EU Safeguards for steel
by Hans Diederichs
The associations present a corresponding statement on the review of measures initiated by the EU Commission in mid-May. According to the IBU and FVK, this control is also too early and the assessment period too short. They fear new uncertainties and a market intervention. Their steel-processing members are directly affected by the protective tariffs finally introduced in February. These are intended to avoid a presumed US customs-related trade diversion of steel towards the EU and to protect its steel producers.
No trade diversion for products in steel categories 4B and 1
According to the industry associations, a quota adjustment would "meet market needs and avoid disrupting global trade flows". For their members, steel categories 4B and 1 are particularly relevant - primarily products made of hot-dip galvanized sheet. Here the duty-free import quotas from China and South Korea were exhausted after a few months. However, trade diversions are not the reason: the trend towards rising imports of 4B products is reflected in both EU and US import statistics. The associations suspect that the causes in the EU area include reactions to the introduction of the measures, supply bottlenecks and long-term contracts. The build-up of inventories and the calculation of quotas on the basis of outdated data could also be reasons.
Country specific quotas too low
Since the EU Commission includes quota exhaustion as a review issue, IBU and FVK underline their position on the extension of category 4B import quotas and the extension of quotas. IBU Managing Director Bernhard Jacobs commented: "There has been no significant change in circumstances in the EU that would justify a reduction in import quotas, nor does the effect of trade diversion matter. On the contrary, we call for an increase in country-specific quotas for China and South Korea". Since this should not take place at the expense of other supplier countries, the quotas should also increase there. IBU and FVK are also concerned about the quotas for steel category 1, which were already severely strained at the end of March 2019. They also plead for an adjustment with a view to the needs of the EU market.
Protective measures: Review too early
In general, the associations assess the review time after about four months as too early and the evaluation period as too short. FVK Managing Director Martin Kunkel comments: "Twelve months would be at least necessary to create a representative basis for monitoring the import quotas. Demand for steel is subject to typical cyclical fluctuations. In addition, the safeguard investigation and the uncertainty about its results have influenced the behaviour of market participants in the first months of 2019.".
Trade relations at risk
The protective measures endanger the free market access of steel-processing small and medium-sized enterprises and their trade relations, which are often painstakingly developed. Both associations had therefore vehemently opposed this in advance. They saw no reason whatsoever and feared that this would have an impact on prices on the market. Particularly in categories 1, 2 and 4, the results of the EU investigation prior to the introduction of the Safeguards showed no serious injury to EU steel producers.