Commission Implementing Regulation (EU) 2021/1029 of 24 June 2021 amending Commission Implementing Regulation (EU) 2019/159 to prolong the safeguard measure on imports of certain steel products

25.6.2021	EN	Official Journal of the European Union	LI 225/1

THE EUROPEAN COMMISSION,

Having regard to Regulation (EU) 2015/478 of the European Parliament and of the Council of 11 March 2015 on common rules for imports ¹ and in particular Article 19 thereof,

Having regard to Regulation (EU) 2015/755 of the European Parliament and of the Council of 29 April 2015 on common rules for imports from certain third countries ², and in particular Article 16 thereof

Whereas:

1. BACKGROUND

• (1) By Commission Implementing Regulation (EU) 2019/159 ³, the European Commission imposed a definitive safeguard measure on certain steel products (‘the safeguard’), which consists of tariff-rate quotas (‘TRQs’) with respect to certain steel products (‘the product concerned’) encompassing 26 steel product categories, set at levels preserving traditional trade flows on a per-product-category basis. A 25 % tariff duty applies only if the quantitative thresholds of these TRQs are exceeded. The safeguard measure was imposed for an initial period of three years, that is to say, until 30 June 2021.

• (2) On 15 January 2021, the Commission received a substantiated request by twelve EU Member States to examine, pursuant to Article 19 of Regulation (EU) 2015/478 of the European Parliament and of the Council and Article 16 of Regulation (EU) 2015/755, whether the existing safeguard measure should be prolonged.

• (3) The Commission considered that the request contained sufficient evidence to initiate an expiry/prolongation review investigation. Accordingly, it published a Notice of Initiation ⁴ (‘the Notice of Initiation’) in the Official Journal of the European Union on 26 February 2021.

2. PROCEDURE

• (4) In order to carry out a proper assessment as to whether the safeguard measure continues to be necessary to prevent or remedy serious injury, whether the Union steel industry is adjusting, and whether such prolongation is in line with the wider Union interest, the Commission collected specific data from the Union industry by means of questionnaires ⁵. These data included, inter alia, the evolution of key economic and financial indicators for the product concerned during the period 2018-2020 (‘the period considered’), as well as evidence that the industry is adjusting.

• (5) The Commission also sought the position of other interested parties on a potential prolongation. To this end, the Notice of Initiation invited interested parties to participate in the investigation by submitting their observations and supporting evidence.

• (6) In terms of due process, the prolongation review investigation comprised a two-stage written procedure, under which interested parties, first, submitted their observations and, subsequently, were given the possibility to rebut the other parties’ observations and submit comments on the questionnaire replies. Overall, the Commission received more than 150 individual questionnaire replies and over 160 submissions from interested parties within the established deadlines. The Commission also offered interested parties the possibility of hearings, if duly justified. Only the Government of the Russian Federation made use of this possibility ⁶.

• (7) In its prolongation review investigation, the Commission assessed, first, whether the requirements of necessity and adjustment, mandatory under the rules of both the Agreement establishing the World Trade Organization (WTO Agreement) and Union legislation, were satisfied (see Section 3). Second, it also assessed what length and liberalisation terms for the prolongation would be justified (see Sections 3.3 and 3.4 respectively). Finally, the Commission assessed whether such prolongation would be in line with the interest of the Union (See Section 5). In its assessment, the Commission took due account of the observations and evidence received from interested parties, as well as any other publicly available information, in relation to the above questions. The Commission specifically addressed the relevant claims made by interested parties that deviate from the Commission’s assessment in a dedicated Section (see Section 7).

3. LEGAL REQUIREMENTS

3.1.   Necessity

• (8) According to Article 7.1 of the WTO Agreement on Safeguards and Article 19(2) of EU Regulation (EU) 2015/478 on common rules for imports ⁷, the period of application of a safeguard measure may be extended “provided that (…) the safeguard measure continues to be necessary (…) and that there is evidence that the industry is adjusting”.

• (9) The Commission first examined and described the economic situation of the Union industry based on the questionnaire replies received (Section 3.1.1). Subsequently, the Commission assessed whether, and to what extent, import pressure existed or continued during the period considered (Section 3.1.2.). This assessment included a detailed analysis of the evolution of imports and TRQs use over the period of application of the safeguard, as well as a detailed assessment of several other relevant factors to determine the likely behaviour of imports into the Union, if the safeguard measure lapses (‘counterfactual analysis’).

3.1.1.   Economic situation of the Union steel industry

• (10) In order to assess the economic situation of the Union steel industry, the Commission issued questionnaires to the known Union steel producers to collect information regarding injury indicators about the product concerned during the period 2018-2020 (‘the period considered’). The Commission also requested the known Union industry associations (EUROFER, ESTA and CET) to distribute the questionnaires among their individual members. In addition, the Commission notified the known Union producers, through the open file system (TRON) ⁸, of the request to fill in questionnaires, which were also made available on the website of the Directorate-General for Trade ⁹.

• (11) The Commission received over 150 individual questionnaire replies. The Commission also received consolidated data submissions from the industry associations known to the Commission. In addition, the Commission received individual questionnaire replies from each producer that had supplied the data to the industry associations individually and by producers that did not belong to any association. The Commission then processed the data received. It first consolidated the data directly received from members of associations, and later crosschecked their accuracy and the consolidation methodology with the dataset submitted by the industry associations in dedicated remote crosscheck sessions that took place on 14 June 2021. The Commission then merged the association members’ replies together with the individual replies received by producers not belonging to any association into a single consolidated dataset. This dataset constitutes the basis for the assessment of the economic situation of the Union industry. The assessment of this dataset (in Tables 1 to 4) showed the following:

(a) Production, production capacity, capacity utilisation, stocks

Table 1

Production, production capacity, capacity utilization, stocks

in 000 tonnes	2018	2019	2020
Production volume of the product concerned	200 416	189 459	168 675
index 2018 = 100	100	95	84
Production capacity for the product concerned	252 367	252 461	251 864
index 2018 = 100	100	100	100
Capacity utilisation	79,41 %	75,04 %	66,97 %
Stocks	21 464	20 000	18 251
index 2018 = 100	100	93	85
Source: Questionnaire replies.	Source: Questionnaire replies.	Source: Questionnaire replies.	Source: Questionnaire replies.

• (12) Over the period considered production volume steadily decreased year-on-year, with -5 % decrease in 2019 and a sharper reduction -16 % in 2020, when compared to 2018 figures. The 2020 quarterly breakdown ¹⁰ shows that this decrease was driven largely by the performance in the second and third quarters, which were the most heavily affected by the effects of the COVID-19 pandemic. Production capacity remained stable throughout the period and, thus, capacity utilisation followed a declining trend in line with the reduction in production (See Table 1). Lastly, stocks went down by 7 % in 2019 and by 15 % in 2020 as compared to the year 2018.

