Steelmakers call for ‘Green Deal’ to counter Chinese dumping

EU steelmakers fear growing imports of dumped Chinese “steel towers” used in the manufacturing of wind turbines. [Lagerwey]

European steelmakers were already reeling from dumped Chinese imports and US tariffs when the coronavirus pandemic hit this year. According to trade body Eurofer, it will take two years for the industry to recover, a process it says could be accelerated with a new “Green Deal for steel” and a carbon border levy.

European steelmakers have welcomed safeguard measures introduced at EU level against US steel tariffs and Chinese dumping, saying they prevented a “worst-case scenario” for the industry.

But these are “not sufficient to tackle the huge downturn in demand caused by the corona pandemic,” said Axel Eggert, secretary-general of Eurofer.

“We will not be able to recover this year – it will take really two years [as of 2021] to fully recover from that,” Eggert told a EURACTIV event last week.

The European steel industry was among the hardest-hit by the COVID-19 pandemic, which caused production to fall by 17% in the period of March to October, Eggert said.

28% of Europe’s steel workforce is currently on short-term contracts or temporary unemployment, he pointed out, calling on the European Commission to “review the safeguards and extend them beyond June next year” when they are due to expire.

The Commission prolonged the safeguard measures on 30 June, including country-specific import quotas aimed at regulating prices on the EU market, which threatened to collapse in the face of falling demand and Chinese dumping.

Marie-Pierre Vedrenne, a French MEP, said Europe had to remain open for trade but needs to respond more quickly and assertively to industrial dumping cases.

“Pursuing our strategic autonomy means putting an end to ‘naïve Europe’,” said Vedrenne, who cited Chinese steel overcapacity as an example where “Europe must defend its interests more vigorously.”

“The objective is not to launch a new trade war but to enable the EU to react to unilateral measures,” which are illegal under international trade rules, said Vedrenne, who authored a parliamentary report on the exercise of the Union’s rights for the enforcement of international trade rules, voted in July.

“It’s a matter of credibility” for Europe, the French lawmaker said, insisting that “deterrence or protection does not mean protectionism”.

EU extends anti-dumping duties on Chinese steel

The European Commission said on Wednesday (4 August) it had extended anti-dumping duties on imports of Chinese corrosion-resistant steel to stop producers avoiding existing duties by slightly modifying the material they export.

Wind industry sees ‘huge expansion’ in steel demand

But worries over Chinese dumping are far from over for steelmakers who now fear growing imports of “steel towers” used in the manufacturing of wind turbines.

The European Commission launched an anti-dumping investigation on 21 October following a complaint by the European Wind Tower Association, which says the volumes and low prices of steel towers have hit EU producers.

Eurofer says this undermines European steel producers who are being undercut by Chinese competitors at a time of booming demand from the wind industry.

Steel makes up 90% of the mass of a wind turbine and a “huge expansion” in demand is expected in the years ahead as the EU adopts tougher climate goals, said Giles Dickson, the CEO of WindEurope, a trade association.

“That means a huge increase in demand for steel,” Dickson said, adding that “the European wind industry needs a vibrant steel industry to meet that demand”.

Carbon border levy

According to Eurofer, Europe’s ability to build its own renewable energy facilities, such as wind turbines, requires fair trade also when it comes to environmental standards.

“It’s important that all steel imports have a similar carbon cost constraint as European producers have,” Eggert stressed, calling for “a Green Deal for steel” comprising up to 10 measures that Eurofer says are needed to promote the production of low-carbon steel.

Among those are a European carbon border tax aimed at restoring fair competition with foreign producers who do not have a similar carbon constraint.

“Yes, of course we support carbon border measures,” Eggert said, adding the levy needs to be “sufficiently high” to incentivise low-carbon steel production in foreign countries and prevent “carbon leakage” – a process whereby industries relocate to foreign countries where the carbon constraint is lower.

The European Commission has acknowledged steel industry’s exposure to environmental dumping.

“It is a fact that the steel industry is very much at the forefront of carbon leakage,” said Leopoldo Rubinacci, director at the Commission’s trade department. Rubinacci agreed with Eurofer in stressing that “the carbon content of imported steel from certain third countries is very significantly higher than EU-made steel.

“There is an issue there” that needs to be addressed, he said but added that the carbon border levy should be seen as a green policy instrument, not as a tool to protect the competitiveness of the European steel industry.

Indeed, in its public consultation, the European Commission made clear that the Carbon Border Adjustment Mechanism was primarily aimed at ensuring that “the price of imports reflects more accurately their carbon content”.

It also insisted that the border levy “would be an alternative” to free carbon allowances and other compensation given to steel producers and other heavy industries covered by the EU’s emissions trading scheme.

EU lists sectors eligible for carbon compensation perks

The European Commission reduced on Monday (21 September) the number of industrial sectors eligible for compensation against higher electricity costs caused by the EU carbon market, the Emissions Trading Scheme.

But Eurofer says it wants both – at least during the transition period during which free allowances under the ETS are being phased out.

“What we would like to see is that during a sufficient transition period until 2030, we have a combination of carbon border measures and the current carbon leakage measures,” Eggert said.

“We are exporting 20 million tonnes of steel. If we do not have any free allocation or compensation anymore – which today amounts to 75% of the real costs – then we will simply stop exporting,” he said.

Eurofer also warned that European steelmakers will continue to be “at a huge cost disadvantage” even after the border levy is introduced. This is because EU steelmakers would still face a carbon cost for every tonne of steel produced, whereas “exporters would have carbon costs only on the volumes that they export to the EU,” Eggert pointed out.

Rubinacci did not elaborate further on the carbon border tax, saying the European Commission was currently looking at ways of making the border levy WTO-compatible.

However, he did warn about the risk of overshooting when applying trade defence instruments, saying measures to protect steelmakers from unfair competition must not penalise downstream industries like the wind sector which needs access to steel at competitive prices.

“The last thing we want is that by protecting one industry we shoot a bullet in the foot of the downstream industries,” Rubinacci said.

According to Giles Dickson, 20% of wind turbines manufactured in Europe today use Chinese steel towers. If trade defence measures were applied, the cost of manufacturing those turbines would go up by 8 to 14%, Dickson said, warning that the wind industry – and EU consumers – would eventually carry the cost.

“Reciprocity in relations, yes. Pushing back against protectionist policies, yes,” he said. “But we need to be very careful how we handle the traditional trade defence measures,” he warned, calling for a holistic approach to trade defence instruments.

“To remain competitive, it’s important that we are able to import certain materials and components without certain tariffs or quotas being applied,” he stressed.

> Watch the full video of the EURACTIV virtual event below:

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