European Steel Market Safeguard Measures Are Finalized

EUROFER recently published its EU steel market outlook for 2019 following announcement of the European Commission finalized its safeguard measures on steel imports on Friday, February 1st 2019. New safeguard measures limit imports of steel and aluminum into European Union countries until July 2021. This period is aimed to prevent the EU steel market in 2019 from flooding with 26 steel product categories that are no longer being imported into the United States. Safeguard measures are both country specific and global, in the form of quotas and tariff rates. Most steel importing countries that exceed predetermined quotas (which are based on historical averages) will be subjected to 25% duty.

European Council’s finalized measures include progressive liberalization at regular intervals during next two years period. Council considers five percent increase for duty free trade volume after each year. Therefore, the first move towards liberalization is planned on 1st of July 2019, followed by same date in 2020.

Director General of the European Steel Association Axel Eggert welcomed the new measures, adding “These measures are completely justified given the large-scale diversion of steel to the EU market, partly as a result of the impact of global overcapacity, distortions and the US’ section 232 measures”. EUROFER urges European Commission to take into actual market conditions at the time of the first revision of the final safeguard measures in July 2019. Mr. Eggert concludes “Recent market and trade volatility have had a severe impact on the European steel industry. These safeguard measures must prove effective in achieving their aim, and their coherent long-term deployment is key to their succeeding”.

European Union already imposed temporary safeguard measures aimed at 23 steel product types in July 2018.

EU Steel Market Outlook for 2019

Eurofer expects headwinds for the trade sector are expected to ease in 2019 and 2020 after 2018’s weakening global economy with protectionist measures. While outlook for domestic consumption is moderately positive, European economy is dependent largely on its domestic demand. Overall sentiment for investment is approached by a level of uncertainty stemmed by a potential no deal Brexit. At the end of 2018 the European Central Bank announced it ended its net asset purchases as part of its tightening policy.

The steel association’s first quarter 2019 European GDP growth is 1.7% for both 2019 and 2020. As one of the steel-using sectors, automotive sector unexpectedly lost momentum in the third quarter of last year.

Apparent steel consumption is expected to increase in 2019 by %0.5 and in 2020 by 1.2% in Europe. Total steel imports (including semi-finished products) rose 5% year-on-year during the first eleven months of 2018. Main countries of origin for finished steel imports to EU steel market has been Turkey, Russia, South Korea, India and China, accounting for 65% of total finished steel imports.

Turkish steel imports to EU rose 65% year-on-year, which includes 80% increase in long product imports, and 57% growth in flat product imports. Whereas imports from China and India fell 18% and 26% year-on-year respectively. Vietnam and Taiwan stepped up its steel imports to EU steel market in 2018.

Imports of steel heavy section products grew strongest in 2018, with 57% increase followed by 51% surge in import of rebars. Merchant bar imports and wire rods also rose 36% and 20% respectively. Imports of quarto plate and organic coated sheets declined. Hot-rolled wide strip omports registered 18% increase.

Overall total imports of steel flat products increased 6% in 2018. Import volumes were comparably lower in the second half of 2018 due to protectionist measures European Commission had to take in order to prevent market from flooding. EU steel market in 2019 may experience a more stable flow of exports to their traditional target markets.

Last year Turkish government exempted EU countries from steel quotas and tariffs. During the first eleven month period of 2018, the United States, Turkey and Switzerland were the top markets for EU finished steel product exports, accounting for 42% of total EU finished product exports.