European steelmakers want more effective tools to challenge low-cost and high-carbon intensity imports, which are gaining an increasing share of overall market supply.
Imports represented over 23pc of total European hot-rolled coil supply in July, according to Argus calculations, and this is set to increase in the coming months as over 1mn t cleared into the EU’s other countries’ quota in October. Utilisation rates at domestic European mills are at around 50-60pc owing to weak demand for domestic product.
In the cold-rolled coil segment, imports make up 35-39pc of total European market supply, steelmaking executives told Argus.
Domestic mills cannot compete with overseas producers’ because they face higher energy costs and have to pay carbon costs that producers in other locations do not incur. European producers are paying around €32/t ($34/t) for carbon, assuming a European carbon price of €80/t and the fact that mills have a deficit of allowances of around 20pc they need to purchase. The marginal cost is €160/t, with average carbon emissions at 2t for each tonne of steel produced.
The EU’s carbon border adjustment mechanism does not require overseas producers to pay for carbon emitted during steel production until 2026, leading European mills to feel unprotected from imports of steel produced in places where there are no carbon costs — despite import quotas and dumping duties on a number of countries. Mills do not expect the current safeguards to be extended, as EU trade commissioner Valdis Dombrovskis has hinted that they will lapse.
“The nonchalance of this flagrant and destructive lack of level playing, and the naivety of politicians and the commission is incredible,” one senior steelmaking executive told Argus.
Director general of European steel association Eurofer Axel Eggert told Argus that he wants the EU and US to deliver on negotiations for a global arrangement on sustainable steel and aluminium (GSSA), which have been under way since early 2021. Only 10 days remain for the sides to agree on a GSSA, if a reimposition of tariffs issued under former president Donald Trump is to be avoided.
“It’s not only China that’s massively pushing outside investment in steel production capacity. Countries like Indonesia also have to be tackled when doing an assessment,” Eggert said. “Traditional trade defence instruments aren’t able to do this. You target one product and one country. But state-driven overcapacity is about everything — all related steel products,” he added, pointing to excess capacity reaching almost 600mn t.
A further 150mn t of carbon-intensive capacity additions are planned between now and 2026, which will emit more carbon than the entire European steel industry, Eggert said. This capacity would wipe out all EU steel industry emission reduction efforts up to 2050 in just three years, Eurofer said.
Eurofer has not been approached about anti-subsidy measures on Chinese steel, which the US has reportedly requested in the GSSA negotiations.
“We don’t know what will be presented. We are simply saying there need to be additional tools,” Eggert said. Anti-subsidy measures are already in place on some Chinese steel products, including hot-rolled coil.