Overcapacity threatens EU decarbonisation: Eurofer

European steelmakers' decarbonisation efforts are at risk because of low-priced imports, according to European steel association Eurofer.

"We need to stop the spillover and the impact of that spillover from global overcapacity," Axel Eggert, director general of Eurofer, told Argus, suggesting low-priced imports are "pushing down any possibility for EU steelmakers to generate the margins they need to fund the green transition".

"If you don't generate the return you need, you will be unable to make the investments you need. Then even climate targets are at risk. This has to be addressed," he said.

With demand declining, particularly in China, and new production being installed in the coming years — in particular in southeast Asia, north Africa and the Middle East — the overcapacity issue will only worsen, Eggert said.

Eurofer has been in dialogue with the European Commission, which it says is aware of the problem, and has asked for a structural solution, such as a comprehensive global tariff-like system. It has not requested a Section 232 style tariff, he said.

While the EU is not known for the speed of its decision-making and implementation, Eggert said the sanctions on Russia showed it can act quickly when needed. "We do not know what the commission will do. They are aware of the problem, but they need to act fast. We cannot wait a year. That is the challenge," he said.

The liberalisation of the safeguard means about 120pc of the 2015-17 import volumes can come to the EU without paying any tariffs, and the impact of this penetration is worsened by demand depression within the EU.

The 25pc tariff, even where applicable, is potentially insufficient for some countries too, Eggert said, alluding to the fact that China recently offered into the EU despite dumping and countervailing duties. China could export 100mn t this year, he said, suggesting the country's mills are still exporting despite making losses.

Asked about Europe's own overcapacity, Eggert said it is the only major region to have reduced capacity, by about 26mn t in the past 15 years, leading to a worsening trade deficit.

"EU steelmakers are continuing to adapt capacity downwards, but we are reaching a point at which further steel capacity reductions will erode the resilience and strategic autonomy of the EU, let alone the negative impact on hundreds of thousands of quality jobs in the EU's steel value chain," he said.

By Colin Richardson