(1)

By Implementing Regulation (EU) 2019/159 (3) (‘the Definitive Regulation’), the European Commission (‘the Commission’) imposed a definitive safeguard measure on certain steel imports (‘the measure’). The measure consists of tariff-rate quotas (‘TRQs’) with respect to certain steel products (‘the product concerned’), covering 26 steel product categories. The TRQs are set at levels preserving traditional trade flows on a per-product-category basis. Where the relevant TRQ is exhausted, an out-of-quota duty of 25 % is levied. The safeguard measure was imposed for an initial period of three years, until 30 June 2021.

(2)

By Commission Implementing Regulation (EU) 2021/1029 (4) (‘the First Prolongation Review Regulation’), the Commission concluded that the measure continued to be necessary to prevent or remedy serious injury, and that the Union industry was adjusting. It also concluded that the prolongation of the measure was in the interest of the Union. Accordingly, it decided to prolong the safeguard measure until 30 June 2024.

(3)

By Commission Implementing Regulation (EU) 2024/1782 (5) (‘the Second Prolongation Review Regulation’), the Commission concluded that the prolongation of the measure was necessary to prevent or remedy serious injury, and that such prolongation was in the interest of the Union. It also concluded that the industry was adjusting. Accordingly, it decided to prolong the safeguard measure until 30 June 2026.

(4)

In recital (161) of the Definitive Regulation, the Commission committed to “carry out an assessment of the situation on a regular basis and consider a review at least at the end of each year of imposition of measures”. In this spirit, the Commission conducted three functioning review investigations in 2019 (6), 2020 (7) and 2022 (8) respectively. In June 2023 (9) it also assessed, in a review investigation, whether an early termination of the measure was warranted (10).

(5)

On 29 November 2024, the Commission received a substantiated request by thirteen Member States to initiate a functioning review pursuant to Article 20 of Regulation (EU) 2015/478 of the European Parliament and of the Council (11) (‘EU Basic Safeguard Regulation’) and Article 16 of Regulation (EU) 2015/755 of the European Parliament and of the Council (12). The request contained evidence of a change of circumstances since the last review of the measure. In particular, the request contained information regarding the contraction in Union demand for steel, resulting in widening gaps with the current level of duty-free quota volumes as these have been continuously liberalised. Moreover, China’s steel export surges to major regions have pushed exports from other markets to the EU.

(6)

According to the request, these recent market developments called for a reassessment of the allocation and management of the TRQs. In view of Article 20 of the EU Basic Safeguard Regulation and Article 8 of the Definitive Regulation, the Commission considered that the information provided, including the sources and supporting evidence, constitute a sufficient basis to initiate an investigation.

(7)

Accordingly, the Commission initiated a functioning review investigation by means of a Notice of Initiation (13) (‘the Notice’) published in the Official Journal of the European Union on 17 December 2024. The Commission invited interested parties to make their views known and submit evidence concerning, in particular, the following grounds of review:

(8)

The Notice invited interested parties to provide evidence and data to determine whether it would be justified to adjust the functioning of the safeguard measure in order to keep the operation of the safeguard adapted to market evolution and in line with the interest of all stakeholders.

(9)

The Commission sought specific information from Union producers and users via questionnaires, which were made available to interested parties on the public file (‘TRON’) (14) as well as on the European Commission’s (DG TRADE) website (15).

(10)

As in previous review investigations, the Commission devised a two-stage written procedure. First, parties had the possibility to send their submissions and where applicable, a reply to the questionnaires by 10 January 2025. The Commission made this information available on the public file and interested parties had 14 days to make comments (rebuttals phase). The Commission subsequently made the rebuttals available in TRON.

(11)

The Commission received 12 questionnaire replies, 40 submissions and 22 rebuttals.

(12)

Multiple interested parties commented that neither the request from Member States for a functioning review, nor the underlying evidence was made immediately available to interested parties. An argument has been made that this has unduly restricted interested parties’ opportunity to rebut the evidence, and significantly impacted the ability of interested parties to provide meaningful contributions.

(13)

Some interested parties argued that there is no legal basis for a functioning review, and others argued that conducting a functioning review based on changed circumstances is inconsistent with WTO law. One interested party mentioned that conducting a reassessment of the TRQs within six months from the previous review amounts to excessive frequency of reviewing the measure.

(14)

In the Notice of Initiation, parties were specifically invited to share their views and submit evidence concerning five grounds of review (see recital 7 above), rather than commenting on the initial request from Member States. Following a written request for information received on 3 January 2025 (16), the Commission has made the relevant documents available for inspection on TRON on 7 January 2025, as provided for in Article 5(4) of Regulation (EU) 2015/478. (17) Additionally, parties have had the chance to respond to the evidence brought forward by the Union industry in their rebuttals, for which they have received 14 days. Some interested parties requested an extension, and in two cases an extension of 10 days was given. As such, interested parties have been afforded ample opportunity to provide their comments.

