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European definitive steel safeguards get green light from European Member States

London — The European Member States, as widely expected, have backed the European Commission's plan to impose definitive safeguard measures on imports of steel, the Commission stated on Wednesday.

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The Commission will now finalize the procedure so that the definitive measures can be implemented at the beginning of February 2019.

The European Member of States made no changes to the previous provisional measures sent to the World Trade Organization. The EC notified the WTO of its plan before Christmas and made it publicly available on January 4.

Provisional safeguard measures have been in place since July 2018 and will remain until February 4, 2019. The new measures will then be implemented and remain in place until July 2021. "These measures are intended to shield European steel producers following the trade diversion of steel into the EU market from other producers around the world as a result of the unilateral US measures restricting imports of steel to the American market," the EC said in a statement. "The definitive measures aim to preserve traditional trade flows."

The proposal is to impose country-specific quotas for the biggest sources of imports, along with quarterly global quotas for each product for all other countries. The exception is for hot-rolled coil, which received a quarterly global quota. When a country with "significant supplying interest" has exhausted its specific tariff-rate quota, it would be allowed to have access to the quarterly global tariff-rate quota for the specific steel product, which would apply to all other countries, according to the EC.

The proposal has been widely criticized by buyers and partially by European steel producers.

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The main criticism has come from the steel buyers of longs and flat products as they fear that steel prices will surge while the market will tighten, harming the European consumers and Europe's supply chain competitiveness.

As soon as the announcement was made, the European Automobile Manufacturers' Association (ACEA) sent a press release saying it was "extremely disappointed."

"These measures do not take into account the needs of downstream users of steel, such as the automotive sector," ACEA said.

The association said it would be sourcing 94% of its steel and fears that European steel prices could increase and that European mills would not be able to fulfil orders with a restricted import system.

"The cost of automotive grades of steel has been consistently high for several years and delivery lead times have lengthened considerably. Meanwhile, through consolidation in the European steel industry, the pool of EU producers is getting smaller and the scarce capacity for automotive steel is getting ever tighter," ACEA said.

Eurofer, the European steel producers' association, welcomed the vote while noting that "there are elements that are not ideal" such as the enlarged quota, the fact that countries with specific quotas can consume the residual part, and the fact that some developing countries are exempt even though they exceed the 3% threshold in some products.

-- Annalisa Villa, annalisa.villa@spglobal.com

-- Laura Varriale, laura.varriale@spglobal.com

-- Edited by Jennifer Pedrick, newsdesk@spglobal.com