site.btaUPDATED Bulgaria's Metallurgy "Suffocating" amid Unauthorized Third-Country Imports of Ferrous Metal Products, Association Board Chairman Says

Bulgaria's metallurgy is "suffocating" amid the unauthorized imports of ferrous metal products from third countries, particularly long rolled steel, of which over 200,000 tonnes worth some EUR 240 million are imported every year, Nikola Rangelov, Chairman of the Bulgarian Association of Metallurgical Industry (BAMI) Management Board, told BTA in an interview on Tuesday, when the industry marks its professional day. 

Most often, these imports are carried out by circumventing customs regulations and involve products originating in Turkiye, Algeria, Egypt or Tunisia. Rangelov mentioned as one example steel declared as tool steel, for which customs regulations are more favourable, and which is then sold as concrete iron bars for construction. He urges tighter state control of unregulated imports.

The sector also has difficulties due to energy prices and insists that support for electricity costs should stay in 2025. Metallurgical companies say they need offsets for so-called indirect costs associated with reducing their carbon footprint. At this stage, companies are constrained to use only green electricity due to limited supply and still unresolved electricity market procedures. They buy domestically produced brown energy from coal-fired power plants and this affects their carbon footprint, hindering opportunities to decarbonize the sector.

The Bulgarian metallurgy has no serious problems from the sanctions imposed on Russia. But after the war began, more significant difficulties arose, Rangelov pointed out. Raw materials for ferrous metallurgy plants are supplied from Ukraine, and there have been periods of production stoppages due to lack of material. Difficulties arose mainly in logistics. Alternative routes are sought, deliveries are delayed and transport becomes more expensive. Substantial quantities of aluminum ingot were also imported from Russia for the country's largest aluminum processing plant. Now imports have changed and new supply chains have been developed from European countries, as well as from distant countries, he added.

Bulgarian metallurgy is export-oriented, primarily to the EU. Germany is Bulgaria's main trading partner, including the metallurgical sector. The economic difficulties in that country have not significantly affected the local metallurgical industry, as exemplified by Aurubis Bulgaria AD, one of the largest copper producers in Europe. They produce mainly for Germany and production is even increasing, the BAMI Board Chairman added.

Rangelov noted that a decline in output quantities was registered last year in some sectors. In non-ferrous metallurgy, the production of copper and lead decreased due to planned and unplanned repairs of equipment. Such repair periods are periodic and mandatory in metallurgy, which operates at high temperatures and pressures, the BAMI Chairman said.

He says that Bulgaria remains a factor in the EU metals industry with a relative share of 12.5% in copper and 7.1% in lead production.

There has also been an 8% decline in the production of aluminum products as a result of increased imports from third countries, mainly from China at low prices. In 2024, a certain "awakening" of the industry has been registered in terms of demand and supply, the Association's Chairman said.

Ferrous metallurgy

Over the last 8-10 years, a decline in the production of ferrous metals has been registered throughout Europe, a trend that is now spreading into Bulgaria. According to Eurofer's latest data, the decline for Europe over this period is close to 30% and the trend continues. Since the beginning of the year, steel production in the EU has declined by 1.8% with preliminary data showing the same trend in Bulgaria. At the same time, however, a higher demand is registered and Rangelov believes that means that there is increased supply of imported non-ferrous metallurgy products, mainly from third countries, to cover this demand to the detriment of European producers. In his words, this is mainly due to the lack of resolve and slow reaction of European institutions. "In China, a decision on imports takes a week. In the US President Trump set in place immediate protectionist measures against the European industry, and there was no response from the EU. All the measures that the EU is mapping out in terms of legislation, assistance to industry, have a horizon of 2030, 2050, and businesses need solutions now."

Non-ferrous metallurgy

The picture in non-ferrous metallurgy in Europe seems much more optimistic, Rangelov said. The reason for that is that it obeys different rules and supply is at London Metal Exchange (LME) prices, which are usually higher and thus to some extent help Bulgarian producers, the expert explained. An upswing in this industry in Bulgaria was registered and the country is traditionally among the EU27's top 10 producers of non-ferrous metal ingots and products thereof. "We have reached the sixth place in terms of the value of total industrial output produced in this economic activity," said the BAMI Chairman. In 2023, Bulgaria ranked fifth among the member states and producers in terms of the amount of metallic lead produced, compared to the sixth place in the previous year. 

This is also a result of the closure of metal production facilities from primary ore concentrates in the EU due to reduced efficiency, high environmental requirements, shortage of raw materials, the operation of the emissions trading scheme and the growing prices. These are factors that affect the entire economy of Europe and lead to a decline in industrial production, the expert pointed out.  

