Supply Lines: Sending out an S.O.S.

Supply Lines
Bloomberg

The coronavirus pandemic has turned a routine European Union review of restrictions on imported steel into something with much higher stakes as EU-based producers push for greater protection.

The spotlight is on EU import curbs introduced almost two years ago to prevent a controversial 25% U.S. levy on foreign steel from diverting global shipments to the European market and flooding it.

The European "safeguard" measures involve a 25% tariff on EU imports of 26 types of steel ranging from stainless hot-rolled and cold-rolled sheets to rebars and railway material when the shipments exceed a three-year average.

Built into the EU measures are planned progressive increases in the import quotas. After an initial review last year, the European Commission raised the quotas by 3% rather than an originally planned 5%.

Now, Europe's steel producers are demanding a massive quota reduction in a second review that the commission, the 27-nation EU's executive arm in Brussels, began in mid-February. That was just before the pandemic triggered widespread lockdowns across the EU and sent the bloc's economy into a tailspin.

Eurofer, the main European steel-industry group representing manufacturers including ArcelorMittal, Thyssenkrupp and Salzgitter, sent a letter to the commission last month urging a 75% quota cut for the second and third quarters of this year to address slumps in European consumption and production of the metal.

"The economy has changed fundamentally," Eurofer said in the April 2 letter seen by Bloomberg News. "This radically different situation means that urgent action is needed."

At issue is whether the gradual reopening of the European economy over coming weeks prompts a surge in EU steel imports, which generally account for about 20% of the bloc's market.

While the commission declined to comment on its review, EU trade chief Phil Hogan has signaled it will take into account the prospect of a jump in steel shipments to Europe from the likes of China.

Concerns exist in Europe "about the possible stockpiling of steel, particularly by China, and what will happen to this particular stockpiling of product when the lockdown is lifted," Hogan told an April 21 video conference with the European Parliament's trade committee.

"We are looking at our review of our steel safeguards in this context," he said. "We've had a number of meetings even this month with representatives of the industry, so we are very familiar with their concerns and their problems."

This review, which the commission plans to complete by June 30, has become anything but routine.

Jonathan Stearns in Brussels

Charting the Trade Turmoil

Brazilian governors are coming up with creative ways to get much-needed medical equipment, avoiding regular routes through Europe and the U.S., and bypassing even the federal government to make it happen.

Today's Must Reads

  • Bellwether warning | South Korea's exports fell in April by the most since the global financial crisis, offering an early indication of how the pandemic is slamming world trade.
  • China retaliation | President Donald Trump is exploring blocking a government retirement fund from investing in Chinese equities considered a national security risk, a person familiar with the internal deliberations said.
  • Stranded at sea | Storage lots — and even cargo ships — are packed with new vehicles that Americans suddenly have little desire to purchase.
  • Weak signal | Global shipments of smartphones fell last quarter at the fastest rate on record, illustrating the devastating impact of Covid-19 on consumption and production in the critical segment of the technology industry.
  • Meat matters | Shutdowns and slowdowns have hit U.S. pork and beef supplies hard, but the chicken industry has avoided major closures and is still fairly cheap.
  • Beer threat | The owner of Latin America's largest chain of convenience stores said its shops in Mexico will run out of beer in about 10 days.

On the Bloomberg Terminal

  • On track | Railroads' variable-cost models, along with pricing discipline and productivity gains, helped the industry better weather first-quarter headwinds, says Bloomberg Intelligence.
  • More help | The People's Bank of China still needs to step up monetary stimulus, according to a Bloomberg Economics dashboard of indicators.
  • Use the AHOY function to track global commodities trade flows.
  • See BNEF for BloombergNEF's analysis of clean energy, advanced transport, digital industry, innovative materials, and commodities.
  • Click VRUS on the terminal for news and data on the coronavirus and here for maps and charts.

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