The European Commission (EC) has notified EU member states as well as the WTO of its intention to prolong steel safeguard measures for three years beyond 30 June.

In its determination following the safeguard review, the Commission found evidence that the measures continue to be necessary to prevent or remedy serious injury or threat to the EU steel industry. The proposal must be voted on and confirmed by member states; it is nevertheless not expected that significant changes will be made to the final measures. According to the EC proposal, a relaxation of tariff-free quotas of 3% annually would be implemented during the 2021-2024 period. A review of how the measure is working would be carried out before the end of June 2022. Consultations on the proposal are set to take place between 14 and 18 June. The European Automobile Manufacturers’ Association (ACEA) says it is disappointed by the European Commission’s proposal to extend safeguard duties. The move disregards the interests of downstream users of steel amid acute automotive steel shortages, it adds.

These shortages have led to a slowdown in manufacturing, requiring “constant crisis management of orders” to avoid complete assembly line stoppages, the association comments in a note. Meanwhile, prices continue to surge to record highs in the European market, with producers now charging up to €1,300/tonne ($1,578) for automotive steel grades. Carmakers source over 90% of their steel in the EU, but the safeguard measures limit their ability to balance the domestic material shortage through imports, acting as a lid on an already over-heated market, the association says.

“While the Commission does propose an expansion of the quota for certain automotive grades, the increase is so marginal that it will make no difference to the scarcity of supply or to the inflationary effect of the safeguard,” it adds.

ACEA director general Eric-Mark Huitema laments: “In a market where EU steel producers are dictating prices and reporting record earnings, the idea that domestic steel is under threat of serious injury from imports is scarcely credible. We need imports to fill supply chain gaps. If this proposal is approved by member states in its current form, then the market situation will remain critical for automobile manufacturers for the foreseeable future.”

A European steelmaker source suggests the three-year extension, if confirmed, would be a time-saver to avoid having to go through the same process again in 2022. The 3% quota increase would raise tariff-free quota levels even higher above the record import years upon which it was based, he added.