UK extends steel import safeguards, risking WTO friction

UK government June 29 announced extension of the nation’s steel import safeguard controls for a further two years “in the national interest,” despite possibly breaching World Trade Organization rules. Safeguards using quotas and tariffs (TRQs) have been extended on imports of products from 15 categories from July 1 until June 30, 2024, after which they can no longer be extended.

Extensions to five of these categories are controversial, following original recommendations from the UK’s independent Trade Remedies Authority (TRA) to phase out these controls June 30: this may target products from certain developing nations and particularly China.

The five are: category

6 — tin mill products;

7 — non-alloy and other alloy quarto plates;

12 — merchant bars and light sections;

16 — non-alloy and other alloy wire rod and

17 — angles, shapes, and sections of iron or non-alloy steel.

The 10 categories on which the safeguards extension had already been expected are:

1 — non-alloy and other alloy hot-rolled sheet and strip;

2 — non-alloy and other alloy cold-rolled sheet;

4 — metallic coated sheet;

5 — organic coated sheet;

13 — rebar;

19 — railway material;

20 — gas pipe;

21 — hollow section;

25 — large welded tube and

26 — other welded tube.

Infrastructure

— UK industry is partly dependent on imported steel. The domestic industry in the UK has been in historic decline raising concerns over the security of supply chains.

• UK steelmakers, including major producers Tata Steel UK, British Steel and Liberty Steel UK, currently produce about 7.2 million mt of crude steel annually, 70% of the country’s annual demand of around 10.5 million mt crude steel, according to producers’ body UK Steel. Products include long, flat and specialty steels.
• The UK steel industry directly contributes GBP2.4 billion ($2.89 billion) annually to UK GDP.
• 96% of steel used in construction and infrastructure in the UK is recovered and recycled.

— Policy makers fear excess global capacity may see cheap product flood the UK market.

• UK International Trade Secretary Anne-Marie Trevelyan in a June 29 speech cited global world excess steel capacity as a factor supporting the steel imports safeguard extension.
• The Brussels-based World Steel Association and OECD estimated global excess steel capacity in 2021 at 504 million mt, down from a 754 million mt peak in 2015.

Trade Flows

–Europe remains a key partner for UK steel trade despite the UK leaving the EU.

• The EU is by far the UK’s biggest steel trading partner, with rights to export 181,526 mt of Category 1 and 305,241 mt of Category 4 products to the UK in 3Q 2022 under the safeguards system. This compares to 23,203 mt and 23,242 mt respectively for Turkey, another of the biggest exporters to the UK under the scheme.
• South Korea, UAE and India have substantial quotas in the extended safeguards scheme, according to a trade department list. China and Japan have gained small quotas relative to the size of their steel production.
• China was the 20th largest exporter of both iron and steel products to the UK in 2021, supplying just 69,188 mt of a total UK import of these products of 6.37 million mt, according to HMRC tax authority data compiled by S&P Global’s – Global Trade Analytics Suite (GTAS). Spain and Germany were the top two suppliers, with Ukraine in fifth place.

— Russia’s war on Ukraine and sanctions have led to changes in trade flows.

• The government has suspended the safeguard measure for steel goods coming from Ukraine for the next two years due to Russia’s invasion of that country.
• Quotas formerly allocated to Russia and Belarus under the previous safeguards system have been reallocated to other countries including Ukraine, the EU, Turkey and Taiwan “to avoid a potential shortage of steel in the UK,” TRA confirmed July 1. Russia and Belarus previously accounted for 22% of the UK’s imports of rebar.
• Developing countries become subject to the safeguard when their supply exceeds 3% of the total UK imports.
• Trade department data shows UK import levels in the major product categories subject to safeguards have fallen since the EU introduced safeguards in 2018 (see graph), following a “sharp and significant relative increase in the 2013-2017 period.”
• The UK steel safeguards system mirrors the EU safeguards system, put in place mid-2018 to curb trade deviation following the US’s imposition of Section 232 import tariffs of 25% on steel imports in March 2018.
• The EU recently renewed its steel safeguards until mid-2024.

— US and UK moving closer on steel trade terms.

• In June 2022 the UK and US established a new tariff quota trade accord to replace Section 232 controls between the two nations. “The tariff-free volumes we have secured mean that UK steel and aluminum exports to the US can return to levels not seen since before 2018,” Trevelyan said June 29.
• The UK safeguards announcement came as new steel protectionist measures are being introduced in various nations in a falling market.
• Turkey July 1 imposed customs duties of between 9% and 16.5% on flat and long steel products from Organization of the Islamic Conference, or OIC, member countries, including Bahrain, Bangladesh, UAE, Morocco, Iran, Qatar, Kuwait, Malaysia, Pakistan, Saudi Arabia, Oman and Jordan.
• China’s ministry of commerce June 29 extended anti-dumping taxes ranging from 5.5% to 26% to imports of steel fasteners from the EU and the UK for a five-year period.

Prices

— EU, US and Asian steel markets continued downward movements following the UK announcement.

• EU HRC prices were reportedly “near bottom” June 30, assessed by Platts at Eur840/mt ex-works Ruhr according to S&P Commodity Insights following a recent decline on poor demand. US HRC prices stood at a four-year low on reports of increasing availability below $1,000/st with a bearish outlook.
• Chinese mill sources saw HRC prices “at bottom” June 30. Platts assessed SS400 HRC 3 mm thick at $672/mt FOB China. Low-priced Indian-origin HRC weighed on SAE1006 prices in Vietnam.
• In long products, Asian rebar prices fell June 30 on bearish seaborne market sentiment with Platts’ 16-32 mm BS4449 Grade 500 rebar price dropping $7/mt to $667/mt CFR Southeast Asia. Asia wire rod extended its fall to a 17-month low June 29. Platts assessed SAE1008 6.5 mm diameter mesh-quality rod down $5/mt on week at $678/mt FOB China.
• EU buyers held back from booking steel sections, expecting further prices falls, with medium sections prices assessed at Eur1,240/mt delivered June 29, down Eur60/mt on week.
• June monthly contracts in the UK domestic ferrous scrap market fell sharply for the second consecutive month across the grades, on relatively low UK mill appetite. Platts’ assessment of 3B shredded scrap was GBP 315/mt delivered to mill June 10, down GBP 32.50/mt on month.

— Diana Kinch, Jacqueline Holman, Staff