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Unregulated imports are killing Bulgaria's metallurgy

The branch is also experiencing difficulties due to energy prices

Nov 5, 2024 07:46 62

Unregulated imports are killing Bulgaria's metallurgy  - 1

Bulgaria's metallurgy is "suffocating" from unregulated imports from third countries of long steel products, of which more than 200,000 tons worth about 240 million euros are imported annually. This is what Nikola Rangelov, chairman of the Management Board of the Bulgarian Association of the Metallurgical Industry (BAMI), said in an interview with BTA, contacted by BTA in connection with today's Metallurgist's Day. The celebration of the professional holiday will be from 18:00 at the hotel "Sofia Balkan Palace". President Rumen Radev will be the patron and guest of honor of the celebration, the Association announced.

Most often this import is carried out by circumventing customs regulations and it is a matter of production originating in Turkey, Algeria, Egypt or Tunisia. The Chairman of the Association gave an example of importing steel declared as tool, for which there are more favorable customs regulations, which is then sold as concrete steel for construction. In this sense, he emphasized the need to strengthen state control in relation to unregulated imports.

The industry is also struggling because of energy prices and insists that support for electricity prices will remain in place next year. Metallurgical companies also need compensation for the so-called indirect costs associated with reducing the carbon footprint. At this stage, companies are struggling to use only green electricity due to limited supply and still unresolved procedures in the electricity market. Enterprises buy domestically produced brown energy from coal plants, and this affects their carbon footprint, hindering the sector's decarbonization opportunities.

Bulgarian metallurgy has no serious problems from the sanctions imposed on Russia. But after the start of the war, more significant difficulties arose, the chairman of BAMI pointed out. Metal raw materials for a ferrous metallurgical enterprise are supplied from Ukraine and there have been periods of production stoppages due to lack of material. Difficulties arise primarily in logistics. Therefore, detours are sought, deliveries are delayed, transport becomes more expensive. Significant quantities of ingot aluminum were also imported from Russia for the country's largest aluminum processing plant. Now imports have changed and new supply chains have been built from European countries as well as distant countries, said Nikola Rangelov.

Bulgarian metallurgy is export-oriented mainly to the EU. The main trading partner of Bulgaria, including the metallurgical sector, is Germany. The economic difficulties in this country did not significantly affect Bulgarian metallurgy, for which "Aurubis Bulgaria" is an eloquent example. AD - one of the largest honey producers in Europe. They produce mainly for Germany and the production is even increasing, added the chairman of BAMI.

Nikola Rangelov noted that last year in some industries there was a decrease in the quantities of the produced products. In non-ferrous metallurgy, the production of the main metals - copper and lead - is decreasing, which is due to planned and unplanned equipment repairs. Such time intervals for repair work are periodic and mandatory in metallurgy, where work is carried out at high temperatures and pressure, the chairman of BAMI pointed out and pointed out that, despite this, Bulgaria remains a factor in the EU metal industry with a relative share of 12.5 percent in copper and 7.1 percent in lead.

There is also a drop of 8 percent in the production of aluminum products and articles as a result of increased imports from third countries, mainly from China at low prices. In 2024, a certain "awakening" of the industry as supply and demand, commented the chairman of the Association.

Black metallurgy

The expert noted that throughout Europe in the last 8-10 years there has been a decline in the production of ferrous metals, and this trend is also transferred to Bulgaria. According to the latest Eurofer data, the drop for Europe for this period is close to 30 percent and the trend continues. Since the beginning of the year, the steel produced in the EU is about 1.8 percent less, and in Bulgaria, according to preliminary data, it is in the same order. At the same time, however, an increased demand is reported, which, according to the chairman of the Association, means that it is covered by an increased supply of imported ferrous metallurgy production, mainly from third countries, which is causing the European producer to suffer. According to him, this is mainly due to the indecision and slow reaction of European institutions. "In China, a decision regarding imports takes a week, in the USA President Donald Trump immediately introduced protectionist measures towards the European industry, and in the EU there is no response," commented the chairman of the Association. According to him, all the measures that the EU is targeting as legislation, aid to the industry, have a horizon of 2030, 2050, and business needs solutions immediately.

Non-ferrous metallurgy

The picture in the non-ferrous metallurgy of Europe looks much more optimistic, noted the chairman of BAMI, Nikola Rangelov. The reason is that it is subject to different laws, because in this segment the supply is at exchange prices on the London Metal Exchange (LME) and they are usually at higher levels, which in a certain sense helps the Bulgarian producer, commented the expert . In this branch, there is an upswing in Bulgaria, as traditionally our country enters the ranking of the 10 countries in the EU (27) - the largest producers of block non-ferrous metals and metallurgical products from them. We have reached the sixth place in terms of the value of total industrial output produced in this economic activity, the chairman of BAMI pointed out. For 2023, in terms of the amount of metallic lead produced, Bulgaria occupies fifth place among the member countries and producers, having been in sixth position a year before. This is also a result of the closure of facilities for the production of metals from primary ore concentrates in the EU due to reduced efficiency, high environmental requirements, shortage of raw materials, the effect of the emissions trading scheme and the growth of their prices. These are factors that affect the entire economy of Europe and lead to a decrease in industrial production, the expert pointed out.

