European Union (EU) member states have approved the European Commission’s final safeguard measures on steel.
According to the European Steel Association (EUROFER) imports surged 12% last year, making the need for an effective defence mechanism essential.
Axel Eggert, director-general of EUROFER, commented: “For every three tonnes of steel blocked by the US’ section 232 tariffs, two tonnes have been shipped to the open EU market.”
Eggert said it was important that final safeguard measures be approved by member states. “These will now be implemented by 4 February. While we welcome this endorsement, we are nevertheless worried that the form of the final measures may undermine their intended safeguarding function,” he said, adding that it was vital that the European Commission monitors EU steel demand development ‘and adjusts the generous increase of the tariff-free import quota accordingly in July 2019 if necessary’.
EUROFER says that the final measures include an immediate ‘relaxation’, increasing the size of the quota by 5% (calculated on the base years of 2015-2017) with a further 5% relaxation in July and another 5% in July 2020, subject to review. Steel demand in 2019 is expected to increase by just 1%.
“This means that the rise in the quota may be multiple times larger than the increase in the size of the market, leaving EU producers to fight over a shrinking market share,” Eggert commented. “Imports already account for around a quarter of the market, up from less than a fifth historically,” he added.
The final measures give country-specific quotas to the main steel exporters to the EU. The remaining residual quota for other countries will be quarterly. Countries with their own quota are free to consume the residual quota once they have used up their own.
The final safeguard measure continues to exempt some developing countries because their import share was below 3%, despite exceeding this threshold during 2018. This is, for instance, the case for Indonesia, whose share of the stainless hot rolled flat steel product segment reached 9.5% in 2018. It is essential that such countries lose their exemption in upcoming revisions.
“So, while we reiterate our welcome for the final measures, and the overwhelming backing they have received from member states, we caution that steel demand must be monitored closely in the coming periods if this mechanism is to prove effective in the long run”, concluded Mr Eggert.
UK Steel's director-general Gareth Stace commented: "Member states' approval of these definitive safeguard measures is enormously welcome." Stace said that the bigger picture was a negative one, arguing that no-one wants to resort to trade restrictions, but the circumstances demand it. "These measures are only necessary due to the US's ongoing 25% tax on steel imports, which has disrupted global trade flows, diverting significant volumes of steel from the US to the EU, and hampered our ability to export to the US," he added.
According to Stace, the priority for the British Government is to come forward with a contingency plan for what happens in the event of a no-deal Brexit. "At present, no deal means no safeguards for UK companies. This cannot be allowed to happen, particularly on top of all the damage the mayhem of a no-deal Brexit would heap upon the sector – we need certainty now," he concluded.