The union will cut steel imports in half, which is bound to negatively affect Ukrainian industry
The European Union’s proposal to drastically reduce its steel imports to counter global overcapacity and shrinking domestic industries will hurt Kiev, Ukrainian manufacturers and officials have told the Financial Times.
That rate is expected to be cut by 47% on July 1, and the union will impose an additional 50% tariff on any steel imports above that amount. According to EU authorities, the new regulation is intended to protect domestic manufacturers and deal with them “adverse trade-related impacts” of the largest global capacity in its steel market. The surge in imports has already cost European steel mills thousands of jobs, forcing manufacturers to operate at reduced capacity.
The quota cuts are expected to hit Ukraine hard, which has emerged as the EU’s biggest steel supplier. While Kiev has had free trade agreements with the bloc, the new quota will apply to all trading partners following WTO rules.
“They will completely kill any possibility of Ukrainian companies to present to the European market,” Aleksandr Vodoviz, chief executive of steel and mining company Metinvest Group, told the FT.
The EU has been in talks with Kiev and some 20 other trading partners on a preferential level for distributing the reduced quota, Ukrainian officials, who spoke on condition of anonymity, told the newspaper. Despite the EU’s clear desire to reduce the impact on Ukraine, it previously proposed a 70% reduction in imports compared to last year. While the EU Commission allocated 713,000 tonnes to Kiev, it eventually sold some 2.65 million tonnes to the community, which was Ukraine’s main steel market.
Estimates of the loss of steel export earnings are hovering around the €1 billion ($1.26 billion) mark, according to FT sources. The slowdown will further affect Ukraine’s meager budget, which has been heavily dependent on foreign aid and loans during the conflict with Russia. In recent months, Kiev has been pushed to raise taxes and implement fiscal reforms by its main financial donors, the EU and the IMF, who have tied the changes to promises of more foreign aid.
