Ferro-alloy, Si market assess fallout of EU safeguard probe

Rotterdam, the main trade port in Europe. Photo by Ali A Suliman at Shuttlestock

In December 2024 the European Commission launched a wide-ranging probe into imports of silicon-metal, and manganese- and silicon- based alloys, with a view to safeguard EU producers. Argus Media tests the market reaction.

The European Commission’s initiation of a safeguard investi­gation into EU imports of manganese and silicon-based al­loys and silicon metal on 19 December is rattling the markets, raising the possibility of measures that could funda-mentally reshape dynamics in Europe.

The investigation covers silicon metal, ferro-manganese, ferro-silicon, ferro-silica-manganese, ferro-silico-magnesium and calcium-silicon. If the commission determines that safeguarding measures are necessary, it will implement them within nine months of 19 December, with a maximum extension of two months for exceptional circumstances. If a preliminary determination provides clear evidence of harm or impending harm, the commission may introduce provisional measures for up to 200 days.

Calls for an investigation were led by Euroalliages – representing ferro-alloy, ferro-silicon and silicon metal producers – and certain member states, in response to increased glob- al production capacity and imports from external countries that erode EU producers’ market share.

“We see tremendous overcapacity in our sector. China can supply EU demand several times over with their excess capacity in silicon metal, and looking at trade data over the last few years it is clear the import share is much higher,” Euroalliages secretary-general Bob Lambrechts told Argus.

Times have changed, and you cannot primarily rely only on countries that you cannot be sure will continue to supply. That is the message we gave to the European Commission,” Lambrechts added.

Price reaction delayed by holidays

In wake of the announcement, several traders have told Argus that they intended to purchase more material, either already customs cleared in-warehouse in the EU or via new shipments that can be cleared before the end of March.

On the one hand, heightened buying demand from traders and intermediaries could put upward pressure on prices. But some third-country producers and exporters are also rushing to move material into Europe ahead of any measures introduced, sources said, potentially saturating a market where steel demand is still depressed. This is not a unanimous position, as certain third-country suppliers have been cautious of offering into Europe. 

Although certain sellers hiked offers in the days after the announcement, the Christmas and new year holidays tempered the immediate reaction, and market participants now expect price reactions later in January when they have further clarity on the investigation.

Defence measures not yet clear

Provisional or definitive measures could include quantitative restrictions on imports through increased customs duties or tariff quotas.

But the time period from which the commission would determine a base for a tariff quota is not clear. Importers/consumers and other interested parties must provide yearly data for 2019-24, with a further quarterly breakdown for 2024.

The permitted quota would be a percentage relative to that base. For example, EU steel safeguard quotas intro­duced in 2018 allowed for 100pc of average imports in 2015 -17 to be imported duty-free (except where anti-dumping applies), above which a 25% tariff is levied. The difference with the products newly under investigation is that they already have third-country duties in place (see table).

It is therefore unlikely that the quota would be duty free, as is the case with steel, because this would be a counter-productive measure and the EU will likely continue to levy existing third-country and anti-dumping duties (ADDJ, alongside the introduction of a quota.

EU, EEA producer positions

The existing EU manganese and silicon-based alloy import framework provides preferential tariffs for certain non-EU states such as Ukraine and countries that are part of the Customs Union or the European Economic Area (EEA), such as Iceland and Norway. Norwegian and Icelandic producers — including Elkem, PCC BakkiSilicon, Finnfjord and Eramet Norway — will likely be treated as EU producers, one source said, considering the extension of the single market to these countries, and the respective company memberships with trade association Euroalliages that instigated the safeguard investigation.

Icelandic silicon producer PCC BakkiSilicon has previously called for higher ADD on China, while Spain and France-based Ferroglobe has called for a broader trade defence to maintain a level playing field, compared with third-country suppliers like Kazakhstan and Egypt.

“As a general principle, Elkem is in favour of any trade policy measures that can ensure a level playing field for the ferro-alloys industry,” Norway’s Elkem told Argus. “We will have to see what the investigation concludes before we can comment on how this may impact Norwegian producers.” Other producers declined to comment at this stage.

Tariffs are a double-edged sword

Protecting European producers through trade defence measures could come at the expense of steel mills as import tariffs are inherently inflationary, but some sources cautioned that dependence on raw material imports remain a greater danger to industry.

“Protectionism would increase significantly the cost of production for steel mills,” one trader said, also noting the
pressure to transition to green steel. “

The consequences would be the shutting down of new production plants in Europe, along with automotive factories. It seems the EU is trying to collapse by itself,” they added.

European steel and secondary aluminium producers, the main consumers of the products concerned in the investigation, are pressured by a weakened automotive end-market, high energy prices, lower cost imports from China and stalling decarbonisation efforts. Industry associations WV Stahl and Eurofer have both called for increased trade defence measures.

A struggling steel industry leads to lower demand for alloying materials and depressed market prices that do not provide sufficient margins for European ferro-alloy producers to operate, showcased in Ferroglobe idling its French operations in November 2024.

Source: GTT

Lower consumption is reflected in import statistics, whereby overall EU intake of the products under investigation have contracted since 2021 (see chart), customs data show. But relative to local production, imports increased from 126% in 2020 to 298pc by mid-2024 and rose in terms of consumption from 71% to 83% in the same comparative period, according to the commission’s initiation statement.

“Preserving the industrial basis in the EU is in the interest of the EU as a whole, not one part of the value chain,” Lambrechts said. “This is about much more than measures in the past — the classical anti-dumping and anti-subsidy investigations.”

By Samuel Wood and Maeve Flaherty

Argus Media