EU expects US S232 tariffs to be replaced with quota

The EU expects to convince the US to change existing 25pc Section 232 import taxes into a tariff-rate quota, in line with Europe's own safeguard, sources in Brussels told Argus today.

The actual quota volume and level of tariff is presently unclear.

A European Commission spokesperson said: "We have confirmed with our US counterparts the readiness to find a solution within the next months, and in any case before 1 December as agreed during the EU-US summit. In terms of progress, we have agreed to move forward with some concrete solutions in line with the key parameters such as restoring historic trade flows and to have a WTO-compliant system in order to avoid managed trade."

Section 232 was imposed on 1 June 2018. EU exports of all steel products into the US fell from over 3mn t that year to 2.33mn t in 2019 and 1.5mn t last year.

European commissioner for trade Valdis Dombrovskis said today that Europe and the US are "working with a view to resolving this issue" by the end of the year. "After the EU-US summit, I'm more optimistic that a solution will be found," he said, adding that the relationship was on a "better track" with the administration of President Joe Biden than with that of former president Donald Trump.

Market sources suggested that the US adopting a similar tariff-rate quota would allow Europe to maintain its own existing measure.

The market expects the removal of the tariff to provide an outlet for European mills: even with the current 25pc duty, there is an arbitrage for European producers to sell into the US, which is easily the highest-paying market in the world. The US Midwest domestic hot-rolled coil (HRC) market is currently trading at a premium of over $832/t compared to the northwest European market, according to Argus data, easily the highest premium on record. Some traders have been buying N.EU HRC futures and selling US futures on CME, in the expectation that the S232 deal will see Europe strengthen and stateside pricing soften on increased import penetration.

Earlier this week the Washington-based Coalition of American Metal Manufacturers and Users said that Section 232 tariffs should be eliminated to give US manufactures the steel they "desperately need".

By Colin Richardson