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October 1, 2021 – End of EU-U.S. punitive aluminum tariffs only on condition that Chinese aluminum products are subject to strict import controls? European Commission (EC), however, wants to suspend anti-dumping tariffs on Chinese aluminium flat-rolled. EU steel producers raise steel prices further due to energy crisis. Will China follow? Chinese steel demand up more than 7 percentage points in September.

Stainless Espresso: Deal on aluminum tariffs must include protection from China
Stainless Espresso: Deal on aluminum tariffs must include protection from China

Aluminum tariffs: agreement must include protection from China

EU and U.S. negotiate an end to reciprocal punitive tariffs on aluminum. An agreement between the European Union and the United States can only be reached if strict import controls are maintained against Chinese flat products. In addition, aluminum producers on both sides of the Atlantic are calling for an intensified fight against Chinese industrial subsidies.

EU to suspend tariffs on aluminum products from China

As of Oct. 12, 2021, the European Commission plans to suspend the anti-dumping investigation (AD668) on Chinese flat-rolled aluminum products for nine months. Already, thousands of tons of aluminum are said to have been pre-ordered by European importers in China and will lead to a flood of cheap imports, according to EU producers. In addition, lobby groups in Europe are working to have another EU anti-dumping measure (AD664) suspended on aluminum extrusions from China.

EU-U.S. tariff negotiations

The current EU measures could lead to a heavy burden in the ongoing negotiations. That’s because the Biden administration’s new China trade strategy is scheduled to be unveiled by U.S. Trade Representative Katherine Tai on Monday. Tai is already talking about major challenges with regard to trade with China and has also already asked Congress for new tools to counter the strong and market-distorting Chinese industrial subsidies.

There is also concern among manufacturers’ associations that steel and aluminum pre-products could be imported into the United States through Europe that originated in Chinese production and were only rolled out or pressed in the EU, for example.

Tariff harmonization instead of import quotas

The aluminum associations also showed agreement that instead of a quota on imports, they would prefer to see tariffs in the European Union and the United States aligned over several years.

EU steel mills concerned about rising energy prices in winter

Prices for electricity and natural gas have risen worldwide. European steelmakers are voicing increasing concern about this development. Energy-intensive production with Electric Arc Furnaces (EAFs) is particularly affected. The first producers have already had to raise prices by 50 to 100 euros per ton. For some European steel producers, energy prices have already more than quadrupled.

Comparable situation in China

The situation in China is similar. It is estimated that due to the statutory electricity price caps, many coal-fired power plants are operating at a loss, i.e. in the red. Increased coal prices, especially due to the import ban on Australian coal, make it unattractive for many Chinese operators to increase energy production. In turn, electricity price caps are discouraging the willingness to save on electricity. So in China, the price cap could be lifted. This should also lead to a further increase in steel prices there.

Chinese purchasing managers’ index up in September

The Chinese steel purchasing managers’ index showed a positive trend in September and increased. The same can be observed for steel orders (+7.4 percentage points) and raw material demand (+3.9 percentage points). Currently, China is in the holiday period around National Day from October 1 to 7. From October 8, the market there should start to move up again.

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