Industry observers show varied opinions on US-EU quota deal

Stakeholders, analysts and other observers of the metals industry are expressing mixed reactions following a trade deal reached Oct. 30 that will see the US remove its steel and aluminum tariffs on imports from the EU and replace them with quotas.

Dave Townsend, an attorney at Dorsey & Whitney, said the agreement more closely positions the US and EU as trade allies as the two sides seek to collaborate in addressing trade issues with China. Still, it will take time to fully assess how the new arrangement will impact producers and importers, he added.

“It remains to be seen how much tariff relief this arrangement provides because it will be implemented in a tariff-rate quota system based on historical import volumes, similar to that in place for certain other countries,” Townsend said in a statement to S&P Global Platts Nov. 1. “Certainly, some importers will obtain tariff relief in this agreement, but it’s not clear how broadly that relief will be.”

Analysts with Jefferies said the implementation of a tariff-rate quota was expected, and the outcome is viewed “as a net positive for Euro carbon steel prices,” according to a research note Oct. 31.

The Coalition of American Metal Manufacturers and Users, which represents metal-consuming manufacturers, said the end of the tariffs on the EU will support many sectors of the US industry that are subject to some of the highest metal prices in the world.

However, the use of quotas presents new concerns that still pose risks to manufacturers, CAMMU added.

“It is disappointing that the agreement will not completely terminate these unnecessary trade restrictions on our allies,” CAMMU said in a statement Oct. 31. “CAMMU is concerned that replacing the tariffs with a tariff-rate quota will hurt its members because the threat of tariff reinstatement looms with the surge in steel and aluminum demand expected when the bipartisan infrastructure bill passes.”

United Steelworkers International President Tom Conway said the quota would maintain the protection offered by the previous tariffs to the benefit of workers within the US’ metal industries.

“This new arrangement…will create a framework that will ensure US domestic industries remain competitive and able to meet our security and infrastructure needs,” he said in an Oct. 30 statement.

“It will also provide a much-needed opportunity to address the non-market predatory practices of China and other countries that have distorted global markets, while also spurring a dialogue over climate concerns stemming from countries whose industries are far more carbon intensive than those in the US and the EU.”

Tariff removal may continue beyond EU

Following the announcement of the US-EU quota agreement, the US Commerce Department said it was now “consulting closely” with Japan and the UK “on bilateral and multilateral issues related to steel and aluminum, with a focus on the impacts of overcapacity on the global steel and aluminum markets,” according to two statements Oct. 31.

Import tariffs of 25% on steel and 10% on aluminum from most countries were introduced by former President Donald Trump in March 2018 using a national security justification under Section 232 of the Trade Expansion Act of 1962.

The US Chamber of Commerce said the US must continue to reach deals with other governments to remove metal tariffs.

“These tariffs hurt 50 American workers for every one they helped, and we should learn from this experience,” Chamber of Commerce Executive Vice President Myron Brilliant said in a statement Oct. 30.

“Meanwhile, Section 232 tariffs and quotas remain in place on imports from many other countries. The US should drop the unfounded charge that metal imports from the UK, Japan, South Korea and other close allies represent a threat to our national security and drop the tariffs and quotas as well.”

New quota deal avoids retaliation

With the replacement of the metal tariff with a quota system, the EU has now agreed to not levy retaliatory tariffs on US products such as motorcycles, jeans and whiskey.

The Brown–Forman Corporation, which owns several US brands in the alcohol and beverage markets, welcomed the news of the US-EU agreement and its beneficial impact to industries subject to retaliation.

“Brown-Forman looks forward to the return of a level playing field and continued international growth for American whiskey,” company CEO Lawson Whiting said in a statement Oct. 31. “We hope a similar outcome can soon be achieved between the U.S. and the UK.”

— Nick Lazzaro

US-EU tariff deal could impact Turkish steel exports to the US

The deal that the US and EU reached on Oct. 31 to replace the Section 232 metals tariffs with a tariff-rate quota on imports from the EU could harm Turkish steel exports to the US, according to Ugur Dalbeler, VP of the Turkish Steel Exporters’ Union (CIB) and CEO of major Turkish steelmaker Colakoglu. He told S&P Global Platts Nov. 1 that following this deal nearly all the steel import requirements of the US market could be met.

