BRUSSELS, June 30 (Reuters) - The European Commission unveiled quotas under the new system to limit duty-free steel imports into the EU, in a move designed to protect the bloc's steel sector and increase its capacity utilisation.

Under the new rules, the European Union's annual tariff-free import quotas are slashed by 47% to 18.3 million metric tons, while an out-of-quota duty of 50% is introduced for 26 categories of steel products imported into the EU.

The rules, which come into effect on Wednesday, seek to increase steel capacity utilization in the bloc to 80%, the Commission said.

European steel association Eurofer, however, said ?the change in rules may only raise capacity utilization to 73%-75%, up from around 67% now, given slow demand.

EU steelmakers are likely to claw back some 15 million metric tons of production, Axel Eggert, Eurofer's director general said, about half of what has been lost over the past few years.

Half of the import quotas have been reserved exclusively for free-trade agreement (FTA) partners, with the other half available to all trading partners, including those with an FTA.

Many of those partners will receive country-specific quotas proportionate to their historic volumes, the Commission added.

"Most of the EU's FTA partners will therefore see a market access reduction significantly lower than the average reduction of 47% foreseen by the Steel Regulation," it said.

A "significant number" of partners have provisionally agreed with these allocations, the Commission said.

The Commission said the rules were needed to protect the European steel industry from overcapacity elsewhere in the world and dumping practices.

"Persistent global overcapacity in the steel sector remains a serious global problem and continues to distort international markets," it said.

"The measure restores fair competition in a market affected by distortions linked to overcapacity," it added.

To have a more significant effect on the steel industry, the measure may need to be extended to downstream sectors, such as companies laminating steel or stamping sheets out for cars, Eggert at Eurofer said.