(b) Union consumption, domestic sales and market share ¹¹

Table 2

Union consumption, domestic sales and market share

	2018	2019	2020
Consumption in 000 tonnes	167 140	157 120	139 955
index 2018 = 100	100	94	84
Domestic sales in 000 tonnes	132 960	127 448	114 936
index 2018 = 100	100	96	86
Market share in %	79,6 %	81,1 %	82,1 %
Source: Industry data and questionnaire replies	Source: Industry data and questionnaire replies	Source: Industry data and questionnaire replies	Source: Industry data and questionnaire replies

• (13) Consumption in the Union market started declining in 2019 (-6 %), and this trend continued in 2020 (-16 %) when compared to the year 2018. The evolution of domestic sales volume by Union producers followed a very similar trend during the period considered (-4 % in 2019 and -14 % in 2020). During the period considered, the Union industry increased its market share by more than 2 percentage points.

(c) Unit sales price, profitability, cash flow and return on capital employed

Table 3

Unit sales price, profitability

¹² , cash flow and return on capital employed

	2018	2019	2020
Unit sales price (EUR/tonne)	763	725	666
index 2018 = 100	100	95	87
Profitability ( % turnover)	5,7 %	-0,4 %	-3,7 %
Cash flow (million EUR)	7 456	6 798	6 386
index 2018 = 100	100	91	86
Return on capital employed ( % )	8,6 %	-2,6 %	-19,4 %
Source: Industry data and questionnaire replies	Source: Industry data and questionnaire replies	Source: Industry data and questionnaire replies	Source: Industry data and questionnaire replies

• (14) Injury indicators related to sales volume (see Table 2) and value saw a continuous decline over the period considered. Unit sales prices went steadily down by 5 % in 2019 and by 12 % in 2020 when compared to 2018. Cash flow and return on capital employed also deteriorated year-on-year during the period considered, the latter reaching negative figures in both 2019 (-2,6 %) and (-19,4 %) in 2020.

• (15) The decrease in prices, coupled with the reduction in production and sales volumes described in Tables 1 and 2, turned the Union industry into a loss-making situation already in 2019 (-0,4 %) and the situation further deteriorated in 2020, reaching -3,7 % losses.

(d) Employment

Table 4

Employment

(FTE)	2018	2019	2020
Employment	215 359	215 620	202 331
index 2018 = 100	100	100	94
Source: Questionnaire replies	Source: Questionnaire replies	Source: Questionnaire replies	Source: Questionnaire replies

• (16) Employment remained stable in 2019, but decreased by 6 % in 2020 when compared to 2018.

Conclusion

• (17) The data in Section 3.1.1. showed that the economic situation of the Union industry had deteriorated significantly already in the year 2019, when the Union industry already became lossmaking, with virtually all injury indicators showing a sharp negative trend. It should be noted that from 2018 to 2019 the profitability experienced a slump by 6,1 percentage points to reach -0,4 % at the end of 2019. This serious worsening thus took place well before the unexpected onset of the COVID-19 pandemic and its ensuing effects on the market. The financial position of the Union industry further deteriorated in the course of 2020, when the economic effects of the COVID-19 pandemic further complemented the weakening of the Union industry’s financial position produced by the continuation during 2020 of the import pressure exerted by exporters to the Union. The effects of the COVID-19 pandemic came on top of the continuous jeopardy to the financial position of the Union industry caused by import pressure. Imports together with to some extent the COVID-19 pandemic plunged the Union industry into a serious financial situation with losses of -4 %. It should be emphasized that the additional impact of the pandemic-induced crisis on the financial position of the Union industry, which deepened the already undergoing import-induced deterioration, was comparatively smaller. From 2019 to 2020 the profitability decreased 3,3 percentage points to reach the bottom losses of almost -4 %. Therefore, the COVID-19 pandemic has thus amplified a pre-existing and continuing source of serious injury for the Union industry, which is mainly driven by imports.

• (18) In conclusion, the Commission therefore found that, during the period of application of the safeguard measure the economic situation of the Union industry continued worsening as a result of import pressure during a period where the important adjustments made by the Union industry have not yet produced positive effects.

Additional analysis per product family

• (19) The Commission concluded on the basis of the economic situation and development of injury indicators for the product concerned in Tables 1 to 4 that the Union industry continued worsening between 2018 and 2020 and it is currently in a fragile situation.

• (20) In addition to this finding, and in accordance with the approach followed in the original investigation, ¹³ the Commission also confirmed its findings on the basis of three product families, this is flat products, long products and tubes ¹⁴.

Table 5

Production, production capacity, capacity utilization, stocks

in 000 tonnes	2018	2019	2020
Production volume of the product concerned (flat)	150 598	143 287	126 795
index 2018 = 100	100	95	84
Production volume of the product concerned (long)	41 395	38 879	35 769
index 2018 = 100	100	94	86
Production volume of the product concerned (tubes)	8 423	7 293	6 111
index 2018 = 100	100	87	73
Production capacity for the product concerned (flat)	184 802	184 682	183 924
index 2018 = 100	100	100	100
Production capacity for the product concerned (long)	54 755	55 013	55 278
index 2018 = 100	100	100	101
Production capacity for the product concerned (tubes)	12 810	12 767	12 661
index 2018 = 100	100	100	99
Capacity utilisation (flat)	81,49 %	77,59 %	68,94 %
Capacity utilisation (long)	75,60 %	70,67 %	64,71 %
Capacity utilisation (tubes)	65,75 %	57,12 %	48,27 %
Stocks (flat)	13 712	13 549	12 354
index 2018 = 100	100	99	90
Stocks (long)	4 859	4 469	4 146
index 2018 = 100	100	92	85
Stocks (tubes)	2 893	1 982	1 751
index 2018 = 100	100	69	61
Source: Industry data and questionnaire replies	Source: Industry data and questionnaire replies	Source: Industry data and questionnaire replies	Source: Industry data and questionnaire replies

Table 6

The Union consumption, domestic sales and market share

	2018	2019	2020
Consumption in 000 tonnes (flat)	108 661	103 357	91 373
index 2018 = 100	100	95	84
Consumption in 000 tonnes (long)	48 226	44 495	40 521
index 2018 = 100	100	92	84
Consumption in 000 tonnes (tubes)	10 253	9 269	8 060
index 2018 = 100	100	90	79
Domestic sales in 000 tonnes (flat)	86 585	83 533	74 504
index 2018 = 100	100	96	86
Domestic sales in 000 tonnes (long)	38 714	36 918	34 252
index 2018 = 100	100	95	88
Domestic sales in 000 tonnes (tubes)	7 661	6 998	6 180
index 2018 = 100	100	91	81
Market share in % (flat)	79,7 %	80,8 %	81,5 %
Market share in % (long)	80,3 %	83,0 %	84,5 %
Market share in % (tubes)	74,7 %	75,5 %	76,7 %
Source: Industry data and questionnaire replies	Source: Industry data and questionnaire replies	Source: Industry data and questionnaire replies	Source: Industry data and questionnaire replies

