Turkey remains privileged EU trading partner: Assofermet’s Sandrini

Turkey will remain a privileged supplier of steel to the European Union, due to their industrial, geographical and historical ties, but Turkish suppliers could do more to enhance this cooperation. So says Tommaso Sandrini, president of Italian steel trade association Assofermet.

The steel industry is operating in a climate of protectionism and extremely fluid and unstable business environment, where buyers are afraid to take positions amid rapidly changing rules and regulations. Timely response to requests, efficiently managed claims and use of credit insurance could therefore strengthen EU-Turkish trade, Sandrini told delegates at the Kallanish Euro-Turkey-CIS Flat Steel conference on 17 October.

After steadily increasing since 2012, the EU’s total imports of steel products declined by -6.8% on-year in the first seven months of 2019, as compared to a 12% rise in the corresponding period of 2018.

The safeguard import quota, introduced last year, has achieved several notable changes, such as reducing hot rolled coil imports over time. However, for long products, due to its quarterly nature, the system creates sudden upsurges in import volumes followed by their absence, thereby distorting the market balance, Sandrini explained.

Both country and quarterly quotas are not consistent with safeguard goals and are detrimental to market stability, while artificially reducing quota availability. But the now-approved revision of the European Safeguard System will have little or no impact on this undoubtedly negative scenario. As geopolitical drivers increasingly replace economic ones, the global trade system and steel market are undergoing a deep revolution, punctuated by deglobalisation and the dismantlement of the WTO. The European steel market will deeply feel the effects of this.

As bilateral trade negotiations replace multilateral trade agreements, geo-political tensions will continue to limit global trade, fragmenting it into regional trade. Long-term, the current “new normal” of trade wars and protectionism, though chaotic and painful, will eventually lead to new investments and opportunities, creating a bi-polar world of winners and losers, Sandrini observed.

But, in the meantime, the current global economic downturn involving all major and emerging economies will continue to affect EU steel demand. “All mills are losing money while the market has not yet reached the bottom,” Sandrini said at the Istanbul event.

As deglobalisation proceeds, US trade wars will continue not as a means of rebalancing its trade deficit, but as a means of limiting China’s – and Germany’s – economic ambition. This will force Europe to adapt to long periods of slow economic growth and low profitability.