in the table above were not to be exceeded ( production ceiling exceeded; see under II.2.a),

- the amount of operating aid was not to exceed the difference between production costs and revenues (so far observed),

- the price charged for iron ore was to be in line with market prices and was not to be lower than the price of imported iron ore (so far observed).

This report covers developments up to 31 December 1999 on the basis of information provided by Austria in its eighth monitoring report, which was submitted, in line with the Commission's request, on 15 March 2000.

II. New monitoring report

1. The company

The company Voest Alpine Erzberg Gesellschaft mbH (VAEG) is held by ÖIA Bergbauholding Aktiengesellschaft, which in turn belongs to Österreichische lndustrieholding Aktiengesellschaft, an industrial holding company wholly owned by the Austrian State. VAEG is involved in the mining of low-density iron ore (~32 % Fe). The company has only one client, Voest Alpine Stahl AG (VASA), which was privatised in the autumn of 1995.

2. Operating aid

(a) Production and sales

In 1999, VAEG produced 1,149 million tonnes of iron ore with an average content of 33.6% Fe and 589.662 tonnes of low grade products which VASA can use for the blast-furnace burden (Möllerzusatzmaterial). These quantities were sold and delivered to VASA. .

Production decreased from 1.3 million t/y in 1998 to 1,149 million t/y in 1999 but exceeded the ceiling of 1 million t/y for 1999 provided in Article 1 of the Decision. The Austrian authorities have indicated that this has led to a better operating result and to a need for less aid than authorised.

The Commission is examining this situation in the light of the Decision and has asked the Austrian authorities for information. The latter informed the Commission on 18 April 2000 that the situation was due to unforeseen circumstances. In the end of 1999 a risk of collapse forced VAEG to explode part of the mine prematurely. The ore thus set free was meant to be produced and delivered in 2000 only. VAEG decided to deliver it already in the end of 1999 as an advance under the contract for 2000. The Austrian authorities ensured the Commission that the advance delivery will consequently be deducted from the authorised production in 2000 and that production ceilings will be respected.

(b) Production costs

The production costs for the standard-grade iron totalled ATS 169.915 million, i.e. ATS 147,22 per tonne in 1999. The production costs for the low grade products totalled ATS 33.581 million, i.e. ATS 56.95 per tonne. These amounts include closure and rehabilitation operations carried out in 1999. A detailed overview of production costs is given in the Annex.

(c) Pricing

The standard-grade iron ore was sold at ATS 139.50 per tonne. This standard price was set in December 1998 for the whole of 1999.

The low-grade material (Möllerzusatzmaterial) was sold at ATS 76 per tonne, fixed on the basis of the market price for lime gravel (Kalkschotter).

The average price for deliveries of iron ore and low-grade material (Möllerzusatzmaterial) results in ATS 99.60 per tonne. Including the costs of transport to VASA/Linz, the price charged was ATS 667.50 per tonne Fe.

The information submitted by Austria in its ninth report confirm the information given by Voest Alpine Rohstoffbeschaffungs GmbH, a subsidiary of Voest-Alpine Stahl AG responsible for the purchase of raw material, that the above price per tonne Fe for iron ore is higher than the comparable price payable for imported iron ore.

It may therefore be concluded that the prices charged in 1998 were not lower than required under Article 2 of the Commission's Decision of 29 November 1995.

(d) Operating aid

The total losses incurred by VAEG in the first half of 1999 were ATS -52.158 million.

Of the total losses sustained in this period, ATS 23.233 million related to closure operations. Further details on losses are given in the Annex.

The company requested ATS 51 million in operating and closure aid for 1999. Only 47,8 million ATS had to be disbursed. This amount is ATS 9,2 million less than the maximum amount of ATS 57 million authorised for 1999 by the Commission (ATS 34 million operating aid and ATS 23 closure aid). The need for less aid is due to the fact that VAEG was able to achieve higher cost savings than anticipated in the original plan and achieved a better operating result due to a higher production than planned and provided in the Decision.

3. Closure aid

The authorised maximum amount of closure aid for 1999 is ATS 23 million. In 1999 ATS 17.8 million was paid, whereas the closure costs were ATS 23.233 million.

4. Aid payments in relation to aid authorised

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5. Evolution of workforce

The plan for reducing the workforce is as follows:

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Departing from the above plan, the workforce in production was reduced to 230 in 1998 as explained in the Eleventh Monitoring Report. In 1999, workforce in production was reduced to 219. Reduction of workforce is therefore ahead of plan.

Annex Comparison of production costs and revenues in 1999

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* The difference of 6.900 tonnes was sold out of stock.