(15)

As per the Notice of Initiation, the legal basis for the review is Article 20 of Regulation (EU) 2015/478 of the European Parliament and of the Council, Article 16 of Regulation (EU) 2015/755 and Article 8 of Commission Implementing Regulation (EU) 2019/159. The latter explicitly provides that the Commission may review the measure in case of changed circumstances. The WTO Safeguard Agreement does not preclude such (optional) reviews besides the mandatory mid-term review.

(16)

In response to the claim that conducting a reassessment of the TRQs within six months of the previous review constitutes excessive frequency, said Article 8 does not impose any time-based restrictions on when a review may be initiated. Since the purpose of the functioning review is to keep the operation of the safeguard adapted to market evolution and in line with the interests of all stakeholders, there is no time bar as to when such a review is warranted.

(17)

Therefore, the timing of the current functioning review is fully consistent with the legal framework of the EU and international obligations under WTO law.

(18)

In identifying the need and extent of possible adjustments, the Commission also assessed the evolution, since the last review investigation, of two key elements: overcapacity and trade measures in third countries.

(19)

The situation of overcapacity continued deteriorating in the second half of 2024 and early 2025. By the end of 2024, it was estimated that the global installed capacity reached 2 482 million tonnes, representing an increase of more than 50 million tonnes compared to 2023 (18). This increase was concentrated in India, ASEAN and Middle East. Such relevant increase in capacity took place in a context of weakening global steel demand. In 2024, global steel demand went down by 1 % (-18 million tonnes) compared to 2023 (19), therefore widening the gap with installed capacity further.

(20)

Going forward, significant additional capacity is expected to come on stream, with around 145 million tonnes either as ongoing or planned projects (20), while demand in 2025 is only expected to grow moderately, reaching 2023 levels, i.e. still outpaced by the sustained growth in capacity. As a result, the level of overcapacity is set to remain at very high levels. Estimates indicate that the gap between installed capacity and production may reach 630 million tonnes in 2026 (21).

(21)

The concerns about the deteriorating situation of overcapacity and its negative impact on steelmakers were clearly reflected in the Global Steel Forum's Ministerial Statement of 8 October 2024 (22). The statement recalled the severe negative impact that overcapacity had on jobs, production, prices, market share, revenue and profitability of the industry, and recognised the importance to take concrete actions to address overcapacity.

(22)

In this context of growing overcapacity, the Commission confirmed that Chinese steel exports continued to increase, reaching 110 million tonnes, close to record levels (23). Since the market outlook indicates a further reduction in domestic demand in China in 2025 (24), it is to be expected that the trend of high level of exports that started in 2023 and peaked in 2024, will continue.

(23)

It is thus reasonable to expect that Chinese exports will continue exerting very strong pressure, both in terms of volumes and prices, across third country markets (25), thus impacting negatively competitors in those markets directly, e.g. by displacing them or by forcing them to compete against lower prices. In addition, since steelmakers in certain third countries are seeing a further gap between demand and capacity growth in their domestic markets, they would be pushed into seeking alternative outlets for their excess capacity. As a result, additional import pressure into the Union market from these origins would take place. This would add to the overall increasing level of imports’ market share seen in 2024 in the Union market.

(24)

In this regard, the Commission further confirmed that since the last investigation, the import presence in the Union market of some origins where relevant capacity expansions continue (notably ASEAN, India, China, Middle East and North Africa), remains high and in some cases, has increased even further. This data showed a correlation between capacity developments and level of import pressure from those origins on the Union market (26).

(25)

Therefore, the Commission confirmed that the situation and outlook of global overcapacity continue to be very worrying and expected it to lead, in the absence of adjustments, to further increased import pressure in the Union, due to increasing capacity, demand evolution and persistent pressure on third country markets.

(26)

The Commission also assessed the latest developments concerning trade measures on steel imports adopted by third countries. The Commission confirmed that the number of trade defence measures in place at the end of 2024 exceeded those in place the year before.

(27)

Beyond trade defence measures, the Commission observed that the tariff measures in place had increased since the previous review investigation. These measures included, amongst others, increased tariffs in Türkiye (27), Colombia (28) and Canada (29). In addition to safeguard measures on certain steel products in South Africa (30), and the initiation of a safeguard investigation on certain flat steel products by India. (31)

(28)

Furthermore, on 10 February 2025, the US announced the termination of previous country exclusions, product exemptions as well as of specific TRQ or quota regimes under the Section 232 measure (32). As a result of this change to the measure, all origins would in principle be subject to a 25 % duty. Given the size of the US market and the level of duty, the Commission considers that this development (33), together with the additional tariff measures implemented by other countries, would create further tensions on the steel markets, thus increasing the risks of additional trade diversion into the Union.

(29)

In order to assess the economic situation of the Union steel industry, the Commission issued questionnaires to the known Union steel producers to collect information on certain injury indicators for the product concerned during the period considered. The questionnaires were also made available on the website of the European Commission’s Directorate-General for Trade. (34) All the relevant instructions regarding questionnaires were also included in the Notice of Initiation.

(30)

The Commission received questionnaire replies from members of the three known Union industry associations as well as from other Union producers not members of any association.

(31)

The Commission consolidated the data directly received from Union producers individually and crosschecked its accuracy with the dataset submitted by the Union industry associations in dedicated remote crosscheck sessions. The Commission then merged the association members’ replies with the replies received from producers not members of an association into a single consolidated dataset, which constituted the basis for the assessment of the economic situation of the Union industry.

