Fitch Ratings: EU Quotas Will Have Limited Impact on EMEA Steelmakers
07/02/2019 13:01
(The following statement was released by the rating agency) Fitch Ratings-Moscow/London-February 07: The EU finalised safeguard measures for steel imports introduced on 2 February will have no material impact on rated steelmakers in EMEA, Fitch Ratings and CRU say. The measures, structured as quotas and tariffs, are marginally supportive for domestic EU steel producers and foreign companies with rolling capacities in the bloc as they could support steel prices in the region. Competition in other markets could intensify if volumes are diverted to countries with lower import barriers. The finalised safeguard measures are largely a continuation of preliminary measures that have been in force since July 2018 and were implemented to avoid diversion of trade flows into the EU following the introduction of steel import tariffs in the US. The measures are structured as quotas based on the average volumes of steel imports during 2015-2017 plus 5%. A 25% tariff will be applied to imports above the quotas. The quotas will be increased by 5% after six months and then by the same percentage every year. They will remain in place until 30 June 2021. The quota for hot-rolled coil (HRC) is global. The quotas for other product categories are based on a country of origin with a specific volume set for each country that contributes at least 5% to import product volume, while other countries fall into a residual category. Imports accounted for 21% of flat products, 14% of long products and 26% of tubes in the EU steel market in the twelve months to end-1H18. Semi-finished products, such as pig iron, slabs and billets, are not subject to quotas, as the EU is structurally short of these products. We do not expect any significant impact on rated EMEA steelmakers because the measures are designed to largely preserve the status quo and allow total import flows to continue into the EU. Still, the quota amounts look low in some categories compared with the most recent import run rate. This could be explained by higher-than-usual imports in 2018 due to front-loading ahead of the safeguard measures, but changes in demand and production patterns could also contribute to the gap.