CBAM complications, safeguard hinder steel activity: Assofermet

The normative framework of the EU Carbon Border Adjustment Mechanism (CBAM) and safeguards on steel imports is hindering the daily activity of Italian and European steel companies, says Italian steel trade association Assofermet.

The challenges in filling CBAM reports, the economic repercussions expected from the mechanism starting in 2026, as well the safeguard measures in force from 2018 are a deep concern for Assofermet’s many members.

The European Commission (EC)’s Directorate General for Trade and the Directorate General for Taxation and Customs Union asked the association to highlight the critical issues of the mechanism to help with drafting the final version. “It has been assured that our perspective will be taken into account, especially for the future evolution of CBAM … Agreeing that CBAM will also generate increased costs for downstream end-users in the steel supply chain, it was pointed out to the Commission that if certain finished products … are not included in the mechanism, the European industry will lose competitiveness, given its global role,” Assofermet warns in a note sent to Kallanish.

The association notes an open-minded attitude from Italian authorities to listen to the problems of the entire steel supply chain stemming from regulations and willingness to continue dialogue on the regulatory framework. While the first quarterly report deadline for CBAM has passed, the safeguard on steel imports is currently set to expire at the end of June 2024. “There are no official updates yet on a possible extension after the first half of this year,” Assofermet concludes.

31 January was the deadline for importers to submit their first report detailing emissions as part of CBAM. The European Commission nevertheless announced this week that due to a technical incident, it is offering the possibility to request for a 30-day delay for submission (see Kallanish passim).

During the ongoing transitional phase of CBAM, European importers of steel need to file quarterly reports in the European Commission system, starting from those for the fourth quarter of 2023. During the transitional period, importers are required to report on the quantity of imported goods and resulting direct and indirect emissions. No payments will be due. The transitional phase is planned to conclude at the end of 2025.

Natalia Capra France

kallanish.com

Salzgitter expects safeguard non-renewal, Section 232 reapplication risk

Salzgitter says the extension of EU safeguard measures beyond their current, end-June 2024 expiration deadline is unlikely.

“It will then be possible to import steel products into the EU market from July 1, 2024 onward without any restrictions by tariff quotas, which will likely drive up import volumes,” the steelmaker said in last week’s second-quarter earnings report.

EU steelmakers have in recent months voiced fears over the potential expiration of safeguard measures in mid-2024, with the EU’s Carbon Border Adjustment Mechanism (CBAM) due to come into full force only on 1 January 2026. This would leave an 18-month gap that would see the EU’s market unprotected, Kallanish notes.

According to WTO rules. safeguard measures can be implemented for a maximum of eight years and then must be rescinded for the same duration as they were applied before they can be re-applied.

Their renewal is likely to depend much on whether the EU and US can agree a steel trade pact, the Global Sustainable Steel Agreement (GSSA), which is currently under negotiation. If no deal is agreed by the October deadline, the US could reapply Section 232 duties on EU steel. “The various negotiation positions are currently still very far apart, which makes arriving at a consensus by October 2023 difficult. The loss of preferential market access to the US would considerably hamper exports again,” Salzgitter says.

As for the EU’s sanctions on Russian steel, importing steel products of Russian origin processed in non-EU countries will be prohibited as from October 2023; importing semi-finished products will no longer be possible starting with October 2024.

“Risks arise from the new sanctions to the extent that the long transition periods through to autumn 2024 continue to facilitate Russian steel imports that are frequently offered at prices significantly below the customary market price level. Owing to the complexity of the directive and the difficulty in its implementation, this risk continues to prevail and may lead to distortions in the market on the back of low prices for Russian steel products,” Salzgitter observes.

The German steelmaker saw shipments drop 3% on-year in the second quarter to 1.32 million tonnes.

Adam Smith Poland