EC to propose potential steel import safeguard changes late May, following review

The European Commission is set to propose an updated European Union steel import safeguards regime later this month, with a view to effecting any changes in July, the EC said May 11.

"The review is still ongoing and should be concluded and adopted in time for any changes to apply as of 1 July 2022," an EC spokesperson said in an email. "The Commission expects to issue a WTO notification with the main elements of the proposal towards the end of May or early June at the latest."

The system, involving tariff-rate quotas, was introduced mid-2018 to curb trade deviation following US president Trump's introduction of 25% tariffs on steel product imports from many countries under Section 232 legislation in March that year. From Jan. 1, Section 232 charges on EU steel have been replaced by a tariff-rate quota accord on trade between the parties concerned. A similar US-UK accord will be effective June 1.

EU steel consumers' associations have lobbied during the current review for the safeguards to be annulled or suspended, or tariff-rate quotas to be increased. They argue the safeguards have contributed to high prices and product scarcity in the EU market and that the ban on imports of Russian steel and new trade opportunities for EU steel in the US now render them unnecessary.

In September 2021, Brussels-based steel consumers' group European Association of Non-Integrated Metal Importers & Distributors Euranimi brought legal action to the General Court of the European Union in Luxembourg, requesting annulment of the three-year extension from June 2021 of the safeguard measure, alleging "a manifest error of assessment" on the part of the EC in the determination of serious injury and likelihood of serious injury from steel imports.

Prices falling

European steel producers' association Eurofer counters that the steel import safeguards continue "to avoid serious disruption from sudden import surges without micro-managing supply or prices...Having peaked in March, European steel prices are now quickly and significantly decreasing (below US price level) as steel users are limiting orders speculating on further price decreases," the association said.

North European hot rolled coil exw-Ruhr prices have fallen 17.2% since the start of Q2 to Eur1,150/mt May 11, according to S&P Global Commodity Insights' assessment.

The current review of the EU's system safeguards system – the fourth review of the system - was brought forward to December last year, with contributions from interested parties required by Jan. 10. Following Russia's invasion of Ukraine on Feb. 24, the EC reallocated Russia's and Belarus' product quota among other exporting countries.

Finished steel imports from Russia and Ukraine together totaled around 6 million mt in 2021, around 20% of total EU imports and 4% of EU steel consumption of 150 million mt, Eurofer noted.

The review covers 26 product categories, including hot-rolled sheets and strips, cold rolled sheets, metallic coated sheets, tin mill products, stainless hot and cold rolled sheets and strips, merchant bars, light and hollow sections, rebars, wire rod, railway material, and seamless and welded tubes.

Aperam seeks stainless import curbs

Tim di Maulo, CEO of EU and Brazil-based stainless steel producer Aperam said May 6 that the company was counting with EC support to help curb "a dramatic increase in imports [into the EU] in Q1.... purely from China."

An Aperam spokesperson said in a statement that "We expect more countries to fall under the safeguard in future with China being a prime candidate," this being the company's request for the upcoming revision. South Africa was recently included under the safeguard measures, he noted.

"China has found a way to sell much more in the past despite anti-subsidy measures," di Maulo said on a call with investors to discuss the steelmaker's Q1 results. "Imports are always putting pressure on the market.

"The Commission has been supportive and will continue to be supportive," he said. "We believe the Commission will address this."

Despite the higher imports, Aperam reported continued record results in Q1 on higher product sales and revenues and the addition of recycling results to its balance sheet. With a flat stainless and electrical steel capacity of 2.5 million mt/year in Brazil and Europe, the company expects further positive records in the second quarter.

Di Maulo added that the current situation in China has led steelmakers there to make extremely low or negative margins on their production, compared to positive margins over the last two years. However, this is "a cycle that may normalize in future," he said.

Euranimi, however, noted in a Jan. 26 letter to the EC that in the EU "due to an unprecedented high level of protectionism and a booming demand, there is a huge shortage of stainless steel, especially SSCR (cold rolled flat stainless steel), and prices out of control."

Changing scenario

"The economic and geopolitical situation has changed fundamentally compared to 2018 when the provisional safeguard measure was put in place," said Euranimi director Christophe Lagrange in a May 11 email, citing the post-pandemic economic recovery, a shortage in Europe of materials including stainless steel, record price increases, record 2021 profits by European stainless steel producers, inflation rates in the EU, overseas transportation congestion resulting in extremely high shipping costs and much costlier imports, war in Ukraine, EU sanctions against Russia, succession of Donald Trump by Joe Biden as US president and the lifting of some Section 232 measures.

"Under such radically new circumstances and since the danger that this measure was intended to combat no longer exists, why keep in place a safeguard measure that was created to protect the EU steel mills in a totally different context?" Lagrange asked.