(32)

The evolution of the injury indicators between years 2021 and 2024 is shown in Tables 1 to 3 below:

(33)

Over the period considered, the production volume of Union producers steadily decreased by -11 % in 2022, by -13 % in 2023 and by –18 % in 2024, when compared to 2021. Capacity utilisation followed a declining trend, reaching a very low level of 67 % in 2023 and remained at the same level in 2024, despite a decrease in capacity of 5 % in 2024.

(34)

Consumption in the Union market started decreasing in 2022 (-8 %), this trend continued in 2023 (-14 %) and remained at the same level in 2024 (–14 %) when compared to the year 2021. The evolution of domestic sales volume by Union producers followed a very similar trend during the period considered (-8 % in 2022, -13 % in 2023 and -14 % in 2024 when compared to 2021). During the period considered, the Union industry’s market share decreased by 0,7 %.

(35)

Unit sales prices increased in 2022 by 34 %, increased in 2023 by 12 % and in 2024 by 1 % when compared to 2021.

(36)

The increase in prices and post-COVID recovery drive turned the Union industry into profit-making in 2021 (9,1 %) with profits slightly increasing in 2022 (9,9 %). In 2023 profitability sharply declined, reaching only a 0,5 % profit and the trend continued in 2024 turning into loss-making (–0,4 %).

(37)

The negative trend observed in 2023 continued into 2024 with injury indicators further deteriorating or remaining at the lower levels of 2023.

(38)

Following the approach of the original investigation, (36) the Commission also assessed the evolution of injury indicators per product family. (37) The product families covered by the steel safeguard are flat products, long products and tubes.

(39)

Tables 4 to 6 below show the evolution of the injury indicators per product family:

Table 4

Production, production capacity and capacity utilisation

Table 5

Union consumption, domestic sales and market share

Table 6

Unit sales price and profitability

(40)

Based on the above indicators, the analysis per product family, corroborates the findings for the product concerned: the Union industry’s economic situation significantly worsened over the period considered and it is currently in a fragile situation. Even the product family tubes, which showed a better performance as regards profitability and market share developments, nevertheless saw a deterioration of other key indicators such as capacity utilisation, levels of production and domestic sales over the period considered.

(41)

The Commission assessed the evolution of imports, both in overall terms and relative to consumption, to determine the extent of pressure they may have exerted on the Union market in the period considered.

(42)

Imports into the Union in 2024 decreased by -11 % as compared to 2021, when they had reached the second highest level since 2013 (38). Yet, there was an absolute increase of 7 % between 2023 and 2024.

Table 7

Evolution of imports in 000 tonnes

(43)

The analysis at the level of product families, including a relative increase of import pressure gaining market share, confirmed this overall trend as shown in Table 8 below.

Table 8

Market share of imports per product family

(44)

The Commission received 12 questionnaire replies, 40 submissions and 22 rebuttals from interested parties, including Union steel producers, Union steel users and importers, as well as their respective associations, exporting producers and third country governments. This section provides an overview of the comments from interested parties is given, organised in 8 sub-sections. The comments are grouped by nature and content.

(45)

The Union industry asserted that the existing TRQs no longer align with the steel demand within the EU. The industry argued that quotas have been liberalised by more than 15 percentage points compared to 2019. This, along with the recent decline in steel demand, has created a widening gap between the current duty-free quota volumes and actual demand. As a result, the Union industry has requested an adjustment of the TRQs to better reflect the present demand, asking the Commission to reduce TRQ levels by 25 % to 50 % on average.

(46)

Certain exporting countries and users argued that although overall demand may seem to have decreased, certain sectors exhibit growing demand for specific steel products. According to these parties, tightening the TRQs in these categories would negatively impact the competitiveness of downstream EU industries. By keeping quotas more flexible, these industries can better meet their material needs, which EU producers may not be able to supply in sufficient quantities. These parties argued that a one-size-fits-all approach to TRQs fails to reflect the diverse demand across different sectors within the EU.

(47)

Additionally, several exporting producers referenced a recent WorldSteel report that predicts global steel demand will increase in 2025. (39) They argue that this contradicts the industry's forecasts, casting doubt on the reliability of the industry's evidence.

(48)

The Union industry asserted that their economic situation has deteriorated significantly, notably in the latest quarters. They argue that this is visible in terms of production, sales, and profitability, while imports retain high or increasing market shares and undercut EU producers’ prices.

(49)

Certain exporting countries and users argued that external factors such as high energy costs and geopolitical issues significantly influenced the steel market. These factors, rather than pressure of imports, may account for much of the difficulties experienced by the EU steel industry.

(50)

The Union industry requested to eliminate the quarterly carry-over of unused quotas to the next quarter, or alternatively, to cap the carry-over. Several exporting countries and users requested to keep the carry-over mechanism, arguing that this is a core element of the TRQ structure that provides predictability and as such does not fall under the scope of the review.

(51)

Certain exporting countries and users requested to remove the system of country-specific quotas for certain categories (or even for all categories) and have certain quotas administered globally within each quarter to maximise their use.

