Commission Implementing Regulation (EU) 2024/1782 of 24 June 2024 amending Implementing Regulation (EU) 2019/159, including the prolongation of the safeguard measure on imports of certain steel products

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 Articles 16, 19 and 20 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) By Commission Implementing Regulation (EU) 2019/159 (3) (‘the Definitive Safeguard Regulation’), the European Commission (‘the Commission’) imposed a definitive safeguard measure on certain steel products (‘the safeguard measure’), which consists of tariff-rate quotas (‘TRQs’) with respect to certain steel products (‘the product concerned’) covering 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, until 30 June 2021.

(2) By Commission Implementing Regulation (EU) 2021/1029 (4) (‘the First Prolongation Review Regulation’), the Commission concluded that the measure continued to be necessary to prevent or remedy serious injury, and that the Union industry was adjusting. It also concluded that the prolongation of measure was in the interest of the Union. Accordingly, it decided to prolong the safeguard measure until 30 June 2024.

(3) In recital (161) of the Definitive Safeguard Regulation, the Commission committed to “carry out an assessment of the situation on a regular basis and consider a review at least at the end of each year of imposition of measures”. In this spirit, the Commission conducted three functioning review investigations in 2019 (5), 2020 (6) and 2022 (7) respectively. In June 2023 (8) it also assessed, in a review investigation, whether an early termination of the measure was warranted (9).

(4) On 12 January 2024, the Commission received a substantiated request by fourteen EU Member States to examine, pursuant to Article 19 of Regulation (EU) 2015/478 of the European Parliament and of the Council (10) (‘EU Basic Safeguard Regulation’) and Article 16 of Regulation (EU) 2015/755, whether the existing safeguard measure should be prolonged. The Commission considered that the request contained sufficient evidence to initiate a prolongation review investigation.

(5) Accordingly, it published a Notice of Initiation (11) in the Official Journal of the European Union on 9 February 2024 concerning the possible extension of the safeguard measure. The Commission also included in the scope of the Notice a commitment to assess whether any technical adjustment to the functioning of the measure would be necessary in case it concluded that the safeguard measure should be prolonged.

(6) 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 (12). These data included, inter alia, the evolution of key economic and financial indicators for the product concerned during the period 2021-2023 (‘the period considered’), as well as evidence that the Union industry is adjusting.

(8) In terms of due process, the prolongation and functioning review investigation comprised a two-stage written procedure, under which interested parties, first, submitted their comments and, subsequently, were given the possibility to rebut the other parties’ submissions. Overall, the Commission received over 65 submissions and rebuttals from interested parties within the established deadlines. It also received more than 100 individual questionnaire replies from Union producers.

(9) In assessing whether the conditions to prolong the safeguard measure were met, the Commission analysed in the first place, whether the legal requirements to prolong a safeguard measure under EU and WTO rules, namely whether the measure is necessary to prevent serious injury (Section 3.2) and whether the Union industry is adjusting (Section 3.3), were satisfied. Second, it assessed whether such prolongation would be in line with the overall interest of the Union (Section 3.4). Finally, in its assessment, the Commission took due account of the observations and evidence received from interested parties, as well as any other available information in relation to the above elements. The Commission specifically addressed the relevant claims made by interested parties relative to prolongation in Section 4.

(10) Subsequently, the Commission assessed the need to make certain technical adjustments to the measure. This exercise followed the areas set out in the Notice of Initiation (see recital (7)), and also included a technical amendment which brings imports from Mozambique within the scope of the safeguard measure.

(11) According to Article 7.1 of the WTO Agreement on Safeguards and Article 19(2) of the EU Basic Safeguard Regulation the period of application of a safeguard measure may be extended provided that the safeguard measure continues to be necessary to prevent or remedy serious injury (‘necessity test’) and that there is evidence that the industry is adjusting. In addition, Article 22 of the EU Basic Safeguard Regulation determines that measure has to be in the interest of the Union.

(12) With regard to the first legal criterion, the Commission first examined the economic situation of the Union industry based on the questionnaire replies received (Section 3.2.1). Subsequently, the Commission assessed several key factors in order to determine how imports would likely evolve and how such evolution would affect Union producers in the absence of a safeguard (‘counterfactual analysis’, see Section 3.2.2.).

(13) 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 on injury indicators for the product concerned during the period considered. The Commission requested the known Union industry associations (EUROFER - European Steel Association, ESTA – European Steel Tube Association and CET-Comité Européen de la Tréfilerie) to distribute the questionnaires among their individual members. In addition, the Commission notified the known Union producers of the request to fill in questionnaires through the open file system (TRON). (13) The questionnaires were also made available on the website of the European Commission’s Directorate-General for Trade. (14) All the relevant instructions regarding questionnaires were also included in the Notice of Initiation.

