Good news for steel users, bad news for steelmakers?
In our view, the likeliest scenario is that the UK will find itself with open borders with regards to commodity-grade flat steels.
This is good news for some — but not all — industry participants. The EU has imposed anti-dumping duties on flat steels such as HR coil and CR coil on imports from a number of countries including China, Russia, Brazil and Ukraine. Once the UK leaves the EU, anti-dumping duties would no longer protect domestic producers, nor would there be restrictions on UK buyers of material previously covered by these duties.
This would be good news for UK-based steel users, who could access cheaper, value-added material tariff-free. However, it would rapidly damage the standing of UK steelmakers, who would find it difficult to compete with cheaper seaborne supply.
Pros and cons of an import tariff
The quickest and easiest way for the UK to prevent domestic flat steel producers from being damaged by cheap imports would be to impose an import tax on all flat steels.
This, however, would apply to imports from all nations, and could make EU manufacturing cross-border supply chains, such as those automotive manufacturers rely on, less profitable. It could also weaken the UK’s post-Brexit negotiating position with potential trading partners. And it is unlikely that the government would protect the steel industry to the detriment of higher-growth, higher-value manufacturing
Another option is to impose tariffs that seek to prevent all steel imports. These would need to be higher than current EU anti-dumping duties on HR coil and CR coil, which range from 13.2% to 22.6%. If such tariffs were imposed, imports would be effectively frozen out of the UK market, creating a captive market for UK producers. The potential losers in this scenario are end users who are likely to foot the bill for any supply chain cost increases.