Eurofer: Final safeguard measures welcome but effectiveness could be hampered

Member states have approved the European Commission’s final safeguard measures on steel. With imports surging by 12% in 2018, the need for an effective defence mechanism is essential, though elements of the final measures are not ideal.

“EU steel imports rose by an unprecedented 12% in 2018. For every three tonnes of steel blocked by the US’ section 232 tariffs, two tonnes have been shipped to the open EU market”, said Axel Eggert, Director General of Eurofer.

“It was important that final safeguard measures be approved by the member states; these will now be implemented by 4 February 2019. While we welcome this endorsement, we are nevertheless worried that the form of the final measures may undermine their intended safeguarding function”, stressed Mr Eggert. “It is therefore vital that the Commission closely monitors EU steel demand development and adjusts the generous increase of the tariff-free import quota accordingly in July 2019, if necessary”.   

The final measures include an immediate ‘relaxation’, increasing the size of the quota by 5% (calculated on the base years of 2015-2017) – with a further 5% relaxation in July 2019 and another 5% in July 2020, subject to review. This is despite the fact that steel demand is expected to increase by only 1% in 2019.

“This means that the rise in the quota may be multiple times larger than the increase in the size of the market, leaving EU producers to fight over a shrinking market share. Imports already account for around a quarter of the market, up from less than a fifth historically”, added Mr Eggert.

The final measures give country-specific quotas to the main steel exporters to the EU. The remaining ‘residual’ quota for other countries will be quarterly. However, countries with their own quota are free to consume the residual quota once they have used up their own.

The final safeguard measure also continues to exempt some developing countries because their import share was below 3%, despite exceeding this threshold during 2018. This is, for instance, the case for Indonesia, whose share of the stainless hot rolled flat steel product segment reached 9.5% in 2018. It is essential that such countries lose their exemption in upcoming revisions.

“So, while we reiterate our welcome for the final measures, and the overwhelming backing they have received from member states, we caution that steel demand must be monitored closely in the coming periods if this mechanism is to prove effective in the long run”, concluded Mr Eggert.

Source: Eurofer, photo: fotolia