UK tightens steel import safeguards regime following industry pressure

The UK government tightened a proposed regulation on steel imports safeguards just hours before it was due to come into effect July 1, after pressure from UK steelmakers put up a convincing case that a proposed liberalization would cost UK mills market share.

With the regime now being introduced, only four product categories will be exempt from tariff rate quotas upon entry to the UK, compared to nine product categories which were to have been liberalized under a final recommendation on the safeguards regime issued June 11 by the UK's Trade Remedies Authority, an arms-length department sponsored by the Department of International Trade.

Import controls will now be extended on 15 product categories. Ten categories will have controls extended for three years, and five categories will have controls extended for one year.

Tariff rate quotas will therefore continue to apply to imports into the UK of various categories of the following products: tin mill products; non-alloy and other alloy quarto plates; non-alloy and other alloy merchant bars and light sections; non-alloy and other alloy wire rod; and angles, shapes and sections of iron or non-alloy steel.

In the absence of a formal publication on the categories of products whose trade is now to be liberalized, S&P Global Platts understands these include stainless wire rod used in industries including automotive and oil/gas pipelines. Some types of hot rolled and cold rolled sheet and strips were also not included in the list of products for which continuing tariff rate quote treatment has already been confirmed.

According to informed sources, the government brought forward secondary legislation enabling the UK Secretary of State for International Trade, Liz Truss, to alter the TRA's final recommendation immediately before the previous regime was due to expire on July 1. Without ministerial approval of the recommendation, the UK would have been left without any steel import safeguards from the early hours of July 1.

Countries signatory to specific trade agreements with the UK and some developing countries will either be exempt or have a limited exclusion from the new import quota system.

EU maintaining protection

Keeping a high level of protection has become a priority after the European Commission confirmed last week it would renew its steel import safeguards scheme for a further three years from July 1 with a 3% annual quota liberalization, a tightening from the 5% liberalization in force since 2018. The EU adopted safeguards in July 2018 after the US imposed Section 232 import tariffs on steel and aluminum in March of that year. The UK has undertaken its own review of the EU steel safeguards it inherited when it left the Customs Union.

"The Government has accepted the TRA's recommendation to maintain the safeguard on 10 steel product categories for a further three years," Truss said in a statement published on the UK Parliament website. "The Government is at the same time making new regulations to further defend the UK steel industry by extending the safeguard by public notice. The public notice will set out the details of the temporary extension on a further five of the 19 steel products for one year. Imports outside the quotas will face a tariff of 25%."

Truss said the government had taken "decisive action" and "will always do everything in its power to defend the UK industry and jobs and to allow our world-leading manufacturers to compete on a level playing field. Current disruption to industry caused by the COVID-19 pandemic, threats of dumping and unfair subsidies, and continued trade restrictions in third countries all put UK steel products at an unacceptable disadvantage."

A spokesperson for UK Steel, a lobby group representing UK steelmakers, said it had highlighted to the government "flaws" in the TRA's June 11 proposal that could have led to "a decrease in market share on the categories to be liberalized and a decline in profitability" for the UK steel sector overall.

A greater liberalization could cost the sector GBP100 million ($138 million) in value and 2,500 jobs, about 8% of the workforce, the spokesperson said.

The UK produces around 7 million mt/year of crude steel, around 70% of its annual requirement of 10.2 million mt, according to UK Steel.

Kwasi Kwarteng, UK secretary of state for business, energy and industrial strategy, said on a BBC Radio 4 interview July 1 that it was important for the UK steel industry to have "national resilience," indicating it could be difficult to open the sector up completely to free trade.

GMB, a trade union representing UK steelworkers, called the emergency legislation "a victory for common sense."

However, "today's announcement is a temporary reprieve, and important questions remain unanswered," said Ross Murdoch, GMB national officer in a July 1 statement. "We urgently need a stronger trade defence policy and procurement decisions that back our steel industry."

The UK government will now also review the Trade Remedies Framework -- introduced in 2018 -- as an urgent priority, to ensure it is "up-to-date, champions WTO rules and is fit for purpose in the post-COVID world," the trade secretary said in her statement.