Impact of Brexit on the steel market

The UK steel sector exported 2.3 million tonnes of steel to the EU in 2017, accounting for about 30% of total production.

While there is little risk that the EU and the UK will impose steel tariffs, the situation in the consumption sectors may be different, according to the EEF of UK producers. Automobile tariffs could reduce the demand for automotive steel in the UK. The automotive industry accounts for 12% of all UK merchandise exports.

According to lawyers contacted by S&P Global Platts, the UK government has already notified the World Trade Organization that if Brexit fails to act, it will use the WTO's international trade agreements. Thus, goods in the automotive industry will be traded under WTO rules, unless they sign agreements with the EU to order. Under WTO rules, UK companies selling automotive components to the EU will face an average EU entry tariff of 4.5%.

In addition, UK carbon market players will exit the EU emissions trading system, which will be replaced by a new UK carbon tax of £ 16 /tonne effective April 1. This will be in addition to the existing UK carbon price support - a £ 18 /t tax on CO2 emissions from the energy sector - the UK has a cumulative carbon tax of £ 34 /t.

The new tax will apply to emissions in excess of the annual free allocation of permits under the EU ETS. The purpose of the new tax is to maintain consistency in carbon prices for UK industry and to replace UK revenues lost from the EU carbon auction.

The EU has already taken steps to protect the ETS itself from a potential flood of excess quotas from UK sellers by passing legislation in 2017 that will label and remove quotas from any country leaving the EU.