(52)

The Union industry and one exporting producer requested the Commission to recalculate all quotas based on a new reference period. The Commission also received several requests (from users and exporting producers) to increase quotas in certain categories to accommodate increasing demand of the EU downstream industries.

(53)

The Union industry also asserted that Chinese steel products, subject to anti-dumping measures, continue to enter the EU market at extremely low prices, rendering the imposed duties ineffective. In light of this, the industry requested that the Commission reinstate country-specific quotas for China in categories where volumes were previously redistributed due to the presence of anti-dumping measures.

(54)

Finally, some interested parties (the Union industry and some exporting producers) requested the Commission to take action to avoid duty dilution caused by immediate exhaustion on the first day of a quarter of residual quotas by either introducing monthly administration, or by introducing a regime based on first come first served for the allocation of quotas. Certain exporting countries and producers opposed the introduction of a first come first served allocation system, arguing that the regime would be impractical to implement.

(55)

Some interested parties (mainly exporting producers and the Union industry) argued that since the past review and in particular in 2024, certain exporters had increased their exports in certain categories in the residual quota significantly, which led to crowding out of others. To solve this issue, some called for introducing additional country-specific quotas or for expanding the use of caps in the residual quotas.

(56)

Furthermore, several interested parties asserted that the current regime of no access should be extended to prevent crowding out in the residual quota in selected categories. Another interested party suggested that the Commission should rather extend the limited access regime.

(57)

The Union industry requested the Commission to consider not granting new exemptions to developing countries on the basis of the most recent import data. Several interested parties opposed this and requested an update of the list of WTO developing country members excluded from the scope of the measure.

(58)

The Union industry asserted that quota liberalisation is no longer appropriate given the declining demand and the widening gaps with the current level of duty-free quota volumes. On the other hand, other interested parties requested the Commission to increase the level of liberalisation beyond the current 1 %, or at least maintain the current level, whether for all product categories or for some specific product categories and/or specific origins.

(59)

The Union industry requested the Commission to consider increasing the 25 % out-of-quota duty. Such a move is argued to be merited given the low-price levels of imports driven by worsening global overcapacity plus increasing numbers of TDI measures in third countries. It was argued that a 25 % out-of-quota duty is therefore no longer sufficient to prevent out-of-quota imports.

(60)

Additionally, certain exporting countries requested to be excluded from the measure on the basis of their respective Association Agreements with the Union.

(61)

Several interested parties requested to split the TRQ of certain categories into two sub-categories, to better address the specificities of the products grouped under the categories. This was argued for category 1 by a Union user, for category 16 by an exporting producer and for categories 21 and 26 by Union producers.

(62)

One interested party (an exporting producer from Egypt) asserted that the 15 % cap in category 1 that was introduced in the Second Prolongation Review has restricted their traditional trade flows. The interested party argued that their historical export volumes to the EU significantly exceeded this cap.

(63)

The Commission considered the current situation and outlook of global overcapacity, as well as the economic situation of the Union industry and the latest developments concerning trade measures on steel imports adopted by third countries, as described in Section 3. On this basis the Commission has determined that the management of TRQs needs to be adapted, to ensure the effectiveness of the measure and bearing in mind the Union interest.

(64)

In view of the comments received from interested parties, the Commission has decided to evaluate the situation on a category-by-category basis across the 26 categories included in the safeguard. The objective of this approach is to ensure the effectiveness of the measure in categories with significant import pressure, while not unnecessarily restricting sourcing opportunities for Union user industries in categories where import pressure is not present.

(65)

The Commission in its assessment analysed in particular the quota usage in the previous safeguard year, the evolution of Union consumption and the market share of imports in each of the categories. In addition, also the available capacity of the Union industry was taken into account as well as the available sources of supply and the specific concerns of interested parties raised as regards quota usage. The Commission paid particular attention to the developments of these factors in 2024.

(66)

On this basis, it appeared that while in certain categories, the measure continues to be effective, in many others, an increase of import volumes disproportionate to the development of consumption has occurred resulting in significant import pressure, both in volumes and prices.

(67)

However, among the categories where import pressure exists, it is not uniformly intense. Moreover, the distribution of imports among the available sources also varies among the categories. In some categories, the increase of imports stemmed from one or a few sources which used most of the available volumes in the residual quota, thus crowding out traditional suppliers, while at the same time exercising significant price pressure. Thus, it became clear that there is not one solution that would solve all the various issues identified in the different categories.

(68)

On this basis, the Commission identified the categories where the effectiveness of the measure was undermined and sorted them according to the severeness of the situation in four groups:

(69)

The subsequent sections present a detailed description of each group. The data underlying these analyses are provided in Annex III.

(70)

This group covers categories 1A, 4A, 7, 21, 24. In these categories very significant import pressure was observed. In all of these categories, the quota usage was on average at 84 %, while in category 4A the usage was above 100 %. Between 2021 and 2024, consumption decreased significantly in these categories. Consumption decreased by 27 % in category 4A, and on average by 17 % in categories 1A and 24 and 7 % in categories 7 and 21. In the most recent period, the Commission observed the same trend. Between 2023 and 2024, consumption decreased in every category, by 6 % in category 7 and on average by 3 % in categories 1A, 4A and 24. In category 21, consumption decreased by 1 %. At the same time, the import shares increased significantly in all categories, by 9 % in category 4A and up to 3 % in categories 1A, 7, 21 and 24.