Table 7

Unit sales price, profitability, cash flow and return on capital employed

	2018	2019	2020
Unit sales price (EUR/tonne) (flat)	775	741	689
index 2018 = 100	100	96	89
Unit sales price (EUR/tonne) (long)	674	623	556
index 2018 = 100	100	92	82
Unit sales price (EUR/tonne) (tubes)	1 065	1 070	999
index 2018 = 100	100	100	94
Profitability ( % turnover) (flat)	6,0 %	-1,0 %	-4,6 %
Profitability ( % turnover) (long)	6,0 %	0,4 %	-2,8 %
Profitability ( % turnover) (tubes)	3,3 %	0,9 %	-0,5 %
Cash flow (million EUR) (flat)	5 652	3 609	4 402
index 2018 = 100	100	64	78
Cash flow (million EUR) (long)	1 411	2 300	879
index 2018 = 100	100	163	62
Cash flow (million EUR) (tubes)	394	889	1 106
index 2018 = 100	100	226	281
Return on capital employed ( % ) (flat)	7,68 %	-3,75 %	-28,47 %
Return on capital employed ( % ) (long)	10,13 %	-1,59 %	-4,76 %
Return on capital employed ( % ) (tubes)	8,58 %	3,05 %	-3,16 %
Source: Industry data and questionnaire replies	Source: Industry data and questionnaire replies	Source: Industry data and questionnaire replies	Source: Industry data and questionnaire replies

Table 8

Employment

(FTE)	2018	2019	2020
Employment (flat)	134 788	137 719	128 837
index 2018 = 100	100	102	96
Employment (long)	49 116	47 314	45 487
index 2018 = 100	100	96	93
Employment (tubes)	31 455	30 587	28 007
index 2018 = 100	100	97	89
Source: Industry data and questionnaire replies	Source: Industry data and questionnaire replies	Source: Industry data and questionnaire replies	Source: Industry data and questionnaire replies

• (21) Tables 5 to 8 showed the evolution of the injury indicators per product family during the period considered. In particular, they confirmed that the economic and financial situation of the Union industry followed, for each of the product families individually, comparable deteriorating trends as those established for the product concerned as a whole. By means of example, injury indicators such as production volume, domestic sales volume, unit sales price and profitability, consistently deteriorated in 2019 and this trend continued in 2020, showing a negative economic and financial situation. The only exception, in terms of diverging trend when compared to those of the product concerned, has to do with development of cash flow in the tubes family during the period considered.

• (22) In view of this, the supplementary analysis undertaken per product family thus corroborates the findings reached for the product concerned, namely that even when assessed on a product family basis, the Union industry’s economic situation significantly worsened over the period considered and that it is currently in a fragile situation.

3.1.2.   Import pressure

(a) Evolution of imports

• (23) To determine whether imports exerted pressure on the Union steel industry during the period considered and to what extent, the Commission assessed, first, the evolution of imports ¹⁵ of the product concerned in overall terms and, second, with respect to the level of consumption. In addition, the Commission assessed the evolution of TRQs used under the safeguard (See section 3.1.2(b)).

Table 9

Evolution of imports in tonnes

	2018	2019	2020
Volume of imports	34 180 000	29 672 000	25 019 000
index 2018 = 100	100	87	73
Source: EUROSTAT	Source: EUROSTAT	Source: EUROSTAT	Source: EUROSTAT

• (24) In overall terms, the volume of imports of the product concerned decreased by 13 % in 2019 and by 27 % in 2020 when compared to the 2018 level ¹⁶.

Table 10

Import share evolution

	2018	2019	2020
Consumption in 000 tonnes	167 140	157 120	139 955
index 2018 = 100	100	94	84
Volume of imports in 000 tonnes	34 180	29 672	25 019
index 2018 = 100	100	87	73
Market share	20,4 %	18,9 %	17,9 %
Source: EUROSTAT, Industry data and questionnaire replies	Source: EUROSTAT, Industry data and questionnaire replies	Source: EUROSTAT, Industry data and questionnaire replies	Source: EUROSTAT, Industry data and questionnaire replies

Table 11

Market share of imports per product family

Consumption in 000 tonnes (flat)	108 661	103 357	91 373
index 2018 = 100	100	95	84
Consumption in 000 tonnes (long)	48 226	44 495	40 521
index 2018 = 100	100	92	84
Consumption in 000 tonnes (tubes)	10 253	9 269	8 060
index 2018 = 100	100	90	79
Imports in 000 tonnes (flat)	22 076	19 824	16 869
index 2018 = 100	100	90	76
Imports in 000 tonnes (long)	9 513	7 577	6 270
index 2018 = 100	100	80	66
Imports in 000 tonnes (tubes)	2 592	2 271	1 880
index 2018 = 100	100	88	73
Market share in % (flat)	20,3 %	19,2 %	18,5 %
Market share in % (long)	19,7 %	17,0 %	15,5 %
Market share in % (tubes)	25,3 %	24,5 %	23,3 %
Source: EUROSTAT and Industry data	Source: EUROSTAT and Industry data	Source: EUROSTAT and Industry data	Source: EUROSTAT and Industry data

• (25) When the decrease in the volume of imports shown in Table 9 is assessed against the evolution of consumption in the Union market, the Commission noted that although the market share of imports gradually decreased over the period concerned, the market share of imports nevertheless remained at the same level in 2020 when compared to 2017, that is to say, the year just prior to the imposition of the safeguard measure ¹⁷. Furthermore, the average market share of imports during the period under the safeguard was higher than in the years prior to its imposition (whether individual years, or averaged). This shows that, despite the safeguard, the presence of imports on the Union steel market has not diminished. Rather, it has increased in relative terms compared to the period prior to the imposition of the safeguard ¹⁸.

(b) Evolution of TRQ Use

• (26) The Commission also undertook a closer look on import pressure by assessing the evolution of TRQ use under the safeguard ¹⁹.

• (27) This analysis shows that the main steel exporting countries have exhausted a large number of the country-specific quotas allocated to them and, quite often, in a rather short time frame within the relevant periods of application of the safeguard measure. In some extreme cases, large volumes of annual quotas were exhausted within the first day of the period or within a few weeks. This trend continued under the quarterly administration of country-specific quotas introduced on 1 July 2020. The analysis also showed that some of those countries also exhausted extremely quickly some residual quotas in several categories after previously exhausting their own, thus crowding out other historical suppliers. This is a consistent pattern, which can be observed across product categories and origins, and in large volumes.

