Eurofer wants steel quota liberalisation reduced

Despite record steel prices last year and the "alleged supply shortage", there should be no meaningful loosening of the EU's steel safeguard, producers' association Eurofer said in a filing to the European Commission.

In fact, the current 3pc liberalisation rate should be reconsidered and reduced to 1pc, Eurofer said in the filing, obtained by Argus from a member of the organisation. Liberalisation at the current rate has increased quota volumes above demand levels, and the underlying fundamentals of the industry remain fragile, it said. Eurofer pointed to elevated energy costs, but also said that the steel price spike and "shortage" of last year were temporary in nature and that "market conditions have returned to normal".

The commission should also review the possibility of exporting countries with their own individual quotas getting access to the residual quota in the fourth period of the safeguard. Major exporters have adopted "opportunistic behaviour to maximise their market presence", it said. Should residual quota access continue for hot-rolled coil and 4b hot-dipped galvanised (HDG), Eurofer said exporters should only be able to access 15pc of the residual quota, half the current level of 30pc.

In its current guise, the quota mechanism "allows exporting countries such as India and Turkey to build huge stocks for specific steel products at the EU border in the weeks preceding the opening of the quota period, thereby allowing it to fill the quota in a matter of hours", Eurofer noted. It said there is no economic justification for the quotas being utilised so fast.

The large quantities of imports into the EU in the third and fourth quarters of last year were not driven by economic reasons, but by excess capacity in the countries, Eurofer said. Buyers would surely counter this by suggesting that the increase in imports seen over the second half of last year was driven by fears over security of supply amid the weaker delivery performance of domestic producers. Without Vietnamese HDG, one buyer told Argus it would not have had sufficient material to keep its lines rolling.

Trade defence measures on steel products in other regions may also leave exporters with "no choice" but to target the EU, it added.

The regime of access to residual quotas with no limitations on some products should also be terminated; for merchant bar and light sections, Eurofer said the commission should limit access to 30pc of the residual quota.

As was widely anticipated, Eurofer wants Vietnam to no longer be a developing nation for 4a HDG, and to get its tariff-rate quota. In the UK, which has its own safeguard post-Brexit, mills are lobbying for Vietnamese HDG and Indian HRC to get their own country-by-country quotas, removing their current exemption.

The commission should cap the level of carry-over of unused quota at 4pc, Eurofer said in the filing.

By Colin Richardson