“EU joined the countries, which are exempted from Section 232 tariffs and could be able to export to the US under quota regulations, like Canada, Mexico, Brazil, Argentina and South Korea. Imports from these countries could now meet nearly all of the US’ steel import requirements,” Dalbeler said.

Turkey’s steel exports to the US showed some recovery signs this year despite the Section 232 tariffs. But, exports to that country remained notably below pre-Section 232 levels, as Platts has reported.

Highlighting that Turkey has been facing trade investigations in the EU market in recent years as well as quota regulations, the CEO said that due to the European Coal and Steel Community Agreement with EU, Turkey should be also involved in the latest Section 232 agreement between the EU and the US.

“If we couldn’t provide this, we should protect our own market from unfair and devastating competition, otherwise we may face unrecoverable damages,” Dalbeler said, noting that Turkey couldn’t respond to the EU’s unfair trade investigations with counter measures till today under the reciprocity principle.

Turkey started a dumping investigation against HRC imports from the EU region and South Korea with a presidential decree published in the country’s official gazette on Jan. 9, 2021. However, no result of the investigation has been announced yet, although it could be announced within the last two months of the year, according to some industry sources.

The possible rise in EU steel exports to the US due to high prices there could soften prices in the US market and could support prices in the EU market and create some availability issues in the region, the rise in Turkish mills’ steel exports to the EU could remain limited due to quotas and trade investigations, according to a service center manager.

Following the dumping decision on Turkish HRC in April, The European Commission (EC) opened an investigation into hot-dip galvanized coil imports from Turkey and Russia on June 24, alleging imports of certain corrosion-resistant steels originating from these countries were being dumped.

Pre-disclosure of the investigation is expected on Dec. 24, while provisional measures, if any, will be imposed by the EC by Jan. 24, 2022. Definitive measures could be announced on July 20, 2022.

Highlighting that “green transformation” is a necessity for the future of the steel industry, the manager also underlined that Turkey should take the necessary steps in this regard to maintain its shares in export markets in the coming years, particularly in the EU and the US.

— Cenk Can

UK Steel seeks removal of US tariffs in response to US-EU deal

UK Steel is calling on the UK government to “urgently” seek an exemption to US Section 232 tariff measures, following the recent agreement between the EU and US to largely end Trump-era tariffs on US steel imports from the EU.

The agreement, reached Oct. 30, does not cover exports of non-EU member the UK.

“The substantial competitive advantage that this deal provides EU steel producers over UK ones will undoubtedly result in our export orders to the US market being lost to EU exporters until such time as the UK government secures a similar deal,” said Gareth Stace, director general of industry group UK Steel, in a statement. “Without this, EU steel landing at US ports, will almost always be favored over what will be more costly UK metal.”

The tariffs, introduced in 2018 before the UK officially left the EU, reduced UK exports to the US by nearly 50%, Stace said, underscoring that a deal was “sorely needed to repair this damage to our export interests.”

The association said the announcement of the EU-US tariff deal will receive a mixed response from steel companies.

“Whilst it is promising to see the US take steps to open up access to its steel markets again, there is significant concern that UK producers have been left behind in this process and continue to wait for their own deal,” Stace said in the statement.

The UK government said its International Trade Secretary recently held positive discussions with US Trade Representative Katherine Tai in London and it “welcomes the US Administration’s commitment to consult closely on bilateral and multilateral trade issues.”

The UK government was committed to addressing both global steel overcapacity and decarbonization, staying “focused on agreeing a resolution that sees damaging tariffs removed to the benefit of businesses on both sides of the Atlantic,” the government said in a press note.

UK Steel told S&P Global Platts it welcomed the UK government meeting, but was still waiting to see the results.

UK Steel represents all the country’s steelmakers and a large number of downstream steel processors. The UK produces 7 million mt of crude steel a year, around 70% of its annual requirement of around 10.2 million mt.

The UK steel industry makes a GBP 2.1 billion direct contribution to UK GDP and supports a further GBP 2.7billion.

The UK exported 309,442 mt to the US in 2017 before the imposition of Section 232 tariffs, dropping by 40% to 186,641 mt in 2019 based on HM Revenues and Customs data. For 2021, only January-August data is available so far – the UK has exported 179,904 mt, boosted as a result of extraordinarily high prices in the US this year.