• (28) The main exporting countries not only demonstrate capacity to supply large volumes within a short period of time, creating significant disturbances on the market, but also appear ready to increase their presence on the Union market further, whenever the design of the measure gives them an opportunity to do so (for instance, through the exceptional access to the residual quota). Therefore, as found during the second functioning review of the safeguard measure ²⁰, the exporters of the main exporting countries clearly show an opportunistic behaviour seeking to maximise their market presence under the safeguard measure, by all possible means.

(c) Evolution of worldwide exports by main steel exporting countries and of consumption in their domestic markets

• (29) Before the adoption of the US tariff measures under Section 232 of the Trade Expansion Act of 1962 (‘Section 232 measures’) measure on certain steel products in March 2018, the US was the largest steel importing market. After imposing a 25 % upfront duty on imports, the US lost this position to the Union, which is at present the world’s largest steel importing country, followed by the US ²¹. In order to shield the Union market from the ensuing trade diversion, the Union imposed its safeguard, provisionally in July 2018 and in its definitive shape in February 2019, by means of TRQs on the product concerned that, unlike the US measure, preserve historical trade flows and deter additional imports, including diverted trade.

• (30) Imports into the Union decreased by 13 % in 2019 and by 27 % in 2020 with respect to their peak in 2018 (See Table 5). At the same time, during the same period, imports into the US market followed a parallel even steeper declining trend after the imposition of the Section 232 measures, as shown in Table 11.

Table 11

Imports into United States in tonnes ²²

Year	Year 2017	Year 2018	Year 2019	Year 2020
Total Third countries (excluding EU)	21 933 440	18 472 301	15 052 561	12 143 791

• (31) Therefore, these data prove a close and significant correlation between the strong reduction in import volumes into the US after the imposition of the US Section 232 measures and the parallel increase of imports into the Union, partially cushioned by the safeguard measure. This correlation is confirmed for all safeguard periods up to the impact of the COVID-19 pandemic.

• (32) After having identified these import trends into the two largest importing markets of steel (the Union and the USA), the Commission turned to assess the export performance in other third markets of the main steel supplying countries to the Union ²³.

Table 12

Evolution of exports of the product concerned from main steel supplying countries to the EU to third markets (other than EU and US)

Year	2018	2019	2020	% variation	volume variation
Volume in tonnes	126 541 868	125 633 907	117 579 311	-7 %	-8 962 557

• (33) The Commission undertook a statistical analysis of the exporting trends of the product concerned for the main steel exporting countries based on data from the Global Trade Atlas ²⁴. Table 8 shows that, overall, the main exporting countries to the Union of the product concerned substantially decreased their export volumes to other third markets over the period considered. An individual assessment of these countries’ export performance confirmed that most of these countries also experienced a decline in their export volumes for every country (other than the Union and the US). Therefore, this means that during a period where the world’s two main largest steel importing countries (the Union and the USA) saw a significant decline in imports when their respective measures were in place, the main exporting countries to the Union also decreased their export volumes to other third markets.

• (34) The Commission further supplemented its own assessment with the analysis carried out by the OECD. The OECD data confirmed the Commission’s own assessment that the export performance of the main steel exporting countries had overall consistently decreased over the period considered ²⁵.

• (35) The Commission then assessed the evolution in the domestic consumption in the main steel exporting countries ²⁶ over the period considered.

Table 13

Consumption evolution in the main steel-making markets (including the main exporting countries to the EU) ²⁷

Year/ Product	HR coil and coil plate	CR coil	HDG + EZ coil	Tinplate	Reversing mill plate	Rebar + wire rod	Merchant bar + Structural Sections	Rail	All - incl. China	China	Without China
2018	501 093,59	172 655,53	87 021,82	8 539,49	110 692,33	495 876,36	190 878,27	8 136,93	1 574 894,32	964 829,00	610 065,32
2019	505 032,94	167 800,90	90 303,02	8 819,83	113 426,32	531 934,21	197 669,27	8 709,86	1 623 696,35	1 024 140,84	599 555,50
2020	518 795,17	176 848,77	91 167,34	8 371,03	121 358,51	552 591,72	211 094,72	8 110,75	1 688 338,02	1 141 388,71	546 949,31

• (36) Table 13 shows that, overall over the period considered, consumption ²⁸ in the domestic market of the major steelmaking countries (encompassing the main steel supplying countries to the Union) increased. However, this overall trend is driven by the exceptional consumption surge experienced in China, by far the largest steel-making market in the world. With this exception, all the other countries saw a continuous decline in domestic consumption.

• (37) Therefore, the simultaneous decrease of exports and domestic consumption over the period considered in the majority of the main steel-making countries unequivocally witnesses to the increasing difficulties they experience to find outlets for their traditional export operations. These difficulties strongly enhance competitive tension and induce a forceful conduct of exporters in third markets.

(d) Overcapacity

• (38) The Commission also assessed the most recent developments related to global overcapacity in the steel sector that it had already considered in its Provisional and Definitive Safeguard Regulations.

• (39) An analysis of various authoritative sources referred to in this Regulation show that the situation of overcapacity in the global steel market has worsened over the period considered. The OECD noted that “the latest available information (as of December 2020) suggests that global steelmaking capacity increased in 2020 for the second year in a row (Figure 10). The net capacity change in 2020, taking into account new capacity additions and closures, brings current global steelmaking capacity up to 2 453,2 mmt, representing a 1,6 % increase from the level at the end of 2019” ²⁹.

• (40) Furthermore, the OECD added that “Global steelmaking capacity rose to 2 453,2 mmt in 2020, while crude steel production declined to 1 827,8 mmt, with the gap between the two increasing to 625,4 mmt from 568,7 mmt in 2019. Global steel production as a share of capacity, as a rough indicator of the global utilisation rate, declined from 76,5 % in 2019 to 74,5 % in 2020” ³⁰.

• (41) The conclusions of the 2020 Global Forum on Steel Excess Capacity (‘GFSEC’) Ministerial Report, based on data up to 2019, had already pointed that developments in the sector could follow this direction. The report noted that “two particular concerns at the close of 2019 were the reversing trend being observed in Chinese steelmaking capacity, with several very large greenfield projects being initiated particularly in southern and eastern coastal areas supported by the government-led capacity swaps scheme, and Chinese support for or participation in capacity expansion in third countries. Rapid capacity growth was also taking place in Southeast Asia and the Middle East” ³¹.

