UK stockists support mill efforts to extend steel safeguards

NASS, the UK steel distributors and service centers association, is calling on the UK government to extend steel safeguards beyond their current June 2021 expiry date. The move comes just a week after UK steel producers asked for the same.

The UK has had the import safeguards in place as part of the EU since 2018 and then transitioned them into UK law in January 2021 to avoid trade diversions.

According to a NASS spokesman the UK safeguard measures are essential to protect and stabilize the UK steel market, particularly while the US, EU, and other countries maintain their own tariffs and import quotas.

"Without these measures the UK would be exposed to trade diversion and potentially uncontrolled import surges with the resulting detrimental impact on market prices, which would of course have a very likely negative impact of the value of steel sitting in stock," the NASS spokesman said.

The UK government is expected to determine whether to maintain the safeguard by June, but it is understood that a date has not been decided yet. For the UK Safeguards, the Trade Remedies Investigations Directorate (TRID) will be making an independent determination, expected possibly very soon. Then this recommendation goes to the Department for International Trade and the Trade Secretary will accept or reject it. For the EU Safeguards the decision is made by the European Commission and will likely be finalized after the UK, as it is expected in July. TRID did not comment on this when reached by Platts.

At the moment steel prices in Europe as well as in UK are at their highest historical level. The Platts North European HRC EXW Ruhr price has increased since the end of 2020 by Eur385/mt to Eur1050/mt, while HRC DDP West Midlands UK moved from Eur689.63/mt to Eur1044/mt, with steel prices that recovered in the UK and globally from unsustainably low levels.

"UK service centers have had a successful and profitable twelve months as the UK economy has recovered from the [COVID-19] pandemic, and UK service centers have played an important role in supplying processed steel to support this. Service center stocks are at reasonable levels and imports continue to complement UK manufactured steel products in servicing key UK steel-consuming markets such as construction, automotive and engineering," the NASS spokesman said.

According to the Bank of England in its latest report: The number of new COVID-19 cases has fallen markedly with more people vaccinated and restrictions on activity eased; the UK GDP is expected to rise sharply in Q2 by around 4.25%, although the GDP would still be around 5% below its level in Q4 2019; near‑term growth will be supported by policy measures, including fiscal measures announced in the March budget, and the 2021 economy is expected to expand by 7.25% overall with extra government spending that would represent the strongest expansion since 1949, when official records began.

According to NASS, there also have been some supply issues linked to specific events, such as the import confusion surrounding Brexit and problems associated with the Greensill insolvency that are impacting supply from Liberty Steel in the UK.

"The quotas reflected in the UK safeguarding measures reflect import levels pre-COVID, with additional headroom built in. UK service centers can source material from UK manufacturers of steel and from steel mills both inside and outside of the EU to meet their needs," said the NASS spokesman. "The quotas protect the UK market from being distorted by import surges, which is ultimately good for all parts of the UK supply chain, including the steel service center sector, UK steel mills and UK steel consumers."

Some steel products were very close to extinguishing all their allocated quota volume very quickly such as large welded tubes, hollow sections and organic coated steel.

Last week, as reported, UK Steel, the association of UK steel producers, called for keeping the import quotas in place because of the continued problems of global overcapacity, and the increased use of import restrictions around the world. They expect it is almost certain the increase will resume if the UK unilaterally removes measures. Also the producer association underscored that measures allow for tariff-free imports equivalent to 111% of historic levels, with further relaxations every year, which would leave enough room to import some products if needed.

NASS has a wide range of members, from large steel service centers supplying markets such as wind tower producers and yellow goods makers, to members also involved in all the key rail projects including HS2 – the UK high-speed railway system – and the booming UK construction market. Other members are embedded with the automotive sector supplying critical parts on a just-in-time basis. Members also act as steel stockists holding large and small inventories.

According to World Steel Association, in the last available data, the UK produced 7.2 million mt of crude steel in 2019, exported 4.22 million mt of semi-finished and finished steel products while importing 7.33 million mt. Apparent consumption of finished steel was 10.2 million mt.