(14) The Commission received more than 100 individual questionnaire replies from members of the three known Union industry associations as well as from other Union producers not members of any association. In addition, the three industry associations consolidated the data provided individually by their members.

(15) The Commission consolidated the data directly received from Union producers individually and crosschecked its accuracy with the dataset submitted by the Union industry associations in dedicated remote crosscheck sessions. The Commission then merged the association members’ replies with the replies received from producers not members of an association into a single consolidated dataset, which constituted the basis for the assessment of the economic situation of the Union industry.

(16) The evolution of the injury indicators during the period considered is shown in Tables 1 to 4 below:

(17) Over the period considered, the production volume of Union producers steadily decreased by -11 % in 2022 and by -14 % in 2023, when compared to 2021. Production capacity remained stable throughout the period and, thus, capacity utilisation followed a declining trend, reaching a very low level of 67 % in 2023. Lastly, stocks went down by -5 % in 2022 and by -3 % in 2023 as compared to the year 2021.

(18) Consumption in the Union market started decreasing in 2022 (-8 %), and this trend continued in 2023 (-14 %) when compared to the year 2021. The evolution of domestic sales volume by Union producers followed a very similar trend during the period considered (-8 % in 2022 and -13 % in 2023 respectively when compared to 2021). During the period considered, the Union industry increased its market share by 0,9 percentage points.

(19) Unit sales price increased by 35 % in 2022 and by 13 % in 2023 when compared to 2021. Cash flow increased by 113 % in 2022 and 57 % in 2023 when compared to the year 2021. Return on capital employed decreased slightly in 2022 and reached negative figures in 2023 (–2,2 %).

(20) The increase in prices and post-COVID recovery drive turned the Union industry into profit-making in 2021 (9.4 %) with profits slightly increasing in 2022 (10.3 %). In 2023 profitability sharply declined, reaching only a 0.3 % profit.

(21) Employment remained stable throughout the period considered, with a -1 % decline in 2023 when compared to 2021.

Conclusion

(22) Injury indicators showed that in 2021 the Union industry reached healthy levels of profitability, largely driven by high prices and a strong recovery in demand after COVID-19. However, as from the second half of 2022, the Union industry started to show signs of deterioration. Some important indicators such as production, sales and capacity utilisation showed a negative trend (16), and energy costs increased significantly (17). The deterioration of most economic indicators became more acute in 2023, with a decline in prices in a context of energy costs higher than past average levels, and a sharp decline in domestic sales and production in the Union market. As a result, the capacity utilisation reached the lowest level in the last decade and profitability went down drastically (reaching break-even level). Whilst the Union industry gained almost one percentage point of market share in 2023 when compared to 2021 at the expense of reducing profitability, this development should be seen in the context of persistent high import pressure (18), with imports reaching a higher market share during the period considered than those of previous periods (19), as it will be explained in Section 3.2.2. below.

(23) Based on the above indicators (Tables 1 to 4), the Commission concluded that the state of the Union industry had deteriorated between 2021 and 2023 and that it was in a fragile situation at the end of the period considered.

Additional analysis per product family

(24) Following the approach of the original investigation, (20) the Commission also assessed the evolution of injury indicators per product family. (21) The product families covered by the steel safeguard are flat products, long products and tubes.

(26) Based on the above indicators, the analysis per product family, corroborates the findings for the product concerned: the Union industry’s economic situation significantly worsened over the period considered and it is currently in a fragile situation. Even for the product family that showed a better performance as regards to profitability and market share developments (tubes), it nevertheless saw a deterioration of other key indicators such as capacity utilisation, levels of production and domestic sales over the period considered.

(27) The Commission assessed the evolution of imports, both in overall terms and relative to consumption, to determine the extent of pressure they may have exerted on the Union market in the period considered. In addition, the Commission assessed the evolution of TRQs used (See Section 3.2.2(b)).

(32) Second, the Commission assessed the most recent developments by looking into the TRQ use so far in the ongoing safeguard year (29) on a quarterly basis.

(34) In fact, a more detailed analysis of this data revealed that on average, during the three quarters assessed, 21 individual TRQs (whether country-specific or residual) were exhausted across several product categories. Their combined average volumes represented 32% (nearly two million tonnes per quarter) of the total average volume of imports in the same period.

