EU safeguard measures review brings imports uncertainty

Steel importers in the EU are braced for the effect of revisions to the European Commission’s import safeguard measures, which it aims to implement from April 1.

The Commission announced its intention to review the current quota-based system on December 18, following an application from 13 EU member states. It said that their request had been prompted by challenges faced by the EU steel sector, which had been exacerbated by increasing global overcapacity and a continued decrease in EU steel demand.  

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Among the potential changes is the extended application of the 15% cap on individual countries’ use of the “other countries” category’s quarterly quotas, which are currently applied to hot rolled coil and wire rod. MEPS understands that this was among suggestions made by the European Steel Association (Eurofer).  

The 15% cap was introduced in July last year. At the time, MEPS reported that imports from Vietnam, Japan and Taiwan – the three largest suppliers of Non Alloy and Other Alloy Hot Rolled Sheets and Strips into the EU in 2023 – would be increasingly exposed to 25% above-quota duties.   

Diversified supply chain  

Import data published on January 6 showed that the three countries’ quarterly tariff-free quotas (each of 138,766 tonnes) had been exceeded; Vietnam by 9%, Japan by 56% and Taiwan by 13%. However, other countries’ quotas remained underutilised, leaving scope for importers to diversify their sources to maintain supply.  

MEPS analysis indicates that many importers have already been able to diversify their supply chains. Hot rolled coil import volumes have increased since the introduction of the 15% “other countries” cap. This apparent uptick, revealed by ISSB data, helped to maintain downward pressure on hot rolled coil prices recorded by MEPS in the second half of last year.   

Throughout the six-month period, MEPS research contacts reported that low-cost imported material could be readily acquired from EU ports, with tightening storage capacity a growing issue in certain locations. Against a backdrop of oversupply and heavily subdued demand across the continent, the MEPS Europe Average hot rolled coil price declined by 11.4% between July and December, from EUR643 per tonne to EUR570 per tonne.  

Increased tariff rate proposed  

An increase in the above-quota tariff rate, from 25% to between 32% and 41%, is among other potential changes to the current EU safeguard measures. These elevated levels were first cited in the European Commission’s modelling for the quota-based system ahead of its introduction in 2018. At the time, the Commission said that a tariff of 32% would allow 10% more imports than in 2015-2017. A tariff of 41% would, it said, serve to maintain imports at their 2015-2017 level.   

The 25% above-quota tariff ultimately adopted would, the Commission stated in 2018, facilitate traditional trade alongside a 10% increase in imports. It said that this represented “a cautious approach”.  

Since 2018, however, EU steel production has declined by 16%, to 126m tonnes. EU steel consumption, meanwhile, has declined by around 22%, to 127m tonnes.  

Imports now account for 27% of EU supply. Furthermore, Eurofer has estimated that global steel overcapacity would exceed 560m tonnes in 2024, with OECD data forecasting that an additional 157m tonnes of carbon-intensive capacity will come online by 2026.    

Despite the risks posed by global overcapacity, the European Commission will not be permitted to cut its safeguard measures’ quota volumes. WTO rules state that quota volumes must be liberalised – or increased – in each year of their application.   

The Commission is expected to conclude its safeguards review on March 31. Until it reveals its conclusions, importers face uncertainty over the tariff rates they will incur in quarter two and beyond.