EU carmakers bemoan steel safeguard

The European Commission's decision to propose definitive steel safeguards will hurt the competitiveness of European carmakers, according to the European Automobile Manufacturers' Association (ACEA).

Access to European steel is "extremely tight and imports remain necessary to fill supply chain gaps", and EU steelmakers are reaping the benefits of long-term high prices and excellent capacity utilisation, the ACEA said.

"Motor vehicle manufacturing has increased by 5mn units per year since 2014, and some increase in steel imports has been necessary to meet this higher demand," ACEA secretary general Erik Jonnaert said.

The association said there has been a "relatively minor drop" in exports to the US, so there is "little reason" to assume diversion of shipments to the EU because of Section 232 tariffs.

The steel safeguard is designed to prevent redirection of imports from the US to the EU and not to restrict fairly traded imports.

Hot-rolled coil (HRC) will remain a global quota under the definitive safeguard, but cold-rolled coil and hot-dip galvanised coil — both of which are used by carmakers — have country-by-country and quarterly quotas that could have a greater impact on supply.

The ACEA warning comes against the backdrop of a slowing European car market over recent months, as the transition to a new testing regime has impacted production and sales quite heavily. The move away from diesel engines also poses a major threat to some carmakers, while UK producers are worried about Brexit and its potential impact on just-in-time deliveries to and from continental Europe.

Against this backdrop, some carmakers are reducing their contractual supply with domestic European mills. Carmakers in northern Europe procure around 90pc of their steel supply from domestic producers, while southern European carmakers rely on a much larger proportion of imported supply.

The commission's decision, should it remain unchanged, could create an equilibrium of discontent among the buy and sell sides of the steel market.

Some European flats mills are also disappointed with the safeguard, as they wanted greater restriction of HRC imports. Over the first 10 months of last year, EU HRC imports amounted to 6.78mn t, up by 15pc from 5.86mn t over the same period of 2017.

News of the proposed definitive quotas began to circulate in the market just after Christmas, when Argus obtained a leaked copy of the commission's notification to the WTO.