— Annalisa Villa

EUROFER welcomes joint EU-US statement on a Global Arrangement on Sustainable Steel and Aluminium

The European Steel Association (EUROFER) welcomes the statement of the EU and the US to tackle jointly shared challenges in the steel and aluminium sectors, including negotiating an arrangement on carbon intensity and global overcapacity, and replacing the current 25% tariff measure of the US Section 232 on EU steel imports by a tariff-rate quota regime (TRQ) based on historical volumes. The arrangement between the US and the EU is a first important step in favour of a globally decarbonised industry in light of COP26 negotiations.

“We welcome the announcement of the agreement which could be the starting point of a new, transatlantic partnership tackling global trade distortions and climate change together, addressing the inter-linkage between both”, said Axel Eggert, Director General of the European Steel Association (EUROFER). “State-supported steel production and capacity built with CO2 intensive technologies contribute significantly to climate change. The global steel industry is responsible for almost 10% of global direct and indirect CO2 emissions, while the less CO2 intensive EU steel industry accounts for only about 0.5%. The arrangement between the US and the EU is therefore the first important commitment towards a global, market-based and decarbonised industry even before COP26 negotiations have really taken-off”, underlined Mr Eggert.

The EU is already a frontrunner in climate policy with a very stringent cap and trade system which exposes EU industry to unparalleled carbon costs. The successful decarbonisation of the steel sector requires a supportive regulatory framework, including a global level playing field.  International cooperation needs to contribute to this objective with concrete and effective measures.

“However, with regard to US import tariffs on steel it is important for EU steel producers exporting to the US that the new provisions, introducing a Tariff Rate Quota (TRQ) system, take into account traditional EU export levels within a stable framework, and that the product exemptions for EU steelmakers already in place are maintained or renewed”, continued Mr Eggert.

This step forward on Section 232 is a positive signal after the EU-US frictions over the past years, which have put transatlantic relations under strain and impacted businesses and consumers alike. It prevents a further escalation in the trade dispute between the two blocks by avoiding the doubling of the EU tariffs on US goods otherwise kicking in on 1 December 2021“EUROFER stands ready to contribute to and support constructively the further exchange and work for alignment between the EU and the US, in order to re-build a sustainable global steel market and achieve carbon neutrality in the sector by 2050”, said Mr Eggert.

EU and US reach agreement on steel trade

The European Union and the US have announced that they have reached an agreement to end the ongoing trade dispute involving steel products, initiated with the imposition by the Turmp administration of Section 232 tariffs.

The latest announcements confirm that steel trade barriers for European suppliers to sell into the US will be adjusted. As expected, the US adiministration has agreed to give to European suppliers a tariff-free volume quota, beyond which the 25% duty will continue to be implemented. The quota volume is to be determined according to historical trading levels. Negotiations have been ongoing since earlier in 2021.

“The US decision to restore past trading volumes of EU steel and aluminium exports means we can move on from a major irritant with the US. It gives us breathing space to work on a comprehensive solution to tackle global overcapacity. The EU will therefore reciprocate this de-escalation by suspending our own rebalancing measures. We can now focus on a more forward-looking transatlantic trade agenda, while also working on a final, lasting outcome to this issue,” Valdis Dombrovskis, EU trade commissioner said.

Before the S232 tariff was imposed, Europe sold to the US some 3.3mt of finished products. Kallanish now understands the tariff-free quota will be of the same magnitude.

The EU and the US also added that the resolution of this trade dispute opens a new collaboration on sustainable steel and aluminium production.“The global arrangement will add a powerful new tool in our quest for sustainability, achieving climate neutrality, and ensuring a level playing field for our steel and aluminium industries,” Ursula von der Leyen, EC president said.

Emanuele Norsa Italy

Unfavourable market conditions impact Gestamp revenue

Spain’s Gestamp saw its performance decline year-on-year in the third quarter due to the setback suffered by the international automotive market as a result of the microchip supply crisis, the company says in its latest report monitored by Kallanish. Gestamp is a major supplier of components to the global automotive sector. Nine-month revenue, however, remained high.

“We remain committed to our objectives for 2021 and we have once again demonstrated our ability to grow above the market, even in a challenging and volatile context such as the current one that we are facing”, Gestamp`s executive director Francisco Riberas says. “We will continue to focus on preserving profitability, free cash flow generation and further net debt reduction,” he adds.

