The US and EU were unable to reach an agreement for a Global Arrangement on Sustainable Steel and Aluminum during a summit in Washington Oct. 20. Negotiations for a GASSA deal will continue until the end of 2023, extending an original targeted deadline of Oct. 31.
- On Oct. 31, 2021, the EU and the US agreed to re-establish historical transatlantic trade flows in steel and aluminum.
- The US agreed to suspend Section 232 duties (25% on steel and 10% on aluminum) and allowed duty-free importation steel and aluminum from the EU at a historical-based volume while the EU suspended its rebalancing duties on selected US products including steel and aluminum.
- The US and the EU agreed to suspend the WTO disputes they had initiated against each other regarding the US Section 232 measures and the EU’s additional duties.
- The EU and the US also agreed to negotiate a global arrangement to address carbon intensity and global overcapacity across the steel and aluminum industries with an Oct. 31, 2023 deadline set to wrap up negotiations.
Why it matters?
- Without an agreement in place or extension granted, the US Section 232 tariffs on EU steel and aluminum would go back into effect at 12:00 am Jan. 1, 2024. EU retaliatory duties against the US could also be put back in place.
- The move by the US and EU to address emissions in addition to excess capacity is a new approach to trade remedies that typically only target dumping and subsidies.
- The International Energy Agency estimates that direct CO2 emissions due to crude steel production is approximately 1.4 mt CO2/mt of steel produced. Overall, the steel industry accounts for about 6-9% of global CO2 emissions, depending on estimates.
- The global aluminum industry accounted for 270 million mt of direct CO2 emissions in 2022, about 3% of the world’s direct industrial CO2 emissions, according to the IEA.
- According to the IEA, both the steel and aluminum industries are not on track to achieve net zero emissions by 2050 on a global basis.
- According to the Organization for Economic Cooperation and Development Steel Committee, global steelmaking capacity increased to 2.46 billion mt in 2022, with excess capacity surging to 632 million mt.
- A September report by the OECD Steel Committee found global steel production is projected to reach 2.5 billion mt in 2023, with an increase of 56 million mt this year alone, marking the largest annual expansion in a decade.
- China’s aluminum output has surged over the past two decades, with the county accounting for roughly 59% of global aluminum production in 2023, according to data from the Aluminum Association. Total aluminum production in China this year is estimated to be 41.2 million mt, up from 2.4 million mt in 2000.
- A 2021 study by the OECD that looked at 32 aluminum firms—representing 70% of the market—globally found that firms in China receive vastly more government support than similar firms in the rest of the world. The report estimates the value of China’s support to have ranged between 4% and 7% of the annual revenue of these firms compared with about 0.2% of annual revenue at other firms in the sample.
- The global aluminum surplus is expected to be about 800,000 mt in 2023, Alcoa CEO William Opliger said during the company’s third quarter conference call Oct. 18.
- Global steel prices have been under pressure in 2023, falling from record highs reached in 2021 and 2022 as demand recovered from the COVID-19 pandemic and as prices rose in the wake of the Russia-Ukraine war.
- The benchmark Platts TSI US hot-rolled coil index has averaged $908/st year-to-date through Oct. 19 on an ex-works Indiana basis, according to S&P Global Commodity Insights data. This is down from a full-year average of $1,016/st in 2022.
- Domestic prices for hot-rolled coil in Northwest Europe have averaged EUR733/mt year-to-date through Oct. 19 on an ex-works Ruhr basis, down from a full-year 2022 average of EUR904/mt, according to S&P Global data.
- Domestic prices for hot-rolled coil in China, meanwhile, have averaged $585/mt year-to-date through Oct. 19, down from an average of $680/mt for full-year 2022 on an FOB basis for SS400 grade coil, according to S&P Global data.
- Global aluminum pricing has been challenged in 2023 on lower demand in most end markets, particularly building construction and packaging.
- In the US, the benchmark Platts aluminum P1020 transaction premium delivered Midwest has averaged 24.28 cents/lb this year through Oct. 19 down from a full-year average of 29.69 cents/lb in 2022, according to S&P Global Commodity Insights data.
- In Europe, the Platts P1020 aluminum duty-paid in-warehouse Rotterdam premium has averaged $295/mt this year through Oct. 19, down sharply from a full-year average of $461/mt in 2022.
Authors: Euan Sadden, Justine Coyne