Eurofer, the European steel association, has called for tougher measures to help the region’s steel industry survive, as the coronavirus outbreak has severely damaged steelmakers, forcing massive cuts in production.
“Our industry is fighting for its survival. The impact of COVID-19 is emptying order books [and] idling entire facilities. With all instruments at their disposal, governments and the EU should prevent COVID-19 from dealing the ultimate blow to our industry – a sector that has repeatedly been recognized as being strategic for the Union,” the association wrote in a letter last week to European Commission President Ursula von der Leyen.
Eurofer wants more stringent safeguard reviews, more new import restrictions and new regulations to withstand global virus impacts.
Safeguards and imports
According to the association, the current import safeguard quota level should be drastically reduced immediately for a period of six months and by about 75% “to align them with the devastating situation.” The tariff level of 25% could be reduced after a review of the situation for the last quarter 2020 and beyond.
“This measure is proportionate, transparent, temporary and consistent with WTO rules. It enables the supply chain to continue to function in this crisis, while expediting the recovery that will follow,” Eurofer stated.
The latest EC data from March 31 showed the global quota for hot-rolled coil had a large unused balance of 1.575 million mt still available for import, with the quota balance being boosted by the 1.196 million mt that was not used at the end of December 2019 being carried over to the first quarter of 2020.
Eurofer also proposed to implement emergency import restrictions outside the context of safeguard measures, as permitted under Article XXI of the GATT 1994 agreement.
The safeguard measures do not cover products imported from undeveloped countries.
Increasingly, aggressive import offer prices have emerged in Europe via importers looking to place material from Russia, Asia and Brazil.
Hot-rolled coil offer prices have moved lower following a weakening of the Russian ruble and better offers reported from Asia where mills are looking to fill demand wherever they find it following the COVID-19 lockdowns.
China, having accumulated larger steel inventories in the lead up to Lunar New Year and expected to have added to those inventories during their February/March lockdowns, might also offer notable volumes to international markets, sources told S&P Global Platts.
However, due to longer lead times in buying imports and elevated supply chain risks, sources said domestic material would for now remain a safer option due to the uncertainty in the very short term within Europe. The Platts TSI HRC CIF Antwerp index was assessed at Eur422.50/mt Friday, down from Eur467.50/mt on March 20, a decline of Eur45/mt.
Over the same period, HRC ex-works Ruhr declined from Eur482.50/mt to Eur473/mt, a decline of Eur9/mt.
Eurofer also asked the EU to recognize steel mills as “essential” to the EU and member states’ fight against the pandemic and encourage regional and local governments to keep them operational during the crisis.
Green steel and carbon leakage
Eurofer addressed the issue of carbon leakage as well. In order to avoid it due to the CO2 cost in power prices under the EU Emissions Trading System (EU ETS), Eurofer is seeking a reset of benchmark-based indirect cost compensation from a current maximum of 75% back to the original 85%, and an agreement to apply it in all EU member states.
The association is seeking a force majeure clause in the EU ETS to guarantee that COVID-19 related production and CO2 emission cuts will not reduce the amount of post-2020 CO2 certificate allocations.
Eurofer highlighted that they want to continue discussions on national and EU levels to bring about a “Green Deal on Steel” as they welcomed the measures taken so far, including flexibility in EU state aid rules, allowing for fast support for the industry and its customers.
— Annalisa Villa, Len Griffin