• (42) The Report added that “the immediate implication of the demand outlook is that the global capacity-demand gap, an indicator of over-supply risks for the steel market, is going to increase significantly to at least 606 mmt in 2020” ³². It also noted “this reversal in excess capacity can lead to trade disturbances, trigger sharply lower steel prices and hurt the economic sustainability of the steel industry”. ³³

• (43) Therefore, the Commission considered it evident that the problem of global overcapacity in the steel sector has worsened in the period considered, resulting in an even larger gap between production, consumption and installed capacity. The Commission further confirmed this information with its own assessment of the data from the CRU database for the main steel-making countries worldwide, which include the main steel-exporting countries to the Union market ³⁴.

(e) US Section 232 measures

• (44) In its regulations imposing a provisional and a definitive safeguard measure, the Commission found that the US Section 232 measures on certain steel products were likely to cause considerable trade diversion to the Union market of exports originally destined to the US market, if no remedial action was taken by the Union. In its definitive regulation, the Commission concluded that there was evidence that the first signs of trade diversion were already taking place in 2018 ³⁵.

• (45) The Commission has already shown in Table 11 that, since the adoption of the US Section 232 measures on steel, the level of imports into the US market had significantly declined. In fact, over the period considered, the imports formerly directed to the US do not appear to have found other outlets worldwide, as overall exports to other countries, including the Union market, decreased in a situation of declining domestic consumption for the main steel exporting countries to the Union.

• (46) To date, the US Section 232 measures continue and there is no indication by the US authorities foreseeing its repeal. Accordingly, the risk of trade diversion, of both goods currently shipped to the US and those that used to be imported into the US market but which, as a result of the US Section 232 measures, are not being imported anymore, fully remains if the Union safeguard measure were to lapse.

(f) Situation of trade defence and trade restrictive measures in third countries

• (47) Over the period considered, in addition to the US Section 232 measures, which remain in place, the Commission observed the continuous imposition of new measures across different jurisdictions that largely affect the main steel exporting countries to the Union in a wide variety of steel products, including several of those falling under the safeguard measure ³⁶. This includes the recently announced notice to prolong the safeguard measure on certain steel products by the United Kingdom ³⁷.

• (48) This observed trend of continuous increase in the scope of steel categories subject to anti-dumping and countervailing duties, without signs of reversal in the foreseeable future, reinforce the above-mentioned difficulties for exporting countries to find outlets for their exports, which enhances competitive tension and makes more forceful the conduct of exporters

(g) Attractiveness of the Union market

• (49) The Union is at present the largest steel importing market in the world in terms of volumes. ³⁸ In terms of price levels, import prices into the Union from its main supplying countries are consistently higher than their export prices to other third markets for a large majority of their steel exports (in 53 % to 73 % of the total codes affected the export values to the Union are higher than to other third markets) ³⁹.

• (50) This means that exporters have an interest in penetrating the Union market by all means and sometimes incurring in unfair pricing conduct. In fact, in recent years the Commission has imposed a series of anti-dumping and countervailing measures on imports of steel, including on product categories covered by the safeguard.

• (51) The statistical trends of imports into the EU (see Table 9) confirm the attractiveness of the Union market for exporters. Imports into the Union have, on average, even increased their market share during the period considered as compared to the period prior to the imposition of the safeguard, in a context of decreasing consumption and despite a safeguard in place.

• (52) In view of these elements, the Commission concluded that the Union steel market remains attractive for exporting countries.

3.1.3.   Conclusions

• (53) Based on the foregoing evidence and considerations, the Commission found that the Union steel industry, after the first three years of the safeguard measure, still finds itself in a fragile economic situation.

• (54) The Commission also found that imports from the main steel exporting countries have exerted and still continue exerting very high import pressure on the Union’s steel market, with a an aggressive and opportunistic pattern of commercial behaviour, that is to say, using any margin to increase market presence.

• (55) Furthermore, given the prevailing downward trends in worldwide exports and domestic consumption by the main steel exporting countries over the period considered, which were already underway prior to the COVID-19 pandemic, and in an overall context of significant overcapacity, the Commission then noted that exporters are in need to increase their sales on any possible market to continue operating.

• (56) The investigation also confirmed that other significant steel markets, including the second largest importing country, the US, continue having trade restrictions in place affecting the ability of exporting countries to sell thereto, in a general context of continuous decline in steel consumption.

• (57) The investigation further confirmed that the Union market is comparatively more attractive for imports in terms of size and price levels, thereby becoming a market where large volumes of steel could be directed.

• (58) The counterfactual analysis undertaken in the light of the set of factors described in Section 3.1.2. to determine what would happen if the safeguard is removed clearly shows at this moment a high likelihood that very substantial volumes of steel unsold in other parts of the world could end up being directed towards in the Union market.

• (59) These additional imports, together with the currently existing ones, would overall lead to a very serious further deterioration of the economic situation of the Union industry, and could seriously endanger its viability. It is therefore established that the lapsing of the safeguard measure would result in serious injury to the Union industry caused by increased imports. This conclusion is not affected by the current effects of the COVID-19 pandemic on the Union industry. Whilst the economic situation of the Union industry was further aggravated in 2020 because of the COVID-19 pandemic, the Commission established that the likely increase in imports should the safeguard measure lapse would result in serious injury to the Union industry.

• (60) The Commission concluded that such increased volumes could undermine significantly any meaningful economic recovery and the efforts being made by the Union steel industry in its process of adjustment to a higher level of imports, which are described in the following section. Therefore, the Commission considered that the safeguard measure continues to be necessary to prevent serious injury.

• (61) This necessity exists also because the Union does not have the possibility under WTO rules to increase import duties on the product concerned without taking a safeguard measure. Indeed, in the WTO the Union has bound its import tariffs at the level of zero for the tariff lines included in the product concerned. For this reason, just as in 2018 the increase in imports evidently was the result of the effect of these obligations (namely zero-duty tariff concessions) incurred by the Union under the GATT, so would these obligations also now permit imports to increase again, resulting in serious injury to the Union industry, should the safeguard lapse.

3.2.   Adjustment

• (62) When the Commission introduced the provisional steel safeguard in July 2018, the Union steel industry had already started a process of adjustment to the serious crisis experienced by the steel sector since mid-2010, when world steel demand slowed down and capacity nonetheless continued expanding. This imbalance, aggravated by State intervention supporting capacity increases and preventing closures of uneconomic facilities in some third countries, distorted market dynamics and constrained producers to turn increasingly to export markets, which fuelled trade defence cases, many of them involving China where the largest overcapacity lays.

• (63) The Union reacted swiftly to this challenge. In 2013, with its “Action Plan for a competitive and sustainable steel industry in Europe” ⁴⁰, the Commission set out an ambitious plan of targeted actions, both at Union and Member State level, to enhance the competitiveness of the Union steel industry and make it sustainable and able to compete globally, as well as to develop the next generation of steel products vital for other key European industries.

