EUROMETAL warns that unless steel derivatives and downstream products are encompassed by the same trade measures as primary steel, the European Commission’s proposed safeguard measures may unintentionally accelerate the displacement of EU downstream industry.
The Commission proposed earlier this month a measure to replace existing safeguards, with a view to cutting EU steel imports to 2013 levels. However, to the dismay of some market players, it does not cover imports of steel-containing manufactured goods, known as steel derivatives, thereby leaving European end-use manufacturers exposed.
In European steel processing companies, the cost of steel represents up to 70% of total invoiced sales, while net profit margins typically range between just 1% and 2%, EUROMETAL points out.
“These companies are already under immense pressure from foreign competitors benefitting from lower input costs, limited regulation, and in some cases, subsidies. When EU-origin steel prices rise due to reduced import quotas and stricter trade defence measures, imported steel-based products and derivatives will become even more competitive,” the distributors’ association’s president, Alexander Julius, writes in a letter dated 21 October to European Commission Executive Vice-President for Prosperity and Industrial Strategy Stéphane Séjourné.
“A 10% increase in domestic steel prices – a plausible outcome under the new safeguard terms – would be enough to push many European processing and manufacturing firms out of business, well before the end of the two-year observation period,” he adds.
The latest safeguard proposal has turned the need to protect derivatives “from a strategic priority into a matter of immediate survival”, Julius asserts.
Earlier this month, EUROMETAL published a paper warning that a surge in steel derivatives imports is quietly eroding Europe’s industrial base and threatening more than three million jobs. These derivatives are not classified as steel under EU customs codes and therefore largely bypass the EU’s existing trade defence instruments. This has turned Europe into a dumping ground for high-carbon steel derivatives diverted from the US market, it said.
Besides derivatives, EUROMETAL warns the proposed cut in imports creates a risk of supply shortages and rising prices, particularly for independent distributors. This comes amid ongoing production shutdowns – for example at Liberty and ADI – skills shortages after years of workforce reduction, limited production of certain specialised grades, and structural cost that may hinder price competitiveness.
“Semi-finished products … remain unrestricted, giving integrated EU mills privileged access to cheaper inputs not available to independent players,” Julius notes. “Mill-owned service centres, now exceeding 50% market share, are able to internalise costs and shield themselves from volatility – a luxury not afforded to independent SSCs.”
“These trends concentrate market power, undermine price transparency, and ultimately increase costs for manufacturers,” he adds.
“The elimination of mechanisms such as carry-over, combined with out-of-quota duties of 50%, creates volatility that threatens the supply stability needed by thousands of downstream producers,” Julius continues.
To remedy the situation, EUROMETAL has requested the Commission to extend safeguards to include steel derivatives and downstream steel-based products, and conduct a rapid impact assessment of the proposed measures on steel processors, distributors, and SMEs.
It also wants to maintain flexibility mechanisms, such as carry-over, to support seasonal and contractual stability, and ensure fair access to competitively priced materials for independent distributors and manufacturers.
Lastly, it is seeking to adopt country-specific quotas to improve predictability and support responsible trade flows.
Adam Smith Austria