(71)

Since 2021, the Union's capacity utilisation has declined across all categories, including in the most recent period. With the average capacity utilisation at just 68 %, the Commission considered there is significant available capacity in these categories.

(72)

This group covers categories 2, 5, 6, 14, 16, 17, 18, 20, 22 and 25B. In these categories, the import pressure observed, though less severe than in group 1, was still significant. In all of these categories, the quota usage was on average at 90,2 %, while in categories 14, 18 and 25B the usage was above 100 %. Between 2021 and 2024, consumption decreased significantly in every category except one. Consumption decreased by 22 % in categories 2 and 16, and on average by 17 % in categories 6, 14 and 18 and 8 % in categories 5, 17, 20 and 22. At the same time, import shares increased in all categories. In the most recent period, consumption started to pick up in all categories except category 14. However, import pressure remained significant given the high quota usage and increased market share of imports from 2021.

(73)

Since 2021, the Union's capacity utilisation has decreased across all categories. This trend continued in the most recent period, with the exception of categories 5, 6, and 16, where there was a slight increase in capacity utilisation, though still well below 2022 levels. With the average capacity utilisation at only 54 % and the highest rate reaching 70 % (category 5), the Commission considered that there is substantial available capacity in these categories.

(74)

This group covers categories 3B, 13, 15, 26. In these categories, the quota usage was on average 65 %. Between 2021 and 2024, consumption decreased in all categories while imports notably increased. Between 2023 and 2024, in most of the categories where consumption decreased, import share also decreased (categories 3B, 15 and 26). Hence, considering the quota usages in each category, the import pressure was more moderate in this group.

(75)

Since 2021, the Union's capacity utilisation has decreased across all categories. This trend continued in the most recent period, except for categories 13 and 15, where there was a slight increase in capacity utilisation, though still below 2022 levels. With the average capacity utilisation at only 60 % and the highest rate reaching 67 % (category 26), the Commission considered that there is substantial available capacity in these categories.

(76)

This group covers categories 1B, 3A, 4B, 8, 9, 10, 12, 19, 25A, 27 and 28. In this group, no or minimal import pressure was detected, as either the quota usage was low in all but one category. Therefore, the Commission considered not to apply any adjustments in these categories so as not to unnecessarily restrict sourcing opportunities for EU user industries. In category 4B, interested parties presented convincing evidence demonstrating that maintaining the status-quo aligns with the Union's best interests.

(77)

Since 2021, the Union's capacity utilization has decreased across all categories. This trend continued in the most recent period, but the utilization rate is increasing in categories 4B, 8, 9 and 19, although still under 2022 levels. With the average capacity utilisation at 56 %, in combination with the low average quota usage (below 50 %), the Commission considered that no import pressure was identified and that it is in the Union interest not to adjust the measure in these categories.

(78)

After identifying the categories where the effectiveness of the measure was undermined, the Commission considered it necessary to introduce a series of adjustments and refinements to the management of the TRQs in these categories, to better align them with the evolution of the market and to improve the functioning of the measure. While some of those adjustments are horizontal in nature, most are specific to certain product categories.

(79)

One interested party commented on the crowding out of a highly specific product in category 1 as a consequence of introducing the 15 % cap in the second functioning review.

(80)

The Commission considers that these products are highly specialised and have a significantly higher value as compared to other products in category 1.

(81)

In its assessment, the Commission confirmed that the introduction of the 15 % cap had an unintended consequence of exhausting the subquota 09.8452 within the residual quota for category 1 on the first day in all three instances since introduction in July 2024. (40) (41) (42) This led to the niche products within the category 1 under the CN code 7212 60 00 not being able to benefit of duty-free quota at all.

(82)

The most appropriate way to deal effectively with this situation is to split this category into two: a sub-TRQ (category 1B) covers the abovementioned CN code of the highly specific product, while the remaining codes are included in category 1A. Such a split does not appear to create any disproportionate burden for the custom authorities. The traditional trade flows of the product 1B that are used to calculate appropriate TRQs are in Table 9.

Table 9

Imports in the Category 1B in tonnes

(83)

The proposed split would ensure the availability of the necessary volumes for the niche product in the Union and preserve traditional trade flows in terms of volumes and origins.

(84)

Under WTO (43) and EU (44) rules, a WTO Member applying a safeguard measure shall progressively liberalise it after one year of imposition at regular intervals during the period of application. The objective of liberalisation is to progressively allow more import competition into the market while the domestic industry is adjusting to an increased level of imports.

(85)

WTO law does not establish any particular requirement as to the form or concrete pace of liberalisation, other than such liberalisation should occur progressively at regular intervals during the period of application.

(86)

The EU steel safeguard measure has been liberalised yearly since 2019 and the appropriateness of the liberalisation rate has been assessed and modified on several occasions. (45) The current yearly liberalisation rate, since July 2024, is 1 %.

