EXCLUSIVE: EU steelmakers request review of 5% safeguard quota rise, seek quarterly HRC allocation

European steelmakers have called for the European Commission (EC) to review its decision to liberalize its import safeguard measures by increasing quota volumes by 5% each year, Fastmarkets has learned.

The current safeguard mechanism will increase the level of tariff-free quotas for each product category by 5% after each year. The first liberalization will take place on July 1, 2019 – the end of the first quota period.

The 5% quota increase was based on an expectation that domestic European steel consumption would also grow sharply, something that has not materialized, sources said.

The EC initiated a review of its steel import safeguard measures on Friday May 17.

European steelmakers have requested that the EC implement a quarterly volume allocation for all country-specific import quotas.

They have also called for restrictions on the use of residual quotas by countries that have already exhausted their individual import quota volumes, arguing that the absence of a cap has led to importers trying to sell large volumes at low prices to gain as large as possible a share of the residual quota, thus causing market disruption.

Market sources believe that a full removal of the use of the residual quota for countries that have exhausted their own quotas is unlikely, however.

Several country-specific quotas for various steel products were exhausted quickly. For example, Turkish-origin imports for the five-month period ending on June 30, 2019 were exhausted for the following products: organic coated sheets, rebar, non-alloy and other alloy wire rod, angles and sections of non-alloy steel and large welded tubes.

Hot-rolled flat products
European steelmakers have also called for the implementation of country-specific quarterly quotas for imports of hot-rolled flat steel products, also known as product category one.

When imposing definitive safeguard measures in February, the EC only applied a global quota to this category, with no country-specific allocation, noting that almost 60% of imports are currently covered by anti-dumping measures.

The introduction of the global quota has allowed individual exporters to sell large volumes for low prices into the European market, steelmakers told Fastmarkets.

Fastmarkets’ weekly price assessment for domestic hot-rolled coil in Southern Europe has averaged €474 ($533) per tonne so far in 2019, down sharply from an average of €537 per tonne in 2018, amid import pressure and weak automotive sector demand.

Fastmarkets’ weekly price assessment for domestic HRC in Southern Europe moved up to €465-480 per tonne ex-works on June 5, from €445-465 per tonne ex-works a week earlier, amid higher offers after global steel producer ArcelorMittal announced flat steel production cuts in Europe.

European steelmakers have also called for product category 4B, metallic coated sheets for use in automotive applications, to be revised, arguing that the individual product quota has not been effective, due to metallic coated sheets for non-automotive applications (category 4A) being circumvented and imported under category 4B.

Developing country quotas
European steelmakers have also called for the EC to establish a mechanism that will swiftly remove the safeguard exemption for developing World Trade Organization (WTO) member countries, if their share in the overall import of a product subject to measures exceeds 3%.

The EC has already confirmed that Indonesian-origin cold-rolled stainless steel material is currently above the 3% threshold, according to Europe-based stainless steelmaker Aperam.

European steelmakers also called for the EC to establish a plan to implement post-Brexit import quotas as a part of the review, given the increasing likelihood of a “no deal” Brexit on October 31.

UK and European steel market participants have repeatedly called for the European Union and the United Kingdom to reach an agreement and avoid continued market uncertainty. The UK has been granted a six-month extension to delay Brexit until Thursday October 31.

A “no deal” Brexit would mean the UK would leave the European Union, and all related agreements and bodies, without a transition period. No preferential tariffs would be in place for UK exports to anywhere in the world.

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