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Fastmarkets spoke to Arnoud Willems, international trade and customs lawyer and partner at global law firm King & Spalding, to find out what could happen next. And why the past few weeks have been so unusual.
In the week commencing August 18, most ferro-alloys market participants were expecting to see minimum import prices imposed on ferro-silicon, silico-manganese and ferro-manganese.
Prices shot up in anticipation. But the measures were not announced and the next three months remain uncertain. This is because the EC could still announce provisional measures at any time.
“This is hanging over the market like the Sword of Damocles,” Willems told Fastmarkets. He outlined three possible scenarios that could play out before the mid-November deadline for definitive measures to be imposed under the investigation.
“The Commission has three options,” Willems said.
“[First,] it has the power to introduce provisional measures whenever it wants; although I think the chance of that is low,” he said.
“Second, it can lower the minimum prices or move to a tariff rate-quota [system], meaning there will be safeguard duty on imports exceeding a certain volume, as is the case in the current steel safeguard measures. This would typically take a month [to come into effect],” he said, adding that, in a little less than three months’ time, the market would know for sure anyway.
“[Third, the Commission] could recalibrate and aim to introduce definitive measures by November 19,” Willems said. “But if there are no definitive measures by then, [DELETE it’s over, and] the Commission will have to restart the whole investigation if it wants to do anything.”
The proposal for minimum import prices was put to member states for an advisory vote at the end of July. Eight votes were cast both for and against.
Usually, a proposal to impose provisional duties results in measures being implemented in some form if there is support from member states, according to Willems.
But the split vote complicates the issue.
“I have never seen this [kind of situation] before,” Willems said. “Usually, when there has been a proposal for provisional duties that’s supported by the member states, the Commission has always pushed that forward. And a proposal is adopted if there is a qualified majority in favour. [This would require] 55% of member states to vote in favour [15 out of 27] representing at least 65% of the total EU population.
“[But this does] mean that a so-called ‘blocking minority’ can prevent a proposal from being adopted,” he added. A blocking minority would be four member states representing 35% of the population. But this is a complicated process. And, in any case, would only be valid at the point of imposing definitive measures.
After the July vote, the Commission still had the option to implement provisional measures. This was because of the vote being just advisory. But a later vote could block the proposal entirely.
“At this provisional stage, the vote is advisory; it is to ‘take the temperature’ to see what the member states think of the proposal. But the vote shows that member states can block the proposal at the definitive stage,” Willems said.
The market had initially expected any safeguards that came as a result of the investigation to be in the form of quotas. So the proposed minimum import prices were a surprise. But many market participants quickly became convinced that they would be implemented. And it was this prospect that caused widespread confusion and concern. Mainly because the proposed levels were so much higher than existing market prices.
If implemented, they would have forced the prices for ferro-silicon, ferro-manganese and silico-manganese to rise by about 35% overnight.
Willems believes the response from the industry was stronger than the Commission had expected.
Safeguard investigations demand less detail than markets are accustomed to seeing in anti-dumping and anti-subsidy investigations, according to Willems. And the effect of the minimum import prices proposed would have been unusual for a safeguard investigation, he said.
This would also explain a key question that was being asked in the markets around the logic of imposing minimum import prices for products that span many grades with huge price differences.
“I think [the Commission] may have underestimated the reaction to the minimum prices. The prices proposed are quite high, at 35-40% [above] the market [level], which is more usual in anti-dumping [situations] but not for minimum import prices in safeguards,” Willems said.
“It may be a result of a safeguarding investigation where maybe the investigation goes less deeply into the case, is more superficial and consequently may have missed things,” he added. “Normally, they have a much better understanding of different product types because, in anti-dumping and anti-subsidy investigations, they need to make dumping and injury margin calculations and have more granular data.”
When the Commission announces a safeguard investigation, as it did with this one in December 2024, it collects evidence and information from interested parties, who can request hearings.
According to Willems, the Commission probably took the relatively unusual step of proposing minimum import prices instead of tariff-rate quotas. This was after initial hearings suggested that continued imports at existing prices would not be sufficiently effective to support the sector.
It then proposed measures that would raise profit levels enough for producers to expand European production, Willems said.
“Basically,” he said, “the Commission changed course after the hearings, and got the idea that minimum prices might be more helpful for the European producers because then they could go to a certain profit level and expand production, which is part of the point of the safeguards.
“The Commission thought that a tariff-rate quota would not be as effective,” he said, “because it would still allow the normal import volumes into the EU market at their usual price level.”
When approached by Fastmarkets, the European Commission declined to comment at the time of publication.
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