EC cements Safeguard justification

13 January 2023 – The EC has announced the results of the Safeguard Review on the lost WTO DSB case and clearly cemented the market protection measure. Indonesia wants to restrict construction of nickel smelters. And is the euro now in danger of crashing?

EU Safeguard: European Commission cements justification

The European Commission today published the results of the EU Safeguard Review regarding certain steel products, which was required by the ruling of the WTO Dispute Settlement Body (DSB) last year.

It states, inter alia:

“Therefore, in view of the elements analysed in this Annex, together with the findings in the original determination the Commission confirmed that there was a threat of serious injury and that such serious injury would have materialised if the Commission had not imposed a definitive safeguard measure.”

(EU) 2023/104 of 12 January 2023

This confirms our assumption that either a deal could be struck with the parties involved or that the Europeans could go it alone.

Safeguard justification firmer than before

Overall, the European Commission has thus cemented the rationale for Safeguard and indicated where the outcome in the recently launched official Safeguard Review is most likely to be found.

As long as there is no agreement with the United States on the Section 232 tariffs and a common approach to steel imports and exports, the European Commission will try to maintain the EU Safeguard measure at all costs.

Despite all the litigation, whether before the WTO or the European Court of Justice, it has once again been shown that in the end only the lawyers involved win. Politically motivated instruments are decided politically in the European Union, even if the EC has to go headlong into the wall to do so.

EC tightens thumbscrews

All in all, the decisions of the European Commission, also in view of the ongoing anti-dumping investigations into stainless steel refillable kegs originating in the People’s Republic of China and certain aluminium road wheels originating in Morocco this week, indicate that the EC wants to and will continue to tighten the thumbscrews on imports into the EU.

Indonesia to limit construction of nickel smelters

According to reports by state news agency Antara, the Indonesian government plans to limit the construction of nickel smelters and restrict them to high-grade nickel products.

This seems to be the Jakarta government’s response to recent criticism from various quarters regarding the massive environmental damage caused by nickel production in Indonesia. And to ensure that raw materials for high-value products remain in the country.

Reaction to Tsingshan Group?

The government is indirectly reacting to the large outflow of e.g. nickel pig iron or nickel matte products to China, which were recently used again by the Tsingshan Group to manipulate nickel prices.

Indonesian nickel ore reserves are limited

For several years, Indonesia has been actively opposing the huge export of e.g. nickel ore from the country. In 2022, the government had also made it clear once again that it wanted to keep the large but also limited and rapidly dwindling nickel reserves in the country and process them to high quality. Investment Minister Bahlil Lahadalia made this clear again today: “On the other hand, reserves of nickel ore as a raw material are limited, so its use is prioritised for products with a higher added value.”

Is the euro losing value?

Despite the improved inflation data from the United States and the recent strength of the euro, it must be assumed that the FED will continue to raise interest rates in the United States and thus make credit and money more expensive. In contrast to the Fed, the ECB reacted very late to the high inflation rate in the euro zone, which should keep the euro much more readily available and thus cheaper than the dollar.

Significant difference between FED and ECB key interest rates

The FED currently has a key interest rate of 4.5%, the ECB just 2.5%. Even the Bank of England has set a higher key rate of 3.5% than the European monetary guardians. This simple consideration of the interest rate difference must inevitably lead to the dollar gaining strength against the euro. A further interest rate hike by the Fed is already to be expected, so the pressure on the euro must increase further from a technical point of view.

Exploit euro strength before it falls again

Before the euro loses its current strength, it might be a good moment to think again about buying, which could be quite interesting due to the current exchange rate.

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