The Bulgarian Association of the Metallurgical Industry (BAMI) was established in 1991 as an association of employers in the metallurgical branch and accompanying production activities and services. It is the only business organization that represents companies focused on the production of basic metals and as such it implements the social partnership with the branch trade union structures and participates in the national tripartite dialogue. Politimi Paunova is Executive Director of BAMI.
Ms. Paunova, in the last three years and especially in the recent months, there has been a new trend in the development of extractive industries, with a focus on their importance and role in the green transition. This has led to the Critical Raw Materials act, which has been put forward by the European Commission and is currently under negotiation. Does Bulgaria have the natural resources to participate in the supply of materials defined as critical?
Currently, Bulgaria is a significant producer and processor of basically non-ferrous metals such as copper, aluminum, lead, and zinc - the first two of them are included in the list of raw materials of critical and strategic importance. All these metals have major applications in the production of green transition products such as electric vehicles, renewable energy installations, batteries, and power networks. They are produced from ores that also contain small amounts of other critical elements, such as antimony, bismuth, selenium, and cobalt. Valuable elements are also found in old slag dumps and landfills. A manganese ore deposit has also been developed in the country. The implementation of economically justified projects for the processing of these deposited products for further extraction of the necessary and defined as critical minerals for the new industry is a real opportunity for economic growth and contribution to the implementation of the EU's raw material independence. Currently, our country is a significant producer of non-ferrous metals. Bulgaria's production of non-ferrous metals by value ranks us sixth among all EU-27 countries.
Is the current investment environment facilitating the realization of this potential, and are there steps for improvement that should be taken?
Nothing new has happened in this regard yet. In recent years, Europe has not been the best place for investments. Even if we consider only the two main factors influencing this process - the cost of energy resources and administrative burdens, they do not give competitive advantages over the USA, China, or other countries of the region. The European Commission's response is delayed. Very quick and radical measures are now needed to make the EU a preferred investment destination again, especially in high-tech development. The two new regulation Acts – the Critical Raw Materials Act (CRMA) and the Net Zero Industry Act (NZIA), which aims for increasing the production of technologies with zero net emissions with the target of at least 40% of the EU's annual deployment needs by 2030, are a positive step in this regard. However, this still does not guarantee change in the investment environment, and the implementation of these policies remains in the hands of the new European Commission.
We are witnessing events with a significant impact on the world economy, especially for manufacturers in Europe. This is a result of the EU’s dependencies on the supply of raw materials from third countries for vital products. In addition, many production processes were outsourced and created crises along the supply chains. Particularly for metals, the EU has lost its previous position. For example, in the case of a significant metal like electrolytic copper (copper cathodes), Asia's share in global production is growing, now exceeding 55%. In the EU, there is a decline, and the share is now at 10%. This is also valid for steel production and most metals, with the production of some of them being completely monopolized. Under these conditions, changes are necessary to ensure a favorable investment environment and sufficient financial resources. Access to rapid, streamlined, and competitive financing is a fundamental element for industrial development. Administrative regimes must be reduced and eased significantly.
Bulgaria needs to be active in this process, to set its goals, advantages, and potential to participate. The implementation of projects funded by EU funds for new production in the critical raw material processing chains should become part of the national plan for transformation and industrial development. The metals sector is ready to accept the new challenges and is willing to contribute with its potential, but this will require support and assistance from the state.
Is there a risk that this new direction of development could lead to an imbalance in meeting our own raw material needs?
At this stage, there is no basis to expect an imbalance in the production and consumption of metals. Bulgaria is a net exporter of metallurgical products, with a high share in commodity exports, approximately 12-14%. In non-ferrous metallurgy, production significantly exceeds domestic consumption of metals and products made from copper, zinc, and aluminum. Lead has higher domestic consumption in the production of battery cells. Only in the steel industry, the trade balance is negative due to the closure of capacities and a limited assortment of Bulgarian producers.
Metallurgy holds a substantial relative share in the country's overall industrial production, reaching around 14-15%. However, there are no major producers and consumers of non-ferrous metals in the subsequent processing chains. The upcoming transformation provides an opportunity for a change through the establishment of new capacities for the production of products based on the already manufactured metals, including for use in the development of industries with zero emissions. The metallurgical industry has achieved sustainable and competitive development over the years, which is a prerequisite for the adoption of new production processes in the processing chains of extracted metals. The impending transition and opportunities for European funding are a chance to change the structure of the Bulgarian economy and create additional added value.
What other trends are influencing the development of metallurgy in Bulgaria?
As a member of the EU and an open economy, Bulgaria is heavily dependent on EU policies and markets. Exports to EU member states exceed 60%. In the black metallurgy sector, the impact is particularly significant. To protect the internal market from the increasing imports of products from third countries, the sector relies entirely on EU trade measures.
For metallurgy, prices of energy resources play a significant role. Changes in these prices have a direct impact on production indicators and competitiveness. At the same time, they are not based on national production but are influenced by external factors. An example is the recent surge in electricity prices in Bulgaria due to the shortage of produced electricity and the high natural gas prices for electricity production in the EU, resulting from the conflict in Ukraine.
Metals are a commodity, and the value of production is based on global prices, primarily those of the London Metal Exchange (LME), which are highly dynamic. Within a year, price changes can reach 20%-30%. This also affects the production and financial indicators in the sector.
The implementation of European climate policies and carbon emission prices further increases the costs for producers. The adverse effects are offset by continuous investments in new technologies and products that aim to keep production competitive and ensure development.
What is your forecast for the industry's development?
In today's dynamic and unpredictable world, making forecasts is difficult. Nevertheless, if we assume that the plans of the European Commission are achievable, we should expect a positive change in the coming years, including in the development of the industry. The metallurgical sector plays a key role in these plans, and the process of digital and low-carbon transition will start from metal mining and production. Therefore, we should be optimistic. However, these changes are not a fact just yet, and growth is minimal, with even some expecting a recession. As mentioned earlier, we hope for more active efforts toward industrial growth in Europe after the European Parliament and European Commission elections.
Looking at a more practical and near-term perspective, I believe that the investments made in metallurgical enterprises are significant and meet the best production practices and standards. This gives me a reason to believe in the future of Bulgarian metallurgy and its leading role in the national economy.