• (64) The McKinsey consulting firm, in its Report “The current capacity shake-up in steel and how the industry is adapting” ⁴¹ published in January 2018, saw the 2016-2025 decade volatile and ripe for further restructuring, in view that the consolidation and adjustment efforts in some parts of the world, notably in Europe, had been “largely offset by continuing expansion elsewhere”. The Report also explained how companies, “especially in Europe, South Korea and Japan, are adjusting to global overcapacity “by pursuing new products and business model extensions that enable them to move up the value chain”. The Report further explained that, “in addition, innovation in steel also encompasses the core production processes, aiming at solutions to reduce production costs, improve functionality products, or reduce the environmental burden”. The Report finally expected “more leading players to experiment with radical innovation in production processes, breaking the long-held belief that steel production technology has matured and thus has limited room for further productivity gains”.

• (65) In this context, in March 2016, the Commission took stock of the actions implemented under the 2013 Steel Action Plan and, by means of its Communication “Steel: Preserving sustainable jobs and growth in Europe” ⁴², strengthened the actions in order to promote investment and create a more favourable business that should assist the Union steel industry in its adaptation efforts. In particular, the Commission refocussed all its Union strategic initiatives to the fullest extent and in an accelerated manner in order to step up the efforts that the EU steel industry was making to modernise and implement innovations that guarantee its long-term competitiveness and sustainability.

• (66) As explained in Section 3.1.e), the adoption by the US of its Section 232 measures on steel, which entered into force in June 2018, deepened the chronic imbalance between steel capacity and demand. The closure of the, at the time, largest steel importing market has exacerbated the aggressive conduct by the steel exporting countries in their desperate search for outlets to place their output excess.

• (67) In these circumstances, the proportionate reaction by the Commission with the introduction of its safeguard measure in TRQ shaped to deter trade diversion, provisionally in July 2018 and in their definitive form in February 2019, prevented that the sudden and sharp steel imports surge that the EU steel market was already experiencing got reinforced. In the absence of this action, the adjustments efforts the Union steel industry was undertaking to adapt to the increasing global overcapacity and the progressively integrated steel markets would have been thwarted.

• (68) Under the Union safeguard, the adjustments efforts of the Union steel industry continued. In their submissions and questionnaire replies, the Union steel industry has documented that it has been adjusting during the first three years of application of the safeguard. The confidential information submitted, complemented with press releases, company reports, and other publically available information, showed that the Union steel industry has been adopting adjustment actions to reduce costs, improve performance, innovate, and undertake its environmental transformation in line with the EU commitments to fight climate change. The adjustments documented concern the product categories covered by the EU steel safeguard. These adjustments are preparing the EU steel industry for remaining financially and environmentally sustainable in the long-run.

• (69) On the one hand, the Union steel industry has reported performance-enhancing measures to save costs and optimize value chain, such as job cuts, closing of less efficient or underutilised facilities, coupled with investments in new machinery and production processes ⁴³. On the other hand, the Union steel industry has also documented more forward-looking adjustments to reinforce competitiveness in the longer run, such as investments in new sustainable technologies (including environmental tech), production processes, and product innovation. Among others, some steel producers, such as Aperam ⁴⁴, Thyssenkrupp ⁴⁵ or ArcelorMittal ⁴⁶, have adopted the latest technological innovations and increased automation and digitalization in their processes. Others, such as Voestalpine ⁴⁷ or Salzgitter ⁴⁸, have pursued the differentiation of their products by investing on premium end-use sectors (such as automotive, energy) and collaborating closely with customers on new steel grades and solutions. All these adjustment help the Union steel industry adapt to a more competitive market with higher import pressure.

• (70) It is to be noted that these adjustment efforts did not cease with the onset of the economic crisis caused by the COVID-19 pandemic, though the ensuing shocks and adverse economic effects of the crisis have increased the complexity and the burden for the Union industry to pursue its adaptation process.

• (71) The principles that are at present guiding the adjustments efforts of the Union steel industry were established by the Commission in its Communication “A New Industrial Strategy for Europe”, published in March 2020 ⁴⁹, in which it laid the foundations for an industrial policy that would support the twin transition to a green and digital economy, make EU industry more competitive globally, and enhance Europe’s open strategic autonomy.

• (72) As this strategy was adopted just when the COVID-19 pandemic started, the Commission has recently updated it in May 2021 by means of its Communication “Building a stronger Single Market for Europe's recovery” ⁵⁰, which takes stock of the emergency and recovery measures the EU implemented in the meantime, in the wider EU industrial policy context. In this update of the EU industrial policy, the Commission highlights the “need for more speed in the transition towards a cleaner, more digital, and more resilient economic and industrial model, in order to maintain and enhance Europe’s drive towards sustainable competitiveness”.

• (73) On account of its key importance, one of the three Staff Working Documents (‘SWD’) accompanying the update of the 2020 Industrial Strategy concerns the steel industry: “Towards competitive and clean European steel” ⁵¹. This SWD describes the challenges and opportunities for the Union steel industry, as well as the EU policy toolbox available to support the future efforts of the Union steel industry in leading the twin transition.

• (74) Accordingly, the Commission concluded that the EU steel industry is and will continue adjusting to a situation of higher imports during the application of the safeguard.

3.3.   Length of the prolongation

• (75) The Commission found that the EU steel safeguard continues to be necessary to prevent a serious injury and that there is evidence that the EU industry continues implementing measures to adjust to a market situation characterised by a higher import pressure. However, according to Article 19 of Regulation (EU) 2015/478, transposing Article 7.2 of the WTO Agreement on Safeguards, the duration of a safeguard measure “must be limited to the period of time necessary to prevent or remedy serious injury and to facilitate adjustment on the part of Union producers”.

• (76) The Union safeguard measure was initially set to last three years until 30 June 2021. However, the Commission noted that, during the second year of application of the safeguard, the economic crisis resulting from the COVID-19 pandemic has lengthened the adaption process of the Union steel industry, with part of the available resources devoted to keep the steel companies going during the most critical phases of the COVID-19 pandemic.

• (77) The Commission also found that a prolongation for only one year would be disproportionately short. In this respect, the Commission noted that the Union steel industry is at present, as its industrial and financial indicators for 2020 show, in a fragile situation and remains vulnerable to import shocks if the safeguard measure lapses at this stage, which could jeopardise the adjustment efforts made so far. Moreover, the Commission also noted that there is still a weak general and economic trade situation, which has not yet fully recovered from the pandemic recession.

