Steel Pipe - Photo by Hebei

JAKARTA (TheInsiderStories) – Indonesia will lose its steel safeguard exclusion for both stainless steel hot and cold rolled sheets and strip from European Commission, said the organization early of this week.

Imports, in these categories, will be subject to the quota and tariff system. Tonnages, from this country, have been arriving in the European Union (EU) at a growing rate, since mid-2018, it said.

Hot rolled stainless steel, from Indonesia, increased to over 25 percent of the total imports into the EU, in the first quarter of 2019. China still accounts for more than half of the foreign sales into Europe. The safeguard measures have done little to stop the rise in stainless steel imports, from all countries, since they were introduced in July 2018.

The volume of Indonesian cold-rolled stainless steel, arriving into the EU, increased to approximately 8 percent of total imports, in the first three months of this year. However, the production of cold-rolled material, in the country, is limited. Taiwan remains the largest supplier, of cold-rolled sheets and strip, to Europe.

Crucially, imports of hot and cold rolled sheets and strip, from Indonesia in 2018, exceeded the World Trade Organisation’s 3 percent threshold, at which developing nation exemption is lost. This is the year that was used in the recent review by the Commission.

Prior to the announcement of the proposed changes to the safeguard measures, the European Steel Association (Eurofer) submitted an antidumping complaint to the Commission. This covered hot rolled stainless steel sheet and coil from Indonesia, China, and Taiwan.

This investigation, combined with the application of quotas for Indonesia, is expected to result in a reduction in imports of hot rolled stainless steel products, in the remainder of 2019. The proposed changes, if agreed by the member states, will come into effect on October 1, 2019.

The Commission reported that “imports from these countries [to the EU] are being made at dumped prices and therefore causing injury to European producers.” EU imports of the product from around the world were worth almost 900 million euros (US$1 billion) last year.

Dumping is a commercial practice consisting of selling products, goods or services at prices below their fair value. Brussels will now investigate such allegations on the basis of calculating the dumping margin for these products in relation to what is allowed under EU law, thus analyzing possible distortions in the prices of raw materials from Indonesia, China, and Taiwan.

“The complaint requests that the EU executive calculate the dumping margin in line with the EU new anti-dumping methodology,” it said.

In the absence of reliable data on domestic prices for Indonesia and Taiwan, the allegation of dumping is based on a comparison of a constructed normal value (manufacturing costs, selling, general and administrative costs – SG&A – and profit) with the export price (at ex-works level) of the product under investigation when sold for export to the Union, the commission said.

The Commission then has eight months to “gather evidence and decide whether to impose interim measures,” the press release statement said. Such investigations have been recurring as part of a European Commission action plan to combat unfair competition from dumped or subsidized products in the EU.

In this mandate, the EU executive applied trade defense measures to 52 steel products and is investigating seven others.

In the area of trade, the Commission also announced that it has imposed 8 to 18 percent countervailing duties on imports of subsidized biodiesel from Indonesia.

“The measure aims to restore a level playing field for EU biodiesel producers”, this after an in-depth Brussels investigation found that “Indonesian biodiesel producers benefit from subsidies, tax benefits and access to raw materials below market prices market,” the commission said in a statement.

In addition, the Commission also completed its review of the safeguard measures, which were introduced to prevent the redirection of material previously destined for the US. Brazil and India were removed from the list for stainless steel hot rolled sheets and strip and will become exempt from the quotas for this product.

Meanwhile, nickel prices have increased significantly, since early July. The threat of bringing forward a ban on ore exports from Indonesia, before the originally planned 2022 date, is the main cause of this dramatic rise. Further price advances could be recorded, if the date of the ban is confirmed.

Furthermore, rising raw material costs are expected to push global stainless steel transaction values upwards, in September and October. Ongoing trade disputes and anti-dumping measures, being implemented in nations on all continents, may restrict the availability of foreign material in many countries. Consequently, the traditional price downturn, usually observed in the final quarter, is expected to be muted, this year.

Steel tariffs introduced by the EU to protect domestic manufacturers against a surge in imports have worked well. The EU introduced 25 percent tariffs on 23 categories of steel products provisionally in July 2018 to offset the US’ increase in tariffs on global imports.

Nevertheless, the investigating body made some further proposals as the EU look to fine-tune the existing safeguards for the industry.

“The adjustments notified today to the World Trade Organization (WTO) aim, however, to make them more effective in full compliance with WTO rules,” it said.

This could be achieved by adjusting the functioning of the quota for some products, including hot-rolled flat steel and steel intended for the automotive sector; updating the list of exclusions for developing countries on the basis of more recent imports statistics; and  slowing down liberalization of imports by reducing the pace of progressive increase of the import quotas from 5 to 3 percent.

The Commission is seeking approval from the affected WTO members, as well the EU member states, in order to implement the changes by October 2019.

US$1=0.91 Euros

Written by Lexy Nantu, Email: lexy@theinsiderstories.com