Assofermet president: Distributors ensured supply continuity via imports at their own risk

Wednesday, 13 October 2021 16:37:06 (GMT+3)   |   Brescia

In the past year, the shortage of steel, together with that of other materials, has been one of the main obstacles to the recovery in Europe. The problem has been exacerbated by the safeguard measures on steel imports, which the European Union decided to extend for another three years starting from last July. Assofermet, the association representing Italian distributors of scrap, raw materials and steel products, has long underlined the need for changes to the EU safeguard. SteelOrbis discussed the issue with the association’s president Riccardo Benso.

What are the critical issues that Assofermet’s associates have been complaining most about in this period?

The problem of logistics is one of those most closely felt at the moment by the distribution sector. This problem is linked to a regulatory issue, because the logistical difficulties derive in large part from the trade protection measures which were too rigid in a period of shortage such as the one experienced by Europe after the first wave of the Covid-19 pandemic. Our associates are asking for a greater degree of order, for a review, and for a solution, so that the whole industry, from distributors to end-users, has the possibility of obtaining certain and continuous supplies, which this year have proved difficult. Finally, the issue of increasing energy prices is certainly also relevant, although it has an impact more on the upstream part of the industry, i.e., on production.

Regarding the EU safeguard, steel producers say that, since the measures came into force, the quotas have been exhausted only for some products and that therefore the measures have simply served to guarantee traditional import flows. What is your opinion on that?

First of all, I would like to underline that we at Assofermet were the first to foresee this issue. When no one talked about it, we immediately said that the quota system would hit the whole sector, creating problems. We predicted that the problem, rather than hitting distribution, would hit our customers, which became evident especially in the current quarter. We can reply to producers with figures: on October 1, the first day of the 90 days available in the October-December quota period, we ran out of quotas for ten products, for which we now find ourselves having to pay duties.

By July, the quotas had been consumed almost immediately for only a few products, such as Indian hot coils. What has changed now?

It should be considered that some positions were not cleared through customs last quarter, otherwise the duties would already have had to be paid at that time.

Has the use of imports remained convenient even considering the extra cost represented by duties?

I reject the theory according to which distribution would have had a speculative attitude linked to price factors. We bought from the import market in the second quarter, with deliveries occurring in this period - i.e., from the end of September onwards - at prices absolutely in line with domestic prices. The goal was not to save money. During the first half of this year, the European steel industry, for absolutely understandable reasons, was unable to cope with demand - an exceptional situation demonstrated by the trend of prices. The safeguard system has forced distribution in many cases to take a risk by relying on extra-European supplies, also for large volumes. This risk is proved by the fact that we will pay extra costs, as we already did for some products in the previous quarter. It is therefore evident that our aim was not to grab material at lower prices. Imports served to ensure that the supply chain did not stop and that therefore the impact on the GDP was not dramatic. Service centers and traders have played an extremely interesting role: they have been a buffer, a shock absorber, and at their own risk they gave continuity to supplies. Despite this, they paid extra costs and now no one can deny the fact that this system needs to be adjusted.

What changes do you propose?

I will not go into detail on how the EU safeguard should be modified. Some institutions have already received our proposals. However, we are absolutely open to a serious, responsible and extremely careful dialogue, which is not intended to harm the rightful interests of steel producers, who are called upon to make important efforts in the coming years. We are all aware of the fact that the European steel industry will need assistance, but the way to do it is not to focus attention only on the upstream sector. We must also think about guaranteeing the continuity of supplies and accept that, when material of European origin is not sufficient, the system must be given the possibility of procuring from other sources without generating extra costs that are self-damaging and are borne by end-users.

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