• (78) In this latter respect, the Commission observed that, although GDP growth outlooks for 2021 are being gradually upgraded by the majority of forecasts, due to the positive results of the vaccination roll-out in the majority of western countries, at this time confidence still remains fragile because of uncertainties in the vaccination process and the difficulties to control the pandemic in important trading countries like Brazil and India. Oxford Economics in its latest Outlook May/June 2021 has raised its world GDP forecast and now expects it to grow 6,3 % this year and 4,6 % in 2022, respectively 0,4 and 0,2 percentage points higher than in its previous forecast, as economies regain ground lost during the worst phases of the pandemic. As to the Eurozone, Oxford Economics expects GDP to grow 4,2 % in 2021 and 4,7 % in 2022, with a return to its pre-crisis level only until the start of 2022. For its part, the Commission in its Spring 2021 Economic forecast has also upgraded its forecast for the EU economy and expects it to expand by 4,2 % in 2021 and by 4,4 in 2022. In terms of recovery, growth rates vary importantly between Member States and the Commission expects that all Member States should see their economies return to pre-crisis levels only by the end of 2022.

• (79) In these current circumstances, in order to prevent that the Union industry suffers an undue serious injury if the safeguard measure lapses at this stage, the Commission considers it necessary to prolong the measure for three additional years until 30 June 2024.

• (80) However, in order to guarantee that the prolongation remains limited to the strict minimum necessary, the prolongation will be subject to the review regime provided for in Section 4, which, among others, foresees a review to determine whether the safeguard should not be terminated by 30 June 2023 after two years of prolongation.

3.4.   Level of Liberalisation

• (81) The current liberalisation rate of the safeguard was set at an annual rate of 3 %. The Commission assessed, based on evidence available, whether this level of liberalisation continued to be appropriate and commensurate to the market developments and outlooks. In addition to the general economic forecasts and industry specific recovery indicators described in the previous section for the assessment of the prolongation length, the Commission has also considered trade recovery indicators.

• (82) In this respect, IHS Markit, in its GTA Forecast of trade flows of April, has predicted important year-on-year rises in the real value of global trade with increases of 6,5 % and 4,3 % respectively in 2021 and 2022 that will allow to already reach the pre-COVID-19 pandemic level by the end of 2021. However, global trade will continue being depressed with respect to its long-term pre-COVID 2011-2019 trend, which will not be reached than until 2025/2026. Moreover, IHS Markit predicts that in the longer run global trade will grow at a lower average Compound Annual Growth Rate of just 2,9 % over the period 2021-2030.

• (83) In these circumstances, as the current forecasts foresee, pre-pandemic economic and trade conditions are not expected to be soundly re-established within the Union until the end of the first half of 2022, and in line with the growth rate predicted over the current trade flows trend, the Commission does not see any reasons to alter at this stage the liberalisation rate of 3 % for the first year of prolongation.

• (84) Furthermore, maintaining 3 % at least until 30 June 2022 will keep imports at maximum 32,5 million tonnes, still slightly below the historical 2018 record. The historical record could be achieved a year later, once economic and trade conditions are by that time recovered.

4. REVIEW REGIME DURING PROLONGATION

• (85) With a view to guaranteeing that the safeguard measure remains in place only to the extent that it is necessary, the Commission will carry out a review to determine whether, on the basis of the circumstances at that time, the safeguard measure should be terminated by 30 June 2023, namely after two years of prolongation. In addition, in order to keep in the meantime the operation of the safeguard adapted to market evolution and in line with the interest of all stakeholders, the Commission will undertake a functioning review, like those conducted in 2019 and 2020. Such functioning review will be initiated sufficiently in advance to introduce any needed changes from 1 July 2022, after the first year of prolongation. An immediate review of the safeguard measure will also be triggered if the US introduces changes to its Section 232 measure on steel that may have a significant impact on the unduly diverted trade flows it currently generates.

• (86) The Commission also decided that the liberalisation pace of 3 % could nevertheless be reviewed and if necessary changed during the functioning review to be completed by 30 June 2022, if the circumstances justify it.

5. UNION INTEREST

• (87) The Commission has also examined whether any compelling economic reasons exist which could lead to the conclusion that it is not in the Union interest to prolong the existing safeguard.

• (88) For this purpose, the Commission assessed the impact of possible measures on Union producers, importers and users. The assessment of the evidence available is structured as follows: i) the economic situation of Union steel producers and the possible effect of a removal of the measure (see Section 5.1); and ii) the interest of users and importers, in the light of the alleged shortages of supply, the high level of steel prices, and the supply delays claimed by some interested parties, as well as the potential causal link between these alleged effects and the Union steel safeguard (see Section 5.2). In its assessment, the Commission particularly looked into the TRQ use evolution under the safeguard and the overall availability of imports in the supply to the Union market.

5.1.   Interest of Union producers

• (89) The Union steel industry has more than 500 production sites operating across 23 EU Member States. The industry directly employs 330 000 people, and when including indirect and induced jobs in other sectors, creates 2,6 million jobs throughout the Union ⁵².

• (90) The Commission described in Section 3.1.1 the economic situation of the Union steel producers and concluded that it was necessary to prolong the measure to prevent or remedy serious injury. If the measure is not prolonged, the investigation has established that the Union industry would likely face a significant wave of imports that would seriously undermine any efforts to adjust to the import pressure in an overall still uncertain economic situation in the Union.

• (91) Therefore, it would be in the interest of the Union steel producers to prolong the measure.

5.2.   Interest of users and importers

• (92) The Commission noted that the safeguard measure has allowed historical trade volumes to continue entering the Union market free-of-duty, and that it has been liberalised regularly (by increasing the TRQ volumes by 3 % in July 2019 and July 2020 respectively) ⁵³. Therefore, the traditional trade volumes have gradually increased under the safeguard measure. Furthermore, during its prolongation, the safeguard measure will continue being liberalised further.

5.2.1.   TRQ use under the measure and the alleged supply shortage

• (93) When assessing the TRQ use, the Commission noted that, during the first three years of application of the safeguard, there have been consistently (and increasingly) free-of-duty TRQ volumes available at the end of each relevant period in virtually all product categories, often with more than one country-specific quota available, and in many instances also part of the residual quota. The Commission also noted that, since the second year of application of measures, this is, 1 July 2019, the trend in TRQ use experienced a steep decline. This was thus the case even before the COVID-19 pandemic.

• (94) This evolution is clearly shown in Table 14 [^ntr54-LI2021225EN.01000101-E0054]:

Source: TAXUD quota database

• (95) The Commission therefore concluded that, while the safeguard has met its objective to deter trade diversion towards the Union market, there has been sufficient free-of-duty TRQ volumes available for importers and users in the Union, commensurate to demand, and exceeding generously historical trade volumes.

