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UK Steel presses govt to secure tariff-free access to EU markets

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Trade association warns over no-deal Brexit

Export costs could rise 5%, excluding tariffs: UK Steel

Seeks competitive electricity prices

London — UK Steel, the trade association for UK steelmakers and manufacturers, is urging the British government to secure tariff-free access to EU markets and more competitive electricity prices in the run-up to the UK's exit from the EU.

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This framework is necessary to ensure future investment by the steel industry and, potentially, the sector's survival, the association warned.

The UK steel industry will no longer be protected by the EU steel imports safeguards system in the event of a no-deal Brexit. This could significantly raise costs and impede UK steelmakers' ability to export to their natural market in the EU, unless tariff-free access is gained, UK Steel said in a paper sent to the new Secretary of State for Business, Energy and Industrial Strategy, Andrea Leadsom.

"Outside the EU, the UK would be subjected to the EU's safeguard measures which apply 25% tariffs to all steel imports above specified quota levels," UK Steel said in the paper.

It noted the cost of paying these tariffs once quotas are filled, which has occurred rapidly, would probably need to be borne by UK steelmakers.

"The UK government must therefore reach an agreement with the EU Commission to ensure tariff-free quotas in the event of a no-deal Brexit," it said. "In the longer term it must be a negotiating objective during the transition period to ensure the UK and EU have the ability to exempt each other from safeguarding measures on the grounds of close economic integration, as is currently the case for Norway and Iceland."

The EU introduced import safeguard quotas last year to ward off trade flow deviation, in response to the US' introduction in March 2018 of Section 232 import tariffs of around 25% on most steel imports. Steel imports into the EU still rose to nearly 30 million mt last year, accounting for nearly a quarter of total consumption in some quarters.

INCREASED COSTS

UK steel exports to the EU have recently run at 2.6 million mt/year, around a third of its total production. UK Steel estimates thatregardless of what tariffs system might be adopted, the extra checks and administration of exporting to the EU after Brexit would increase costs by 4%-5% -- an estimated GBP70 million ($84.91 million) cost to the industry each year.

The UK government must also take decisive action to align UK industrial electricity prices with those of the UK's key competitors inFrance and Germany, UK Steel said in the paper, listing this as the second of six key demands it is making of government. It also requests changes or cooperation in the areas of business rates, public procurement policies, carbon costs and R&D.

"The UK's electricity prices for large industrial energy users are higher than in any EU country," the paper said. "In 2018/19 UK steel producers paid 51% more than German producers and 110% more than French producers, even after the compensation and exemption schemesalready provided by the Government. This amounts to a GBP55 million/year additional expense for the UK steel sector."

Related story: No-deal Brexit could cut UK's CO₂ revenues by GBP555 million/year

ALUMINUM TRADE LINKS

The UK Aluminium Federation, Alfed, whose members have significant trading links with Europe too -- including for processing steps in the aluminum production chain -- also spoke out strongly this week over the dangers to the metals industry of a no-deal Brexit. European businesses are calling for this scenario to be averted immediately to avoid major disruption of supply chains across all industries and to protect jobs, it said.

"A no-deal Brexit will have disastrous consequences for businesses and citizens on both sides of the Channel," Alfed CEO Tom Jones said in a statement. "EU and UK companies have benefited from over 40 years of economic integration and 25 years of the single market. As a result, value chains have become so closely intertwined that a no-deal Brexit will lead to chaos.

"Delays at customs and disrupted supply of all goods ... will affect communities and incur significant costs for businesses and governments alike," he said. "In many areas, businesses do not yet know the trading conditions they will be operating in and smaller companies are already experiencing cash flow problems in the face of this uncertainty."

-- Diana Kinch, diana.kinch@spglobal.com

-- Edited by James Burgess, james.burgess@spglobal.com