European manufacturers say Brussels is adding to their supply chain crisis after it rejected requests for a big increase in the amount of steel they can import without paying punitive 25 per cent tariffs.
Despite high prices for steel amid supply constraints, the European Commission has opted for only a small rise in quota-free imports for the next 12 months, from 3 per cent of annual demand to 4 per cent. Business groups say factories could be forced to relocate from Europe if the tariffs are not scrapped soon.
The EU’s “safeguard tariffs” were imposed in 2018 after then US president Donald Trump hit many countries with duties of 25 per cent on steel imports and the EU feared a price collapse as it was swamped with steel diverted from US markets.
Steel consumers wanted a big increase in the tariff-free quota now and abolition of all duties next year. Automotive-grade steel in the EU recently hit almost €1,500 a tonne, three times the price two years ago. Most western steelmakers are still enjoying healthy profits after recording their best year in 2021 following a decade of plant closures and lower demand. The economic recovery after the coronavirus pandemic helped boost demand for steel.
“The slight liberalisation margin is simply not sufficient to ensure a fair access for European manufacturers to competitive steel,” said Paolo Falcioni, director-general of Applia, which represents Europe’s white goods makers. Calling for the removal of tariffs, he said they “risk promoting industrial delocalisation through imposing additional manufacturing costs”.
ACEA, which represents carmakers in the EU, said the increase was “completely insufficient”. It added that “domestic steel producers are still incapable of satisfying the needs of EU automakers”, while the safeguards “artificially maintain record prices”. Around 90 per cent of EU car production used steel made in the bloc.
Euranimi, an association of steel importers, filed a legal case against the commission at the EU’s General Court in June 2021, when the safeguard measures were extended for three more years.
The annual review sets the level of quota, and member states will vote on the commission proposal on Wednesday, with the changes taking effect from July 1. Next year the commission will decide whether to extend the tariffs beyond 2024.
Euranimi’s case, which has yet to be heard, said the commission should have taken into account the rebound in prices. In parts of Europe, hot-rolled coil, a widely traded product that is often seen as a benchmark for steel prices, jumped to €1,400 a tonne in April, according to commodity data provider Argus Media, though it has since fallen back to below €950 a tonne.
“We are faced with massive inflation,” said an executive at one carmaker who declined to be named. “Steel is a big part of the price of a car. Having a car is no longer going to be affordable for the man on the street, only the most wealthy.”
They added: “If things remain difficult our management will say we prefer to produce in Asia and import and pay the 10 per cent [vehicle import] tariff. It is still cheaper.”
The situation is another problem for carmakers, many of which reduced production because of a shortage of semiconductors. Chips and other car components such as batteries are increasing in price.
Eurofer, the European steel producers’ association, declined to comment before the member states’ vote on the annual tariffs on Wednesday. The trade body, however, has previously countered calls to completely remove the import safeguards. It argued that such calls do not “consider the real function of the steel quotas, which is to avoid serious disruption from sudden import surges without micromanaging supply or prices”.
Chris Bandmann, steel analyst at CRU Group, said EU steel imports had been strong since the outbreak of the war in Ukraine in February as users had looked to source material from other countries. Imports from Ukraine have fallen heavily, while those from Russia have dropped off entirely as a result of EU sanctions in March.
“The main story here is the change in sourcing. The loss of Russia as a trade partner following the import ban has forced diversification — with countries like India and South Korea benefiting from this gap in availability,” said Bandmann.
The commission declined to comment because of the pending court case.
Source: Economy - ft.com
