EU member states call for steel safeguard review

The European Commission is being pushed by 12 member states, with most of the bloc's steel production capacity, to review the existing steel safeguard that is due to lapse in June.

"As the Covid-19 pandemic and the unprecedented economic slowdown in Europe caused by it continue, so does the severe impact on the activity of the steel industry," the member states suggest in the letter to trade commissioner Valdis Dombrovskis. "The use of production capacities remains reduced and several production sites in Europe have been closed. At the same time, stock in exporting countries has been piling up," the letter, obtained by Argus from multiple sources, says.

But some sources suggest that there is insufficient support for a review from all member states, and that the scheme may terminate when expected. Some commission officials have said the safeguards will be replaced by other mechanisms, such as individual measures. European steel association Eurofer, which is pushing for a review, said anti-dumping duties and the safeguard are different tools. "The safeguards counter a generalised threat while anti-dumping and anti-subsidy measures tackle specific, individual country and product distortions."

"The downturn caused by the pandemic has made it even more necessary to reform and extend the EU steel safeguard," the association told Argus, suggesting that the extension is consistent with the World Trade Organisation as the world's other large producing regions did not scale back their output during the pandemic, while European producers did.

UK steelmakers are also pushing for the country's steel import safeguard to be extended for three to four years from June this year, according to documents submitted as part of the transition review.

UK Steel and its members said "there is a high risk that the UK steel industry will be swamped by high volumes of deflected steel imports after June 2021" if the safeguard is not extended. British Steel, which is owned by Chinese producer Jingye, also requested a three-year extension of the safeguards.

Buyers have questioned whether or not the measures should be continued, given that availability of some products is already tight — a situation that has been aggravated by the pandemic.

Hot-rolled coil (HRC), the bellwether flat steel product, is already protected in the EU market by dumping duties. China, Russia, Ukraine, Iran and Brazil have existing definitive duties, and the commission has opened a review that could see duties on one Russian mill rise further, cutting into third-country availability even more. Turkey is already subject to provisional anti-dumping duties, as well as an anti-subsidy case.

Domestic European producers have struggled to satiate strong apparent demand in recent months, leading to soaring prices, extended lead times and historically high margins. Yesterday, the spread for HRC over integral blast furnace raw materials was $450/t, according to Argus data — the historical margin is closer to $250/t, and recent levels have rarely been witnessed before, if ever.

Buyers also point to domestic producers using other markets as leverage in their talks. At least one mill has been selling to North America, despite claiming to be sold out on spot and limiting allocations to customers — all while calling for the extension of safeguards.

By Colin Richardson