(87)

In order to determine the appropriateness of the current level of liberalisation, the Commission conducted both a backward-looking and a forward-looking analysis.

(88)

In its backward-looking assessment, data reveals that the liberalisation rate has outpaced the evolution of consumption. While TRQs have been liberalised by almost 25 % (including the 5 % top-up applicable since February 2019), EU consumption decreased by 14 % over the same period. In 2024, global steel demand declined by 1 % (-18 million tonnes) compared to 2023, contrary to the expected +1,7 % growth for 2024. These opposing trends have significantly widened the gap between the level of TRQs and market demand.

(89)

As to the forward-looking assessment, as explained in Section 3 above, the latest market outlooks on world steel consumption only foresee a modest recovery in 2025 (reaching 2023 levels), which the Union market is expected to follow.

(90)

In view of the recent negative trend and outlook on steel consumption in the world and the Union steel market, the Commission considered that it is not in the Union interest to increase further the current large gap between the pace of TRQ volume increase and that of steel consumption. Therefore, the Commission considered that maintaining or increasing the current 1 % rate would seriously undermine the effectiveness of the measure.

(91)

For these reasons, the Commission considers that establishing the liberalisation rate at 0.1 % is appropriate to ensure the effectiveness of the measure.

(92)

Consequently, the TRQs will continue to increase by 0.1 % as of 1 July 2025 for all product categories. The specific volumes for the period 1 July 2025 – 30 June 2026 (on a quarterly basis) are set out in Annex II to this Regulation.

(93)

Together with other adjustments presented in this Regulation, this rate of liberalisation will contribute to improving the effectiveness of the measure in a period where the Union market is suffering significant import-driven tensions, caused by the negative effects of overcapacity and the resulting responses to it across the world, in a context of weak demand. Union users will continue to have sufficient free-of-duty volumes available under existing TRQs.

(94)

According to section 2 of the Notice of Initiation, the Commission announced that it would review whether imports from a developing WTO Member exceeded the 3 % threshold in the relevant period (2024) and, if needed, update the list of WTO developing country Members that should be included in, or excluded from the scope of the measure.

(95)

According to Article 9 of the WTO Agreement on Safeguards and Article 18 of the Basic Safeguard Regulation, a safeguard measure shall not be applied against a product originating in a WTO developing country Member, as long as its share of imports remains below 3 % of the total imports in a given product category. If the share of imports of all WTO developing country Members below the 3 % threshold account for more than 9 % of total imports in a given category, the safeguard measure applies to all WTO developing country members. The Commission has reviewed and updated the list of developing countries on a regular basis.

(96)

The last update of the list took place in June 2024, in the context of the previous review investigation to assess a possible prolongation of the safeguard measure. (46) As in previous review investigations, the Commission has updated the list of developing countries subject to and excluded from the measure based on a calculation of their share of imports using the most recently available consolidated import data, i.e. year 2024 import statistics. No change to the methodology followed in previous reviews was deemed appropriate.

(97)

The changes resulting from this update, which are applicable from 1 April 2025, are the following (updated table in Annex I to this Regulation):

(98)

Due to the system of carry-over of unused quotas from quarter to quarter within a safeguard year, (47) the last quarter of the safeguard year (April-June) is usually the quarter where unused volumes are the highest. In order to maximize the use of quotas at the end of the safeguard year, the Commission considered it in the Union interest to introduce in the definitive Regulation a mechanism whereby larger exporters having exhausted their country-specific quota could also access the residual quota volumes in the last quarter. The objective of this mechanism was to avoid that volumes of the residual quotas would potentially remain unused.

(99)

Under the first functioning review in 2019, the Commission observed that this system could result in undue crowding out of smaller suppliers in the residual quotas. This trend expanded to more categories after 2019. Therefore, in the second functioning review, the Commission devised a system whereby the access of country-specific quota holders to the residual quota in the last quarter of a safeguard year would be based on the actual use of the residual quota in the previous quarters by those countries subject to the residual TRQ. This adjustment sought to protect the flows in the last quarter of smaller suppliers that are the natural beneficiaries of residual quotas. (48)

(100)

In order to minimise the displacement of traditional origins in the residual quotas, while continuing to allow additional access in those categories where it was necessary to ensure the maximum use of the quota, the Commission created a system whereby each product category would fall within one of the following three different groups, corresponding to three different access scenarios. This system fulfilled one of the key principles and objectives of the safeguard measure, namely, to ensure that traditional trade flows in terms of origins are preserved.

(101)

The three regimes currently in place are the following:

(102)

The system allowed country-specific quota holders to exceed their traditional trade flows in most product categories by accessing the residual quota in the last quarter of a period when the incumbent suppliers were not able to fully use the quotas. The Commission recalls that this mechanism was initially introduced in the Union interest to avoid that volumes of the residual quotas would potentially remain unused, which could otherwise limit sourcing opportunities and supply for EU user industries.

