The real game changer

Released yesterday “The European Steel and Metals Action Plan” considers a new rule to restrict imports – “melted and poured”. Some market participants called it a game changer. I disagree, but feel free to correct me in the comments.

Let’s try to imagine how this might work. Any manufacturer from a third country sells products to the local market and for export. The manufacturer can buy slabs from Russia, which are subject to an import ban in the EU from 2028, produce a rolled product and sell it to the domestic market, receiving a good margin. But products of their own production, melted and poured in this country, with the appropriate certificate of origin can be exported to the EU. Export prices may be lower due to margins from buying cheap Russian slabs.

In other words, it is difficult to ensure that this rule works effectively. It works well for allowance processes but is unlikely to work as restrictive. In addition, no one can give correct estimates of the volumes of “indirect imports” to the EU. The effect of this measure may be close to zero.

I would like to highlight another thing from the Action Plan” that has received little attention. I am talking about the “threat of injury” rule, which will allow investigations to be initiated for cases where there is no damage, but there is a risk.

This is a real game changer.

Just imagine – any import can be considered a “risk of damage”, which can result in import duties. It’s like in the movie “Minority Report” (2002) with Tom Cruise, where people were convicted of crimes they didn’t commit based on a prediction that came true with 100% accuracy.
This is state control over any import based on a subjective determination of risk.

What risk criteria could there be? This measure could be aimed at price control. As soon as the Commission sees imports at what they consider low prices – please get an investigation. It will greatly discipline exporters. Therefore, probably, when this rule comes into force, exporters will be more careful with their offers. It also means that there will be no sharp changes in import flows, when suppliers from one country begin to dominate in one of the product groups.