EU steelmakers lobby hard for safeguard changes

European steelmakers are lobbying hard for expedited and substantive changes to the definitive steel safeguard, including for product category one, hot-rolled coil (HRC).

Mills want the HRC quota, which is currently global, to be country-by-country as with other products. They cite surging imports in the first quarter of this year, despite the safeguard being implemented on 2 February. A total of 2.31mn t of wide HRC was imported to the EU 28 in January-March 2019, up by 15pc from 2mn t in the same period last year.

Most notable has been the growth in Turkish import volumes, which soared to 1.07mn t from 712,000t in the first quarter of 2018. Domestic mills argue that the safeguard has failed to adequately counter the diversion from the US, especially since the Section 232 steel and aluminum tariffs were doubled to 50pc in August last year.

The tariffs have now been relaxed to 25pc and Turkish offers to the EU have not been competitive for the past three months or so. In fact, EU-28 exports to Turkey rose to 178,000t in March, their highest level since December 2017, as domestic sellers looked to offload tonnes in a weakening market. Turkey is also the largest market for EU HRC mills, despite volumes falling dramatically last year as the country grappled with a 50pc contraction in domestic demand.

Russian HRC shipments, primarily from Severstal, which has the lowest dumping duty of any of the country’s mills, will also be in focus.

There is a growing expectation that the HRC quota will be amended, although it is not yet clear how.

European mills want the 5pc increase in the quota levels to be amended in light of the weakening market, and the fact that the short quota periods have made for a 10pc yearly rise. The WTO mandates growth in the quota from one period to the next, but not by 5pc.

Steelmakers suggest that the hot-dip galvanised quota needs to be rejigged. They argue that typical industrial material that should be sold into the 4A category is being sold into the 4B automotive grade category — there are existing anti-dumping duties on 4A HDG from China, so it has no quota for this product, but a substantial one for automotive-gauge galvanised steel. Mills said they believe that the quotas should not be increased, despite them filling up so quickly. In their view, traditional flows are being disturbed when residual country quotas open up and are immediately filled — Chinese material has been accounting for a significant portion of this in the 4B category.

Traders are also lobbying for amendments to the galvanised quota. They suggest it should be global, like the current HRC quota, and not split into 4A and 4B. One source close to the review said auto-gauge material could be removed from the safeguard measure altogether.

The International Steel Trade Association (Ista) is expected to send a letter to the commission requesting a meeting to discuss such issues. It will argue that the current quotas are below 2017 and 2018 import volumes, and too restrictive on certain products.

The commission had said that, because of the speed of the review, it would not hold meetings.

Rebar should also be global, and it is deficient by around 500,000t, Ista said. Some buyers, particularly in the UK where Cares certification is necessary, have seen their supply sources dwindle. Turkey is the primary region for Cares-certified rebar, in light of the existing duties on Chinese material. Sole domestic producer Celsa owns around 50pc of the downstream fabrication market.

The commission’s steel safeguard is not designed to reduce or upset legally traded traditional flows or create blockages, but to stop import volumes rising in the light of protectionism elsewhere — namely Section 232 in the US.

Importers argue that some of the changes mills are suggesting, such as HRC becoming a country-by-country quota, would reduce typical flows. For HRC there are already anti-dumping duties in place on Brazilian, Iranian, Russian, Ukrainian and Chinese material — these cover all of the big exporting regions except Turkey.

European steel industry association Eurofer’s submission to the commission will be made available to interested parties next week.