Steel production in Slovakia threatened: when politics gets involved

Steel production and metallurgy in general is one of the pillar industries in Slovakia. However, the energetic issue disrupts the industry since the present situation between Russia and Ukraine questions the energy exchanges and therefore the future of the production of steel sector.

Steel production threatened by rising prices of electricity

Indeed, steel production in SlSteel plantovakia represents 10% of total industrial output and employs nearly 23,000 people. Representing 2.4% of the total steel production in Europe, no need to specify that the sector represents an undeniable asset for Slovakia. Playing the one hand a key role with respect to regional employment and allowing other countries to position themselves internationally, the challenge the industry is currently facing about the energy costs threaten Slovak companies. Indeed, the theme of energy transition is now on everyone’s lips and involves more costs for companies that want to produce in an environmentally friendly way by using renewable energy. On another hand, Slovakia is one of the countries where electricity is the most expensive, an effect caused in particular by giving preference to renewable energy. From all points of views, production costs are therefore meant to increase.

The European Commission, however, realized the difficulties faced by companies producing steel in Slovakia but also in general in Europe and thus set up a plan to reassess the costs and solve the problem. Future actions will therefore be carried out in order to make the  industry more competitive but also to facilitate implementation of facilities promoting the use of renewable energies.

Politico-economic threat

Gas in EuropeOn the other hand, we must consider the fact that steel production is a very important sector in Europe concerning nearly 500 companies spread in 23 member countries. However, the branch recently developed in non-EU countries, namely Ukraine, Russia and Turkey.

Given the current climate between Ukraine and Russia, the branch could also be threatened by political factors. The decision taken in Brussels on 07/07/14 that would sanction Russia by freezing trade in industrial products, including those concerning mining and gas trade, could force Russia to reconsider the participation of companies from the EU and the United States regarding the energy sector, as mentioned by Putin in response to threats from Washington and Brussels. Russia is indeed one of the largest gas producer in the world. Recent events have shown that the threat of Moscow were not to be taken lightly, since Ukraine already experienced the withdraw of its « friendly prices » regarding gas, that the country imported so far for a 30% cheaper price than its initial value.

Here we must mention that the main Slovak steel mills (U.S. Steel Kosice and Podbrezova Steelworks) happen to be American and are supported by the Slovak government. One may therefore ask which impact the sanctions against Russia will have on steel production in Slovakia, a post-communist country counting Russia among its top trading partners.

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