Extension of U-shaped steel import guarantees divides market views
The European Commission has officially published rules governing steel import safeguards into the European Union for the next three years: leaving the safeguards in place for all 26 categories of steel products, subject to annual review . The extended safeguard, which pits traders and consumers against mills, will officially take effect from July 1.
Widely expected by the market, the new regulations differ from the old system in that the annual tariff rate quotas used to govern imports will now be increased by 3% per year, instead of 5% previously.
The EC has extended the guarantees due to what it perceives to be a “fragile financial situation of the Union steel industry”. The EC notified the World Trade Organization on June 11 of its intention to extend safeguards, which was approved by member states on June 18.
The European steel producers’ federation, Eurofer, welcomed the extension. “The conditions which necessitated the initial launch of the safeguard are still very present, notably the global steel overcapacity and the American Section 232”, said Axel Eggert, Managing Director of Eurofer.
Current safeguards were put in place in July 2018 to protect the EU market against trade flow gaps following the US imposition of Section 232 tariffs on imports of ‘steel in March of the same year.
“End of free trade”
Although widely expected and well received by steelmakers, the extension did not find favor with traders, who foresee further upward pressure on prices in a market suffering from high material tension in some product areas. .
“I understand that this decision is taken to primarily support the steel industry and not the end users,” said an EU trader. “This will keep the price very high and fuel steel price inflation and volatility. If you add all the anti-dumping investigations to that, you might think we’re living through the end of free trade, where everyone wants to protect their steel industry; as we already know, it does not work.
An Italian steel buyer called the extension a “disaster … EU factories will not be able to offer all the products we need … this year has been a terrible year for them. service with incredible delays and abnormal speculation: we are really worried for the months to come. “
Prices for flat and long steel products hit their highest level ever in Europe this year, as they also did in the United States. Steel buyers have made their voices heard on the price increases but also on the difficulty of finding material.
Prices at historic highs
Prices in the EU have reached their highest level ever, according to Platts’ price analyzer. On June 21, the Platts Benchmark Ruhr factory hot-rolled coil price hit a record high of EUR 1,190 / mt, slightly lower from the June 28 valuation of EUR 1,187.50 / mt. EU rebar also hit its highest level on record in June, at € 817.5 million delivered.
Euranimi, a Brussels association of steel consumers that represents the “middle of the supply chain” (importers, distributors, traders and processors), said “it finds incomprehensible that the EU chooses to ignore what takes place downstream and sticks to a protectionist logic which is no longer justified in a context of flagrant shortage of materials and exceptionally long delivery times which are at the origin of ever higher prices.
“The economic reality of this decision will be that countless European steel processing companies, which already today have an urgent need for equipment, will receive only a fraction of their steel needs, which will be delivered to them a lot. later and at a much higher price. Euranimi does not understand why such a measure is considered favorable to the European economy.
In its safeguards paper, the EC argued that “the Commission has found that the steel price increases recently observed in the Union steel market cannot be attributable to or be the result of the safeguard of Union steel, as such high prices also prevail on world markets and large volumes of duty-free tariff rate quotas nevertheless remain unused and available under the safeguard. “
Regarding material shortages, he said that “the supply problems encountered after the rebound in demand were transient and the return to service of facilities unused by the Union industry, which is underway, should thus help ensure that normal steel supply conditions before the pandemic are restored within a reasonably short timeframe.