HRC shortage expected due to EU safeguard amendment

EU safeguard

The Italian Steel Trade Association (Assofermet) has predicted that the European Union (EU) will face an annual shortage of 1.63 million tons of hot-rolled coil (HRC) due to changes in the remaining safeguard quotas.

In May, the European Commission announced its decision to extend the steel safeguards for another two years, until June 30, 2026. The Commission also announced that for HRC, it will impose a 15% per country of origin limit on tariff rate quotas (TRQs) for other countries. This measure aims to maintain market stability and protect existing suppliers from being displaced.

However, Assofermet warned that the extension of the safeguard measures could lead to a shortage of HRC, which would have a negative impact on the automotive, construction, machinery, and other manufacturing sectors. In 2023, Vietnam, Japan, Taiwan, and Egypt, which were covered by other countries' TRQs, sold 3.9 million tons of HRC to Europe. Due to the new regulation, the annual volume from these four countries to Europe is expected to drop to 2.26 million tons, resulting in a shortfall of 1.63 million tons.

The association emphasized that imports are essential to meet the needs of these sectors, as this is a type of steel that cannot be sufficiently produced in Europe. However, maintaining the safeguard measures for the next 24 months will effectively lead to double taxation due to overlapping rules with the Carbon Border Adjustment Mechanism (CBAM).

The association also highlighted that the safeguard amendment is based on data from 2015 to 2017. Many countries listed as EU suppliers during this period are now either under export bans or sanctions or are redirecting their materials to other regions. As a result, this comparison is no longer relevant. The association expects that the safeguard tariffs will lead to uncontrollable increases in raw material costs, long waiting times for customs clearance at the beginning of each quarter, financial burdens for all importers, and congestion at port terminals.

According to Eurometal, Vietnam exported 1.11 million tons of HRC to Europe last year. This year, exports are expected to drop to 570,000 tons due to the safeguard amendment. Similarly, Japan and Taiwan, which each exported more than 1 million tons to Europe last year, are expected to export only 570,000 tons each year. Egypt, which exported 720,000 tons, is also expected to be limited to 570,000 tons.