Key EU steel imports could drop by over 30pc

The EU's proposed post-safeguard quota regime could cut tariff-free steel imports by more than 30pc across key product categories, according to internal calculations.

A draft proposal, obtained last week by Argus, suggests that imports should be capped at around 13pc of market share, resulting in a total annual quota of 18,345,922t. "The tariff quotas should be allocated per product category based on the share of imports that each product category held over the period 2022-24," the proposal says, adding that a 50pc out-of-quota duty will apply to all finished products, in addition to any existing anti-dumping or countervailing duties.

European steel association Eurofer data show that steel products imports to the EU totalled 28.9mn t in 2022, 25.6mn t in 2023 and 27.4mn t in 2024. Hot-rolled coil (HRC) accounted for an average of 31.1pc of these volumes over the three-year period, Argus calculates.

Based on the European Commission's proposed cap of a 13pc market share for tariff-free imports, this would imply a quota of around 5.7mn t/yr for HRC — a reduction of 35pc compared with 2024 imports. This equates to a shortfall of approximately 3.1mn t on 2024, which would need to be supplied by domestic producers.

Imports of most other products are also expected to fall by more than 30pc under the proposed quota regime, with the steepest decline projected for plate. The draft mechanism would cap plate imports at 38pc below 2024 volumes — the largest cut among major product categories.

Banks prefer EU to US

Investment bank BNP Paribas Exane is going "all in" on European steel equities in response to the proposal, hiking its HRC forecast to €700/t.

The bank said the EU steel action plan is a "Hail Mary" and "arguably the most impactful policy shift… even eclipsing [US president Donald] Trump's Section 232".

"After two years, our preference for US steelmakers comes to an end," it said, adding that the US market has grown "increasingly shaky as tariffs have suppressed activity levels for longer than anticipated".

EU imports will drop by 18pc next year, unlocking "double-digit volume growth for mills", boosting cost structure and pricing, it added.

Domestic shipments would increase by more than 10pc next year, taking margins to multi-year highs.

The bank said flat carbon imports could drop by around 8.5mn t/yr. Argus calculations suggest that imports across HRC, cold-rolled coil, hot-dip galvanised, plate, organic coated and other flats could drop by 7.4mn t/yr, based on the draft proposal.

Timing risk is the main problem, from the bank's point of view — should the measure not be in place in January, which seems increasingly likely, buyers could try to front-load the measures, importing substantial tonnes in a weak demand environment. Another bank, Morgan Stanley, also said implementation would probably not take place in early 2026 given the legal hurdles it needs to pass. The measures could propel EU utilisation rates to around 70pc, up from about 60pc, supporting an uplift in spreads of as high as $130/t.

The proposed melt-and-pour clause represents a "potential turning point" in reducing Chinese volumes that have been further processed elsewhere, it said, "tightening the integrity of Europe's trade defence regime".

By Lora Stoyanova and Colin Richardson