(103)

However, in the current context of general deceleration in the Union steel market, the Commission considers it no longer appropriate to provide quarter 4 access to country-specific quota holders in those categories where import pressure and decreasing consumption has been identified (groups 1, 2 and 3). In these cases, imports have been negatively impacting the Union industry's economic situation, as described in Section 3.3.

(104)

Furthermore, the Commission also established on the basis of the questionnaire replies of the Union industry that in all these categories the Union industry had sufficient capacity to fulfil the potential demand of the users.

(105)

On this basis, the access regimes per product category should be adjusted as follows (for specific volumes see Annex II to this Regulation):

The categories for which this system would not apply are the following:

Special regime: 4B

(106)

With these adjustments, the key principles of the safeguard measure, namely, to ensure that traditional trade flows in terms of origins are preserved, will not be undermined.

(107)

The changes resulting from this update are applicable from 1 April 2025.

(108)

Following Russia’s unprovoked war of aggression against Ukraine, the European Union banned the import of certain steel products originating in Belarus and Russia. (49) As a result of these measures, imports from Belarus and Russia subject to the safeguard measure were no longer able to enter the Union. Thus, the Commission considered it in the Union interest to adjust the functioning of the safeguard measure by redistributing the import volumes originating in Russia and Belarus (the sanction volumes) in each product category where these countries had country-specific quotas, among other exporting countries subject to the safeguard measure based on their respective shares of overall imports in 2021.

(109)

The Commission recalls that this decision was taken in the Union interest, in line with market outlooks at that time, in order to ensure that these import bans do not create a shortage of supply in the Union market in the categories affected, and that Union steel users can continue sourcing those volumes free of duty from other sources. This decision has increased the access of all trading partners to duty-free volumes, beyond their traditional trade flows.

(110)

However, as explained in Section 3 above, given the current context of general deceleration in the Union steel market and its outlook, the Commission considers it no longer in the Union interest to have these volumes available in the categories in which the Union industry is facing the strongest import pressure, and where consumption has notably decreased.

(111)

Therefore, in order to maintain the effectiveness of the measure, the Commission considers it appropriate to reverse the earlier redistribution fully or partially in those categories falling under groups 1 and 2.

(112)

Accordingly, the Commission considers it appropriate to reverse this redistribution in category 24. This category is characterised by a decreasing trend in consumption in 2024 (-7 %), while imports gain market share (+4 %). Reversing the redistribution will align the TRQs with current and projected demand, without risking a shortage of supply as sufficient duty-free volumes will still be available for user industries.

(113)

For categories 1A, 7, 16, and 21, the Commission also considers it appropriate to reverse the redistribution of 65 % of the volumes. These categories show decreasing consumption in 2024, while imports gain market share. However, reversing the redistribution of the full volumes subject to sanctions would risk a shortage of supply for user industries. Therefore, the Commission considered it appropriate to retain 35 % of the volumes subject to sanctions in these categories redistributed over all origins.

(114)

The specific volumes can be found in Annex II to this Regulation. The changes resulting from this update are applicable from 1 April 2025.

(115)

In designing the definitive safeguard measure and in the subsequent reviews, the Commission sought to preserve traditional trade flows in terms of volumes and origins. The objective of preserving traditional volumes was achieved by calculating TRQs based on past trade flows, while the objective of preserving traditional origins was achieved by establishing country-specific quotas.

(116)

However, this system has resulted in smaller traditional supplying countries, which did not qualify for a country-specific quota in certain product categories, being potentially exposed to a ‘crowding out’ effect within the residual TRQs. Therefore, in the second prolongation review, the Commission considered it appropriate to introduce a 15 % cap per single country in categories 1 and 16.

(117)

In light of the claims from interested parties that certain exporters significantly increased their exports in specific categories within the residual quota, resulting in the crowding out of others, the Commission has assessed the situation in each of the 26 categories. The analysis confirmed that recent market developments have resulted in a decrease of exports of traditional suppliers to the Union under the residual quotas in some categories while exports from other suppliers have significantly increased under the same residual quotas. This change of trade flows has disrupted the balance of origins in the residual TRQs, thus negatively impacting the functioning of the measure in some categories.

(118)

In other categories, the Commission has identified a risk of crowding out. As discussed in Section 3, several factors contribute to this risk, primarily the latest developments concerning trade measures on steel imports adopted by third countries, in combination with the persistent issue of global overcapacity, rising steel exports from China and the increase in worldwide installed capacity. These developments would create further tensions on the steel markets, thereby increasing the imminent risk of the crowding out of traditional trade flows due to additional trade diversion into the Union.

(119)

Based on the above, the Commission considers it appropriate to impose a limitation to the maximum volume that one single country can export under the residual TRQ in those categories where crowding out occurs, or where a risk of crowding out has been identified.

(120)

The Commission aimed at calibrating the levels of the caps to ensure a balance between preventing (the risk of) crowding out and preserving adequate sourcing opportunities for EU user industries.

(121)

In view of the above assessment, and after careful consideration of all the interests at stake, the following caps for the countries and categories should be applied:

(122)

These levels have been identified with the aim of enabling incumbent suppliers under the residual quota to continue exporting their historical (and liberalised) trade flows, while maintaining the stability of traditional trade flows for countries that were at risk of being crowded out.