Gestamp’s January-September net revenue amounted to €6.01 billion ($7.03 billion), up 15.6% on-year.

In Q3 alone, net revenue was €1.80 billion, down 11.3% y-o-y. The form total, body-in-white and chassis segments together represented €1.48 billion.

Revenue from Western Europe reached €644.7 million, 22.3% less y-o-y. This region registered a decline in volumes y-o-y due to the microchip shortage impact. As a result, production decreased by 29.6% versus Q3 2020. The drop has been well spread across the region, with Germany, the United Kingdom and France having the strongest falls, while Morocco has been the only country in the region to see positive growth in the quarter.

Eastern Europe revenue in Q3 increased by €300,000 to €296.2m, while in Asia it fell 1.6% to €267.4m.

Gestamp saw its activities in the Americas also decrease. In North America, revenue dropped by €39.3m to €474m, while earnings from the South American market were down by €7.1m to €120.8m.

The company’s Q3 Ebitda was €202.5m, 17.1% less y-o-y, while nine-month earnings reached €700.7m or 52.3% more over the same period in 2020.

Todor Kirkov Bulgaria

Salzgitter exceeds market expectations despite supply chain disruptions

Germany’s Salzgitter AG has maintained its strong performance through the third quarter and confirms the guidance it lifted again in September (see Kallanish 8 September).

According to preliminary figures it gives in a release seen by Kallanish, the group generated a pre-tax profit of €604.5 million ($701.6m) in the first nine months, thereby outperforming current market expectations. All segments lifted their results in comparison with the previous quarter. The main drivers were once again the Strip Steel and Trading business units, it says.

External revenues rose to €7 billion, compared with €5.3 billion in the first three quarters of 2020. It mentions that supply chain disruptions and their repercussions have been impacting some units since the end of the summer quarter. Still, it reaffirms its guidance of an increase in revenues to more than €9 billion and a pre-tax profit of between € 600-700m.

Christian Koehl Germany

Italian steelmaker Arvedi working to use more scrap less metallics

Italian flat steel producer Acciaieria Arvedi plans to adapt its processes to use more ferrous scrap and cut down use of imported pig iron and hot-briquetted iron (HBI), as steel industry executives warned greater global demand for scrap and metallics to cut emissions may impact tradeflows.

Arvedi operates two electric arc furnaces (EAF) and wants to use more scrap to reduce carbon emissions further and benefit from recycling local supplies, Maurizio Calcinoni, vice president of Arvedi, said at an Association for Iron and Steel Technology webinar on Oct. 28.

Cremona-based Arvedi uses around 2.4 million mt/year of scrap, mostly sourced from Italy and Europe, with 600,000-700,000 mt of pig iron and 400,000-500,000 mt of HBI a year. The company is working with scrap suppliers, to monitor received qualities, and working with new shredding processes to help clean the scrap for use.

Italy is a major scrap-based steel producer, accounting for 17-19 million mt of scrap demand, and importing around 4 million mt of scrap, as well as around 1 million mt of pig iron and around 700,000 mt of HBI, he said.

Arvedi has 20-25 years of experience using scrap and has been paying close attention on the mix of grades, and on how to improve scrap quality as well as reducing residuals in the scrap, he said. Arvedi is closely monitoring copper content in scrap, and the mix of scrap and metallics with the steel grade being produced, along with electricity consumption, slag volume and tap-to-tap operating metrics.

Calcinoni expects the European and global steel industry to place a greater attention on the overall qualities and impurities in scrap, along with origins and grades required to maximize benefits and cut down on emissions from processes and transportation.

Pig iron and HBI have higher associated carbon emissions compared with scrap, and reducing use of the metallics, which help compensate for scrap qualities, can bring down emissions.

With the energy transition and move to use more scrap in new EAFs and through the blast furnace- basic oxygen furnace process, there may be a greater depending on national and regional scrap supplies, he said.

Scrap tradeflows and export volumes could be impacted by changes in consumption, reducing volumes available and leading to higher prices for EAF-focused steel markets such as Turkey and the US, which import scrap from the EU and the UK.

