European Steel Industry: Impact of the Import Quota
| Case Code: ECON092
Case Length: 11 Pages
Pub Date: 2020
Teaching Note: Available
| Price: Rs.300
Organization : European Steel Industry
Industry :Metals & Mining
Countries : Belgium
Themes: Macroeconomic Environment/ International Business/ Global Economy;Trading Blocks
Abstract Case Intro 1 Case Intro 2 Excerpts
The case is about the demand of the European Steel Association, Eurofer, for a 75% cut in steel import quotas amid the outbreak of the coronavirus pandemic in 2020. The steel industry has long held a strategic position in the EU economy as it is closely linked to many industries such as the automotive and construction.
The safeguard measures that the European Union followed to protect its steel industry included a 25% tariff on import of 26 types of steel when the shipments exceeded a three-year (2015-17) average quota. In February 2019, the EU decided to continue the final trade protection measures for steel products up to June 2021. After an initial review in September 2019, the European Commission (EC), the executive branch of the European Union, lowered the yearly import quotas to 3% rather than the originally planned 5% due to the falling demand for steel in the European regions.
In April 2020, Eurofer requested the EC for safeguard quota revision for a period of six months to address the slump in steel consumption and production during the pandemic. The pandemic had a massive impact on the Europe region’s steel demand, which had fallen by more than 50% since the beginning of the crisis. The fall in steel demand and subsequent decline in its production led to a temporary laying off of workers, cut in new steel orders, the idling of steel plants, and even shutdown of production. All these factors put the European steel industry at risk and EU-based producers urged the EC for greater protection.
However, the EC declined to consider reduction of steel import quotas. It felt that there was no need for a drastic change in the import quotas since the available quotas had not been fully used. The European steel producers expected that unless the EC checked against massive stockpiling of steel through import cuts, the European market would be flooded with steel once demand returned after the crisis. Despite a slump in steel demand and production, industry analysts expected a steady growth of the sector during 2020-24. Whether the European steel industry would be able to recover from the pandemic situation and go back on the growth track, remained to be seen.
The case is structured to achieve the following teaching objectives:
- Understand import safeguard quota measures imposed by countries.
- Discuss the impact of import quota during a pandemic situation.
- Examine the need for import quota reduction during a pandemic.
- Analyze how the import quota reduction can help indigenous producers.
COVID-19, Steel industry, Steel demand, Fall in steel consumption and production, stockpiling of steel, Economic growth, Trade protectionism, Steel safeguard measures, Import quota, Import quota reduction
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