(35) In terms of origins, the investigation also confirmed that a relevant number of these TRQs were exhausted by some of the largest steel exporting countries to the Union (30), which were exhausting from one to up to eight of their respective country-specific TRQs in a given quarter (31). Similar export patterns were already identified by the Commission in the First Prolongation Review Regulation. (32) In addition, the largest TRQ under the measure (the residual TRQ in category 1) was consistently exhausted almost immediately during the last three consecutive quarters, showing a continuous opportunistic behaviour from certain third countries. (33)

(36) The exhaustion of TRQs and the pace of such exhaustion in some cases are an indicator of those TRQs where it was more likely that additional volumes would have penetrated in the Union market absent the safeguard measure. In this regard, the safeguard measure was thus preventing additional import pressure from taking place. Therefore, in view of this data, the Commission concluded that these patterns of TRQ use, which took place to different extents across all product families, further confirmed the high level of import pressure existing on the Union steel market.

(38) After having identified the evolution of import volumes into the two largest steel importing markets (the Union and the USA) (36), the Commission analysed the export performance of the main steel supplying countries to the Union (37) to third countries (other than the EU and the USA).

(40) In view of these figures, the Commission concluded that in addition to having lower volumes of exports to the Union market (Table 9) and to the US market (Table 11) these countries were generally not able to replace their export volumes lost in the two largest importing markets by exporting them to other markets. Thus, in overall terms, the main steel exporting countries to the Union had lost substantial amounts of export volumes worldwide.

(41) The Commission further supplemented its own assessment with the analysis carried out by the OECD on a broader product scope. The OECD data confirmed the Commission’s own assessment that the volume of exports of the main steel exporting countries had overall consistently decreased over the period considered (39).

(42) The only notable exception from this otherwise consistent trend concerned the performance of Chinese exports, which surged in 2023, reaching around 95 million tonnes of exports. This represented an increase in exports of 24 million tonnes (+40%). (40) The exports increase by China, given its sheer magnitude, would mask the decrease of exports identified for virtually all other large exporting countries. For this reason, China is not included in the aggregated analysis of Table 12 above.

(43) In fact, the additional pressure exerted by Chinese exports substantially increased competition in other third country markets (41). This has reduced further the availability and size of export markets across the world (42) and contributed to the other countries’ reduction of exports.

(44) In this regard, OECD data revealed that despite most of the largest steel exporters reducing their exports, imports in many of the large import markets apart from the EU and the USA showed an upwards trend (43). This appears to be, in several of these markets at least (e.g. ASEAN (44), Korea, Türkiye (45), Brazil (46)), driven precisely by the surge of Chinese exports (47). Furthermore, the data from the first months of 2024 does not show signs that this export behaviour from China is reversing (48).

(45) In connection to this development of Chinese exports, the Commission also assessed the correlation and impact that such drastic increase of Chinese exports to third countries had on the Union market in terms of import flows.

(46) The Commission confirmed that imports from some of the origins where China had increased substantially its export presence in 2023 (including Vietnam, Indonesia, and Malaysia) (49) as well as other countries usually competing in such Asian markets with China (Japan (50)) had surged in the Union market in 2023 (51). Such increases were even more acute if compared to the period prior to the imposition of the safeguard measure. Hence, the data analysed strongly suggests that, in an overall context of weaker consumption, this strong and increasing import pressure from China in certain third markets pushed producers in some countries into finding other export markets for part of their production, amongst which, the Union market (52).

(48) Table 13 (54) above shows that, in overall terms, consumption in the domestic markets of the main steel exporters went down in 2022 (55) by 61 million tonnes (-4 %) with respect to 2021 (56). Out of this, Chinese consumption experienced the sharpest decline in overall volumes, with a reduction of -34 million tonnes. In 2023 the overall decrease compared to 2021 was -2 % (–29,2 million tonnes).

(49) The analysis in this Section confirmed that the main steel exporters are experiencing increasing difficulties to export part of their production to third markets (see also Section 3.2.2.(e) and (f) below). In addition, data showed that it would hardly have been possible to direct the lost export volumes to their own domestic markets in view of the consumption evolution. This resulted in a significant loss of volumes sold both domestically and in third countries for many of the largest steel suppliers to the Union.

(50) The evolution of global overcapacity was a key element in the Commission’s decision underpinning the imposition of a definitive safeguard measure in February 2019 (57) and its prolongation in June 2021 (58). In the current investigation, the Commission assessed the latest developments of steel overcapacity, relying on sources such as the OECD Steel Committee and the Global Forum on Steel Excess Capacity (GFSEC), which confirm, in their most recent reports, that overcapacity remains at very high levels (59).

(51) According to these sources, in 2023, global steelmaking capacity was estimated to have exceeded production by over 550 million metric tonnes. This is equivalent to the combined steel production of India, the Americas, EU, Japan, and Türkiye in 2023 (60), and it amounts to four times the consumption in the Union market in 2023.