EU’s safeguard probe unnerves steelmakers

Another tariff risk is haunting the Korean steel industry as the European Union (EU) has begun a safeguard investigation into imports of steel products.

Given that the EU is a major export market for Korean steelmakers — as big as the United States — a possible import restriction could spell trouble for local steelmakers who currently face a quota on its steel exports to the U.S.

Last week, the EU announced it opened a safeguard investigation into 26 steel products imported into the EU that range from stainless hot-rolled and cold-rolled sheets to rebars and railway material.

“The information currently available to the European Commission (EC) has revealed that imports of certain steel products have recently increased sharply, showing that there is sufficient evidence that these trends in imports appear to call for safeguard measures,” the European Commission said in a statement.

The probe may lead the EU to come up with options such as specific tariffs or quotas on certain countries. The EC will have up to nine months to reach a decision.

According to the Korea International Trade Association (KITA), Wednesday, Korea was the fourth-largest exporter of the 26 products of concern to the EU among countries outside the trading bloc, with a share of 11.3 percent worth 2.39 billion euros (3.1 trillion won).

India was the EU’s largest steel supplier of the 26 products at 13.5 percent, followed by China’s 13.1 percent and Turkey’s 12.4 percent.

Korea’s top steel export to the EU is a steel sheet. In 2017, local steelmakers shipped 2.9 million tons of steel sheets to the EU of their total steel export of 3.3 million tons. In that respect, if a safeguard measure goes into effect, it would be another brutal blow to the local steel industry that needs to discover another export destination following the U.S. import quota.

Although Korea evaded a 25 percent tariff on its steel exports to the U.S. last month, it had to accept quotas on steel exports equal to 70 percent of its average annual shipments to the U.S. between 2015 and 2017.

The local steel industry keeps close tabs on the EU investigation.

“While Korea’s steel exports to the U.S. will diminish due to the import quota, the EU’s safeguard probe is another challenge ahead. The industry is required to aggressively respond to the situation,” said a steel industry official.

Remaining cautious about the investigation, the Ministry of Trade, Industry and Energy plans to explain its position by attending hearings and submitting questionnaires to the EC.