(123)

The Commission considers that these adjustments are in the overall Union interest as the calibrated caps improve the functioning and effectiveness of the safeguard measure by minimising the risk of undue crowding out. At the same time, they ensure sufficient diversity in supply sources for EU users, thereby allowing them continued access to competitive and varied sourcing options.

(124)

The changes resulting from this update are applicable from 1 April 2025.

(125)

The Commission considered it in the Union interest to allow Union users to make the fullest use of the duty-free volumes under the TRQs and consequently allowed in the Definitive Regulation unused quarterly tariff-rate quota allocations to be automatically carried over to the next period.

(126)

However, in the present investigation, the Commission has observed that such carrying over of volumes has contributed to increasing import pressure in certain quarters and certain categories.

(127)

Taking into consideration the current context of general deceleration in the Union steel market and its outlook, the Commission considered that allowing this carry-over of unused quotas is no longer in the Union interest, notably in the categories in which the Union industry is facing the strongest import pressure, and where consumption has decreased in 2024.

(128)

On this basis, the Commission considers that the possibility to carry-over of unused volumes from one quota quarter to the next should be repealed in the categories where significant import pressure is identified (groups 1 and 2), namely in categories 1A, 2, 4A, 5, 6, 7, 14, 16, 17, 18, 20, 21, 22, 24, 25B.

(129)

The Commission considers the carry-over mechanism to remain appropriate in the categories where low import pressure is identified (groups 3 and 4), namely in categories 3A, 3B, 4B, 8, 9, 10, 12, 13, 15, 19, 25A, 26, 27, 28.

(130)

The changes resulting from this update are applicable from 1 July 2025.

(131)

The TRQs, whether country-specific or residual, were allocated based on the export performance in the reference period of the original investigation. (50) This reference period cannot be changed, as suggested by Union industry, since recalculating all TRQs based on more recent flows, which are covered by the measure would be against the objective of maintaining traditional trade flows.

(132)

The Commission notes that increasing the out-of-quota duty would be contrary to the obligation of progressive liberalisation of the measure under Article 19(4) of the Basic Safeguard Regulation and Article 7(4) of the WTO Agreement on Safeguard.

(133)

Regarding the request concerning the pro-rata splitting of the duty on the day of quota exhaustion, Article 51.4 of Commission Implementing Regulation (EU) 2015/2447 (51) establishes that duties shall be allocated on a pro-rata basis.

(134)

The Union industry asserted that the implementation of such a system is nevertheless possible. Notwithstanding the above, the Commission considers introducing a regime based on First Come First Serve for the allocation of duties impractical to implement. Such a system would rely on identifying the exact timing of import registrations, which in turn would be influenced by external factors like the efficiency and speed of the 27 national customs authorities in registering imports. As a result, the Commission considers that such an approach would not be in the Union interest, as it could create substantial legal uncertainties for EU importers.

(135)

The Commission nevertheless considers that the underlying issue, which is a very rapid exhaustion of certain TRQs often within one day, will be addressed through other adjustments, notably the introduction of caps on the maximum volume that one single country can export under the residual TRQ in categories where such rapid exhaustion occurs.

(136)

Certain interested parties argued that the quota in certain categories should be globalised to facilitate a complete utilisation of the allocated volume while ensuring equitable distribution among all exporting partners.

(137)

The Commission notes that it was decided in the Definitive Regulation (52) that a country-specific tariff-rate quota system is the most appropriate system to ensure traditional trade flows and was therefore set as the default. The Commission has only introduced global administration in exceptional circumstances and because of duly justified claims. (53)

(138)

The Commission considers that the interested parties have not provided sufficient justification as to why the default system is unsuitable for the specified categories, nor have they demonstrated how such an adjustment would serve the overall interest of the Union.

(139)

The Union industry claimed that Chinese steel products, despite being subject to anti-dumping measures, still enter the EU market at extremely low prices. The Commission notes that reinstating country-specific quotas for China in categories where these volumes were previously redistributed due to the presence of anti-dumping measures will not address the concerns raised by the Union industry, as imports from China would continue to enter the market, but under a country-specific quota instead.

(140)

One interested party (an exporting producer from Egypt) asserted that the 15 % cap in category 1 that was introduced in the second prolongation review has restricted their traditional trade flows. The Commission notes that this claim is not substantiated by any data from the interested party. Notwithstanding this, the Commission considers after its own analysis that this statement is incorrect. Egypt’s historical export volumes to the EU do not exceed the 15 % cap, nor the 13 % cap.

(141)

With regard to the request from certain exporting countries with a bilateral agreement with the Union to be excluded from the scope of the measure, the Commission would like to recall that the bilateral agreements in question do not require the exclusion of imports from the respective countries from the safeguard measure. The Commission has ascertained that the conditions of those bilateral agreements are met for imports to be subject to safeguard measures taken in accordance with the WTO Agreement on Safeguards.

(142)

The measures provided for in this Regulation are in accordance with the opinion of the Committee on Safeguards established under Article 3(3) of Regulation (EU) 2015/478 and Article 22(3) of Regulation (EU) 2015/755 respectively,