The European Commission (EC) will extend its steel safeguard measures for another three years rather than the expected one-year period. The proposal includes a 3% increase in quota volumes, rather than 5%.
The proposed extension will come into effect on 1 Jul’21 and consists of a tariff-rate quota (TRQ) available per product category, out of which, an out-of-quota 25% duty applies.
The main exporting countries are Turkey, Russian Federation, India, China, Korea and Ukraine.
European mills had urged the European Commission to extend the safeguard measures while steel consumers had opposed the safeguard amid high prices and tight availability in the European home market.
The UK Trade Remedies Authority on 11 Jun’21 recommended the continuation of import safeguards on 10 categories of steel products, ranging from railway materials to stainless-steel bars, based on tariff rate quotas for three years, and to revoke import curbs on a further nine product categories.
The Commission had launched a review of the import safeguard measures in February to determine whether the same should be prolonged beyond 30 Jun’21. The investigation covered the period 2018-2020.
The current safeguards system has governed imports into the EU since Jul’18, following an import surge and following the US’ decision in March of that year to implement a 25% import tariff on steel under Section 232.
Probe findings
The probe revealed that production volume declined constantly throughout the period considered by 5% and 16% in 2019 and 2020 respectively. The capacity utilisation ratio declined year-on-year. Consumption decreased 6% and 16% in 2019 and 2020 respectively when compared to 2018.
Domestic sales within the European Union industry followed a similar downward trend. The Union industry experienced a massive drop in profitability, turning loss-making in 2019. This trend continued in 2020, reaching -3.7% losses. Cash flow and return on capital employed also saw a continuous negative trend during the period, the probe revealed.
From 2018 to 2019 profitability experienced a slump by 6.1 percentage points to reach -0.4% at the end of 2019. This “serious worsening” took place well before the unexpected onset of the Covid-19 pandemic and its ensuing effects on the market.
Exporting countries exhausted quota fast
In addition, the investigation confirmed that during the period considered the main steel exporting countries exhausted a large number of the country-specific quotas allocated to them and, quite often, in a rather short time within the relevant periods of application of the safeguard.
Therefore, the investigation concluded that import pressure remained high during the period considered.
~by Madhumita Mookerji
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