U.S., Russia, Asia Nations Hit With 5-Year EU Steel Measures

  • EU producers ArcelorMittal, ThyssenKrupp win price floors
  • Trade protection targets rivals such as AK Steel, Posco

The European Union imposed five-year trade protection against electrical steel from the U.S., Russia, Japan, China and South Korea in a bid to curb competition for producers in the bloc such as ArcelorMittal and ThyssenKrupp AG.

The EU fixed minimum-import prices on American, Russian, Japanese, Chinese and Korean shipments of grain-oriented electrical steel -- or GOES -- until late 2020. The measures on this niche steel product, which is used in power transformers, are meant to punish exporters in the five countries such as AK Steel Corp., Novolipetsk Steel OJSC, Nippon Steel & Sumitomo Metal Corp., Baoshan Iron & Steel Co. and Posco for allegedly having sold it in the EU’s 400 million-euro ($440 million) market below cost, a practice known as dumping.

The five-year protection follows provisional European measures introduced in May that took the form of ad valorem duties as high as 35.9 percent. Under the system of minimum-import prices, GOES sold below the price floors are subject to EU tariffs. The duty rates amount to the difference between the minimum prices and any lower import prices.

The minimum import prices will “allow the union producers to return to sustainable profit levels,” the European Commission, the 28-nation EU’s trade authority in Brussels, said on Friday in the Official Journal. The decision will take effect on Saturday.

Lobbying Power

The GOES trade dispute became a test of lobbying power in the EU between European electrical-steel makers, which also include Tata Steel U.K. Ltd., and users such as Siemens AG in Germany, ABB AB in Spain and Alstom Grid U.K. Ltd. in Britain. The European Steel Association said the planned five-year EU trade protection would safeguard “a vital strategic subsector” of the steel industry, whereas a group representing transformer manufacturers argued the measures would set GOES prices at “unreasonably high” levels and force large transformer producers to shrink or move their factories outside the bloc.

The commission said the benefits of the trade protection for European producers of GOES outweigh the disadvantages for users. It also said the minimum-import price system poses less harm to users than do the ad valorem duties.

“The imposition of measures would lead to a further price increase of GOES, at the expense of the users,” the commission said on Friday. “The competitiveness of the user industry would be even more negatively affected if measures were to be imposed in the form of an ad valorem duty.”

The commission said it would refund EU importers of GOES the ad valorem duties collected since May because prices during this period were generally higher than the minimum-import prices being fixed.

The decision sets three price floors based on the specific type of GOES: 2,043 euros a metric ton, 1,873 euros a ton and 1,536 euros a ton. The commission added a proviso to the minimum-import price system by saying that, in cases where duties are applied, they can’t be higher than a set of theoretical ad valorem rates calculated for specific exporters. These range from 21.5 percent for China’s Baoshan Iron & Steel to 39 percent for Japan’s JFE Steel Corp.

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