Companies in Bulgaria

According to NSI data in economic activity "Production of basic metals" 100-120 companies are reported, of which about 10 are the large metallurgical enterprises, defining the appearance of the Bulgarian metallurgical industry, commented the chairman of BAMI. From the beginning of the democratic changes, among the big investors who left our country was the Indian "Mital", the expert reminded and added that the investors who left our country were not always correct in fulfilling their commitments under the privatization contracts. In general, during this period, two large enterprises from the "Metallurgy" branch were completely closed in Bulgaria: "Eliseina" - producer of unrefined copper, and "Kremikovtsi" with a closed technological cycle for the processing of ore into a variety of final metallurgical long and flat products. The lead-zinc complex (BCC), the town of Kardzhali, was also completely closed, but now the Bulgarian company "Harmony 2012" is operating there. - member of BAMI. The non-ferrous metals (mainly zinc) contained in them are extracted from the deposited waste (slag) from past periods available on the site. This is a good example of a circular economy that leads to efficient and ecological utilization of stored and nature-polluting industrial waste. There are many landfills for industrial waste in the country and they are waiting for their investors, commented the chairman of BAMI.

National and foreign companies work in the industry, but the large producers and processors of metals are dominated by those owned by foreign companies. But there are capacities and productions of Bulgarian investors that have achieved sustainable and competitive development, the expert pointed out. Such are the producers of lead and zinc in Bulgaria, as an example of this is KCM AD, which is one of the largest companies owned by Bulgarian investors, with a high contribution to sectoral and national indicators.

A serious rise is now observed in the extrusion of aluminum profiles, which are widely used in construction, in the automotive industry, in the construction of solar systems, in machine building, said Nikola Rangelov. Among them are the factory "Etem" in Sofia and "Alcomet" in Shumen.

Markets

For this year, Bulgaria's metallurgy is expected to account for the traditional 12-15 percent share of its production in the country's total commodity exports. The main market for Bulgarian metallurgical production is Europe, with around 60-70 percent of all exports destined for EU countries. Our production is also exported to some regional markets - neighboring countries of Bulgaria, as well as to North Africa, and for these countries, in terms of non-ferrous metallurgy, export growth is observed. New markets for our metallurgical production are the former republics of the USSR, where our industry is actively working to create stable and long-term contacts, noted the chairman of BAMI.

Among the companies in the branch there are also those that export about 98 percent of their production - for example "Sofia honey" - the largest industrial employer in the capital. A large part of the coins that are in circulation on the European market are made from an alloy produced by this enterprise, Nikola Rangelov said.

The prices of metals and construction

Regarding the rise in metal prices, the expert pointed out that their effect on construction prices was exaggerated. The prices of ferrous metals are stable, without change, but even with a possible rise in the price of the input metal, the impact on the cost of construction is minimal, commented Rangelov and added that finishing works have the main weight. In addition, when metals from third countries are used, which are cheaper than European ones, this should even lead to a drop in construction prices, something that is not observed, but reflects mainly on the Bulgarian metallurgical producers, the expert pointed out. The Bulgarian producer is extremely ecological, complies with all the norms of European legislation and it is not right to have no reaction when importing from countries where there is no such legislation or it is not respected, the chairman of the Association believes.

Investments

Bulgarian metallurgy is among the branches with the largest amount of annual investments in the country. On average, between BGN 300 and 500 million are the investments of the enterprises, and a large part is in ecology, said the chairman of BAMI. In terms of technology, companies have already reached a world-class upgrade. Such an example is KCM AD with the world's newest high-tech lead production scheme implemented. In order to be competitive, the investment process in metallurgy continues. "Alcomet" AD in the city of Shumen started a new investment of BGN 150 million, aimed at increasing the production capacity, assimilation of new high-quality products, as a supplement to their environmental investments. "Aurubis Bulgaria" presented its 4-year investment for 800 million BGN, which has a high ecological effect, Rangelov reminded. The enterprise will expand its production of cathode copper and its solar capacities and will probably become one of the largest producers of solar electricity in Bulgaria, he added.

Investments in metallurgy automation in Bulgaria are high, there are separate workshops and productions without the presence of workers in them. Process management has been outsourced to command rooms. There are already examples of using artificial intelligence. But still, one cannot expect the processes to be completely robotic, because in some the assessment of the qualified personnel is leading. Such processes exist in the production of alloys and specific products, the chairman of the Association pointed out.

Out of over 35,000 people at the beginning of the transition, there are currently around 12,000 employed in metallurgy in Bulgaria

In the metallurgical industry in Bulgaria, between 10,000 and 12,000 people were directly employed out of 35,000 people before the closure of "Kremikovtsi", the privatization of "Stomana" - Pernik and some other large enterprises from the sector. Currently, between 60,000 and 75,000 people are indirectly involved in the industry, while before they were at least a hundred thousand, said the chairman of BAMI.

In non-ferrous metallurgy, the average salary already reaches BGN 3,000, and in ferrous metallurgy it is around BGN 2,700-2,800.

The sector is experiencing a shortage of personnel, especially when opening new production sites, with assemblers being the most sought after. There are still qualified personnel in the industry, but a problem arises when leaving, because a certain time is required to create new ones - prepared. There are also difficulties in the importation of labor from third countries, especially from countries for which it is assumed by default that the people there are potential emigrants to Western European countries. Among them are Bangladesh, India, Pakistan, Nepal, said the chairman of BAMI. People from these countries, employed in some branches in Bulgaria, leave our country, but when the employer offers good wages, treatment and working conditions, these workers would not leave the country, Rangelov pointed out.

Workers from Uzbekistan, Kazakhstan, Turkmenistan are successfully integrated into our market. Ukraine has a well-developed metallurgical industry and our industry relied heavily on skilled Ukrainian refugees seeking employment in Europe. Unfortunately, not a single Ukrainian citizen joined the labor market in our sector, even in "Promet", which is Ukrainian property, the chairman of the Association pointed out. Among the reasons are the inefficient actions of the institutions and the extremely long terms for processing documents in our country, as well as the more attractive salaries in the sector in other European countries. According to unofficial data, the branch can provide from 500 to 1000 jobs, the chairman of BAMI pointed out.