5.2.2.   High steel prices

• (96) The Commission has also assessed the evidence available with regard to the price increases observed in the steel sector in the first months of 2021 and part of the second half of 2020. The Commission looked, in particular, at whether these increases in the Union and worldwide markets had any link with the EU steel safeguard measure, and the impact this increase is having and/or would have on the Union market if the safeguard measure is prolonged.

• (97) In this respect, the Commission first noted that it is an undisputed ⁵⁵ fact that steel prices, including those of some product categories within the product concerned, have experienced a sharp increase worldwide during the last months (starting in the course of the second half of 2020) ⁵⁶. This trend and scope is also clearly depicted in the charts contained in Graphs 1-3 ⁵⁷ which show the price evolution of three product categories (categories 1, 4 and 13) [^ntr58-LI2021225EN.01000101-E0058]:

Image omitted; see official source

Image omitted; see official source

Image omitted; see official source

• (98) Furthermore, the Commission noted that steelmaking raw material prices notably iron ore and scrap have also been experiencing a drastic increase over the same period when steel prices started increasing, as explained in recital (91) (see Graph 4) ⁵⁹.

Image omitted; see official source

• (99) The OECD Report explained that “prices of the main steelmaking raw materials increased dramatically during the second half of 2020, and as of February 2021 benchmark prices for iron ore, coking coal and scrap were up 97 %, 53 % and 56 %, y-o-y, respectively.” ⁶¹

• (100) This information confirms the picture outlined by the evolution of the injury indicators in Tables 1 to 4. In particular, that the increase in prices in the second half of 2020, coupled with signs of recovery in demand, contributed to the improvement in the situation of the Union industry from a previous very negative situation. However, such price increase did not allow the Union industry to return to profitable margins by the end of 2020. This fact is attributable, at least partially, to the parallel surge in prices experienced in the main steelmaking raw materials.

• (101) In this regard the OECD noted that and “spite of the sharp increase in steel prices, the steel-raw material price margin, measured by the difference between the price of steel and a basket of steel inputs, has not increased, due to the upswing in raw material prices (Figure 9). Indeed, the basket of raw material prices used to compute the margins was 97 % higher in February 2021, y-o-y” ⁶².

• (102) As shown in Graphs 1-3, the Commission also noted that the rise in steel prices is not a phenomenon tied to the Union market, but a widespread trend across the main steel markets worldwide.

• (103) Despite this, however, as shown in table 14, the Commission noted that there has been ample availability of free-of-duty quotas from several sources in virtually all product categories in the last period of the measure, i.e. starting on 1 July 2020 ⁶³. Consequently, the safeguard did not limit Union users to purchasing steel exclusively from Union producers at the prices these would have set, thus leaving them without any other realistic (and free-of-duty) alternative of supply. On the contrary, Union users had the possibility to import from other origins under the relevant volumes of free-of-duty TRQ available for every product category.

• (104) The Commission also observed that the submissions of certain users alleged that they were prevented from importing larger free-of-duty volumes from certain specific origins (these origins would vary depending on the product category at issue). However, the Commission noted that one of the enforcement conditions of a safeguard is to preserve that traditional trade flows in terms of both volumes and origins continue being available on the Union market. The fact that a given country may have exhausted its country-specific TRQ in a specific product category, while there are multiple volumes and origins with free-of-duty TRQ available in that same category, does not mean that the safeguard measure is creating an undue shortage in the market.

• (105) These facts thus strongly suggest that the safeguard measure is not the cause of the observed steel price increase, and that it did not create an overall shortage of steel on the Union market. The Commission thus concluded there is not a direct connection between the safeguard measure and the recent evolution in steel price levels. Furthermore, it is not evident that the currently high prices will be sustained in the longer term, once the market adjusts to a post-COVID-19 pandemic situation. ⁶⁴

5.2.3.   Alleged supply delays

• (106) The Commission then turned to assess the alleged delays incurred by the Union steel industry in supplying the Union market ⁶⁵. It became apparent from the investigation that in the last part of the period considered, there had been a transitory mismatch between demand and supply in the Union (as well as in other third markets) when the economy started to rebound from the bottom of the COVID-19 pandemic recession. ⁶⁶ In this regard, the Commission noted that the steel producers had to react to the sudden and drastic reduction in demand that took place in 2020 because of the COVID-19 pandemic ⁶⁷. The Union industry idled some of its capacity to reduce as much as possible its fixed costs and to align the available capacity to the existing demand. Subsequently, later in 2020 and in early 2021, demand in some steel using sectors experienced a quick and sudden recovery, e.g. automotive ⁶⁸.

• (107) This situation has occurred also across several markets worldwide. In this regard, according to the OECD latest Report “Vast steelmaking capacity idled during the heights of the pandemic could not be brought online quickly enough to meet recovering steel demand and restocking, leading to the rapid rise in global steel prices” ⁶⁹.

• (108) In the same vein, S&P Platts Global noted “China aside, crude steel production has been slow to ramp up post lockdowns in key countries and regions. Europe's output fell 7,1 % on year in March, North America's by 8,9 % and India's by 8,6 %, according to the World Steel Association. In the US, mill capacity utilization rates are still only around 77 %, compared with 80 % in March last year before the pandemic took hold. Japan's METI forecasts the country's crude steel production at 23,24 million mt in Q2, down from 23,67 million mt in Q1” ⁷⁰. IHS Markit also noted that “furnace restarts and sharply increasing imports are starting to alleviate the supply crunch” ⁷¹.

• (109) To reach a conclusion, the Commission analysed the evidence available on the file regarding the resumption of operations in the production lines that had been idled by the Union industry during the pandemic.

• (110) The evidence in the file points to a steady increase of capacity available in the market from furnaces that were idled in 2020 ⁷². The Commission considered that this evidence shows that the Union industry is responding to the economic recovery in certain downstream sectors in 2021, which should result in it being able to supply larger volumes of steel in a shorter period, and hence restoring a balance in the market ⁷³.

• (111) The OECD Report further observed in this respect that “steel supply is widely expected to catch up with orders by the end of the first quarter of 2021” ⁷⁴. Similar forecasts are echoed by several specialised publications ⁷⁵.

• (112) The Commission therefore found that the problems of supply experienced after demand the rebounded were transitory and that the return to operation of idled facilities by the Union industry, which is underway, should thus help ensuring that normal pre-pandemic steel supply conditions are re-established in a reasonably short timeframe.

5.3.   Conclusions

• (113) A recent Commission Staff Working Document has confirmed the importance of having a strong and competitive steel sector in the Union. In this respect, it noted that the EU’s Industrial Strategy also recognised that “energy-intensive industries are indispensable to Europe’s economy and that other sectors rely on them” and that “the steel sector and other energy-intensive industries play a vital role in providing products and services to a wide-range of Europe’s industrial ecosystems” ⁷⁶.