Companies in Bulgaria

According to the National Statistical Institute, between 100 and 120 companies report in the production of basic metal economic activities sector, including 10 of the largest metallurgical enterprises which determine the industry outlook, Rangelov said. From the beginning of democratic changes in 1989 two major enterprises in the sector were closed down entirely. Those were unrefined copper producer Eliseina and Kremikovtsi steel works. The lead and zink works in Kardjali were also closed down, but now Harmony 2012, a BAMI member, operates the. It produces non-ferrous metals, mainly zink, from the slag depot. This is a good example of a circular economy that leads to efficient and environmentally friendly recovery of stored and polluting industrial waste. There are many landfills for industrial waste in the country and they are waiting for their investors, the BAMI chairman said.

There are national and foreign companies working in the industry, but of the large producers and processors of metals, those owned by external companies predominate. However, there are facilities and industries of Bulgarian investors that have achieved sustainable and competitive development, the expert said. Such are the producers of lead and zinc in Bulgaria, as exemplified by KCM AD, which is one of the largest companies owned by Bulgarian investors, with a high contribution to sectoral and national indicators.  

A serious upsurge 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, and in mechanical engineering, said Rangelov. These include the Etem plant in Sofia and Alkomet in Shumen.

Markets

This year, Bulgaria's metallurgy is expected to account for the traditional 12-15% share of its production in the country's total commodity exports. The main market for Bulgarian metallurgical products is Europe, with about 60-70% of all exports destined for EU countries. Bulgaria also exports to some regional markets - neighbouring countries of Bulgaria, as well as to North Africa, and these countries are experiencing an increase in exports in terms of non-ferrous metallurgy. New markets for our metallurgical products are the former republics of the USSR, where the Bulgarian metallurgy is actively working to establish stable and long-term contacts, noted the BAMI Chairman.

Among the companies in the industry there are those that export about 98 percent of their produce - for example Sofia Med - the largest industrial employer in the capital. A large part of the coins that circulate on the European market are made from an alloy produced by this company, said Nikola Rangelov.

Metal prices and construction

Regarding the increase in metal prices, the expert pointed out that their effect on construction prices is exaggerated. The prices of ferrous metals are stable, unchanged, but even with a possible increase in the price of the metal, the impact on the price of construction is negligible, Rangelov said. He argued that finishing works have the main weight. Moreover, when metals from third countries are used, which are cheaper than the European ones, it should even lead to a drop in construction prices, something that is not being talked about, the expert pointed out.

Bulgarian producers are extremely environmentally friendly, comply with all the standards of the applicable European legislation, and it is not right that there is no reaction to imports from countries where either there is no such legislation or it is not respected, the Chairman of the Association thinks.

The investments

Bulgarian metallurgy is among the industries with the largest annual investment in the country. The investments of the enterpises average between BGN 300 million and BGN 500 million and a large part of them are in environmental improvements, the BAMI chairman said. In terms of technology, companies have already reached world-class innovation. One such example is KCM AD with its latest high-tech lead production scheme. To be competitive, the investment process in metallurgy continues. Alkomet AD in the city of Shumen has started a new investment of 150 million leva aimed at increasing production capacity, absorbing new products of high quality, as a complement to their environmental investments. Aurubis Bulgaria presented its 4-year investment for BGN 800 million, which has a high ecological effect, Rangelov reminded. The company will expand its cathode copper production and solar capacity and will likely become one of the largest solar electricity producers in Bulgaria, he added.

Investments in the automation of metallurgy in Bulgaria are high, there are separate workshops and industries without the presence of workers in them. Process control is relocated to control rooms, with examples of AI in use already. Yet processes cannot be expected to be entirely robotic, because in some the assessment of skilled personnel is leading the way. Such processes exist in alloy and specific production, the association's chairman pointed out.

From more than 35,000 at the beginning of the transition, there are currently about 12,000 employed in metallurgy in Bulgaria. Currently, between 60,000 and 75,000 are indirectly involved in the industry, while before they were at least a hundred thousand, the BAMI Chairman said.

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

The sector is experiencing a shortage of staff, especially with the opening of new production sites, with assemblers being the most in demand. Qualified personnel are still available in the industry, but the problem arises when they leave because it takes time to create new trained ones. There are also difficulties in importing labour from third countries, especially from countries where it seems to be assumed by default that people from there are potential migrants for Western European countries. Among them are Bangladesh, India, Pakistan, Nepal, the BAMI chairman said. People from these countries employed in some industries 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 successfully integrate 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-owned, said the Chairman of the Association. Among the reasons are the inefficient actions of the institutions and the extremely long time 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 industry could provide 500 to 1,000 jobs, said the BAMI Chairman.