Metals & mining (AO) | EU Steel shield takes effect today

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Metals & mining (AO) | EU Steel shield takes effect today

cted to face a 50%

tariff, assuming quota exhaustion. Based on an average import price of around EUR500/t, these imports become structurally

uncompetitive against current European HRC prices of approximately EUR675/t.

The Commission reiterated that these new measures, which replace the previous safeguard regime, are expected to raise capacity

utilisation across the European steel industry to around 80%, compared with 67% currently (65% according to our estimates).

Given the still-weak demand environment, however, Eurofer believes utilisation is more likely to recover towards 73-75%.

Regardless of the exact outcome, the measures are clearly supportive for European steelmakers. In the absence of a meaningful

demand recovery, they should nevertheless redirect volumes towards domestic producers, improving operating leverage and

supporting profitability. Companies such as ArcelorMittal and Salzgitter have already indicated that they are preparing to restart

idled production capacity.

The measures should also provide further support to European steel prices. Prices have recently paused following customer

restocking ahead of the implementation date, while buyers have adopted a wait-and-see approach heading into the seasonally

weaker summer period. We expect inventories to be gradually worked down during Q3 before a new restocking cycle emerges

towards the end of the quarter, supporting HRC prices back towards EUR700-750/t.

Half of quotas allocated exclusively to free-trade-agreement (FTA) partners

The European Commission announced yesterday that half of the available quotas will be reserved for countries benefiting from a