Scrap demand is set to grow with climate targets and steel industry plans to use more scrap and reduce carbon may have a bigger impact on EAF mill operations and sustainability plans, said Sara Hornby, president of Global Strategic Solutions at the AIST webinar.

She said a global ferrous scrap rating system will be difficult to implement and gain consensus. Scrap markets have different grades and classifications in national and regional markets.

While using DRI and HBI cuts carbon emissions compared with typical blast furnace emissions, carbon is necessary for the EAF process, she said. Carbon adds to energy used by EAFs melting scrap and metallics, improving yields and improving operating conditions, Hornby added.

Supply and demand for scrap is set to change with decarbonization targets, on a local and regional level, the Materials Processing Institute’s CEO Chris McDonald told the AIST event. McDonald cited scenarios modelled by Cambridge University on steel and scrap flows and availability. The changes imply a shift from blast furnaces to EAF steelmaking over time, and little need for an expansion in iron ore-based steelmaking. Less reliance on iron ore imports may lead to a reduction in globally exported scrap.

— Hector Forster

US, EU reach deal to replace Section 232 tariffs with tariff-rate quota

The US and EU have reached an agreement to replace the former’s Section 232 tariffs on steel and aluminum with a tariff-rate quota on metals imports from the EU, according to a joint fact sheet Oct. 31.

Under the tariff-rate quota arrangement, historically-based volumes of EU steel and aluminum would enter the US without application of the Section 232 tariffs, according to a Commerce Department statement.

The import tariffs of 25% on steel and 10% on aluminum were introduced by former President Donald Trump in March 2018 using a national security justification under Section 232 of the Trade Expansion Act of 1962.

In addition to moving to a tariff-rate quota, both sides have agreed to expand their coordination involving both trade remedies and customs matters, and to meet regularly to consult and develop additional actions to address non-market excess capacity in these sectors, according to the joint statement.

As a result of the agreement, the EU will suspend the additional duties imposed on US goods and have agreed to suspend the disputes they have initiated against each other regarding the US Section 232 tariffs with the WTO.

In exchange for removing the tariffs, the EU will ensure market-oriented conditions in its market, including through the application of safeguards and other appropriate measures, according to the statement.

Additionally, the US and EU will negotiate further arrangements for trade in the steel and aluminum sectors that take account of both global non-market excess capacity as well as the carbon intensity of these industries. The US and the EU agreed to form a technical working group to enhance their cooperation and facilitate negotiations on these arrangements and will invite like-minded economies to participate in the arrangements, they said.

“The United States looks forward to partnering with other trading partners and key stakeholders to address the common global challenge of steel and aluminum excess capacity,” the White House said in a statement.

The US is consulting closely with Japan on bilateral and multilateral issues related to steel and aluminum, with a with a focus on the impacts of overcapacity on the global steel and aluminum markets, the need for like-minded countries to take collective action to address the root causes of the problem, and the climate impacts of the sectors, Commerce said in a statement Oct. 31.

— Justine Coyne

Joint EU-US Statement on a Global Arrangement on Sustainable Steel and Aluminium

The United States and the EU have today taken joint steps to re-establish historical transatlantic trade flows in steel and aluminium and to strengthen their partnership and address shared challenges in the steel and aluminium sector. As a part of that partnership, they intend to negotiate for the first time, a global arrangement to address carbon intensity and global overcapacity.

The European Union and the United States have a shared commitment to joint action and deepened cooperation in these sectors and are taking joint steps to defend workers, industries and communities from global overcapacity and climate change, including through a new arrangement to discourage trade in high-carbon steel and aluminum that contributes to global excess capacity from other countries and ensure that domestic policies support lowering the carbon intensity of these industries.

In a demonstration of renewed trust, and reflecting long-standing security and supply chain ties, the United States will not apply section 232 duties and will allow duty-free importation steel and aluminium from the EU at a historical-based volume and the EU will suspend related tariffs on U.S. products.

As a first step, the United States and the EU will create a technical working group charged with developing a common methodology and share relevant data for assessing the embedded emissions of traded steel and aluminum.

The global arrangement reflects a joint commitment to use trade policy to confront the threats of climate change and global market distortions, putting their workers and communities at the center of the trade agenda. The global arrangement will be open to any interested country that shares our commitment to achieving the goals of restoring market-orientation and reducing trade in carbon intensive steel and aluminium products.