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201 implications for EU steel
March 2002
The decision to impose substantial tariffs on imports of steel into the US is having repercussions around the world but is being particularly damaging to sentiment in the EU. A few weeks ago, significant price rises were being confidently predicted by many in the strip mill sector. Now we detect a degree of uncertainty regarding future price hikes.
Approximately 10 million tonnes of imports will be affected by the recent announcement of the results of the 201 investigations. Last year, total foreign supplies to the US were near to 25.4 million tonnes. Of that figure, 5.4 million were slabs which are subject to quotas and are, therefore, outside this judgement until filled. A further 5 million tonnes are products not included in the enquiry. An additional 5 million tonnes are supplied from countries excluded from the arrangements.
It is estimated that 2.6 million tonnes of exports of finished steel products from the EU will be at risk in 2002, using last year as the reference period. At least 2 million tonnes fall into the 30 percent tariff classification. This is, clearly, a serious problem for the industry. Moreover, it comes on top of production cutbacks of up to 4 million tonnes, scheduled for the early part of this year, to re-balance supply and demand. The EU steelmakers are also faced with an added threat. Some of the lost exports by other producers around the world could be redirected to the European market.
Lobbying has already started to gain exemptions from the tariffs. Reports are coming through of substantial concessions to Australian and South Korean suppliers. It is quite possible that the original total of 10 million tonnes under threat could be reduced by over 40 percent before the end of March. However, problems could be caused to price and production levels from the remainder.
Hot rolled coil/sheet is a product at risk from the large tariffs. EU mills sold approximately 1 million tonnes in 2001 to the US. Diverted tonnage from other countries is likely to be modest.
The cold rolled sheet/coil segment has the potential to be a seriously damaged category. Under threat are 350,000 tonnes of exports to the US - representing 2.5 percent of total production. However, the EU market could be pressurised by the redirection of some of the 2 million tonnes sold by third country mills in the US last year. Exemptions are less likely for this form of steel.
The picture for coated sheet is not so alarming. Last year's 350,000 tonnes of exports to the United States represented just 1.3 percent of the total manufactured. However, a part of the 1.4 million tonnes of sales to the US by non-EU producers could be re-routed to Western Europe.
Hot rolled plate and bar producers were not significantly exposed to sales to the US market. Less than 2 percent of total output was supplied. Concern is being expressed about diverted material but it is not considered a major issue. Most of that trade is with Asian mills and freight costs to the EU could be prohibitive - particularly in the bar sector.
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