Day: 2 June 2020

Turkish mills’ slammed the European Union’s new import quota system, is expected to reduce Turkey’s hot-rolled coil exports to that region, describing it as contradictory to World Trade Organization free trade rules.

According to the EU’s notification to the WTO, it will impose a country-specific quota on HRC imports as of July 1, instead of a global quota, which is expected to especially impact Turkey’s exports.

Turkey shipped more than 3 million mt of HRC to the EU region during a 12-month period to July 2019, while the country’s HRC shipments fell to 1.5 million mt during July 2019-March 2020 period, annualized to 2 million mt.

With the new quota regulation, Turkish mills can only ship 1.37 million mt of HRC to the EU region during the July 2020 to July 2021 period, a sharp on-year decline in export volumes.

According to the EU’s notification to the WTO seen by S&P Global Platts, Turkey can export 344,890 mt of HRC to the EU region in the quarter starting July 1; 344,890 mt in the quarter starting October 1; 337,393 mt in the quarter starting January 1, 2021, and 341,141 mt in the quarter starting April 1, 2021.

Drawing attention to the ongoing decline in Turkish mills’ steel export volumes to the EU in recent years, due to the quotas, Ugur Dalbeler, CEO of a major Turkish HRC producer and a director of the Turkish Steel Exporters’ Union (CIB), told Platts on June 1 that with this new move the European steel sector showed its desperation and negative attitude against Turkey.

“This move is definitely against the WTO rules and politically motivated. With this decion, the EU steel sector became a government-regulated sector as it is losing its competitiveness,” Dalbeler said, adding that the latest quota review increased their mistrust in the European Commission’s decisions.

The EC recently launched an anti-dumping investigation into imports of certain hot-rolled flat products from Turkey following a request by European steel association Eurofer. The association also filed a complaint at the beginning of last week with the EC requesting a countervailing duty (CVD) investigation against allegedly subsidized hot-rolled coil imports from Turkey.

As a reply to these moves Turkey informed the WTO on May 25 that customs duties could be imposed on steel imports from the EU, in response to the EU’s move for additional measures against EU imports of Turkish steel.

Turkey is planning to impose duties ranging from 9% to 17% on some flat-rolled products, non-alloy bars and angles from the EU region, under HS codes: 7208, 7209, 7210, 7211, 7212, 7214, 7215 and 7216, in an effort to balance trade between the parties.

— Cenk Can

The European Commission is proposing a number of changes in the EU steel import tariff quota system, according to a notification to the World Trade Organization dated May 29.

The notification does not mention reduction of the actual quotas set earlier but instead suggests changes focused on making the import flow more evenly spread out between quarters and protecting some of the smaller export countries from being crowded-out from the residual quota by bigger countries.

The adjustments are resulting from the earlier review of the existing tariff-rate quota system following substantial changes in market circumstances.

“Nobody could foresee…the COVID-19 pandemic could make the world economy suddenly plunge in the most severe recession since at least the global financial crisis of 2009. The magnitude and sharpness of the economic shock has been brutal in terms of output, fixed investment, lay-offs, and demand,” the EC stated.

The EC singled out hot-rolled coil and sheet, proposing bringing back the country-specific quotas after a period of the global quota in place. Those countries are Russia, Turkey, India, South Korea and Serbia. A cap of 30% share will nevertheless continue applying to the use of the residual quota in the fourth quarter to prevent crowding-out effects.

The first general adjustment suggested in the notification moves all country-specific quotas from annual to quarterly in order to ensure “a more stable flow of imports and minimize the risk of undue import surge during the remaining duration of the measures,” as stated in the notification document.

“The good thing is that some quantity is allocated for each quarter so the Turkish [rebar] quota won’t be gone in the first two months and then quiet for 10 months. But on the other hand, there will be more speculation and there is only a quarter available as of July 1 so this is going to put out a lot of uncertainty whether you import in time because the allocation will be lower. Everyone will try to get the material in the first 2-3 weeks. If the yearly quota [starting July 1] for Turkey was 300,000 mt you could assume that it was safe to import in July and August but now it is not gonna be like that,” a European rebar importer commented.

The second adjustment is meant to ensure that the smaller exporting countries, which use the global quotas, are not crowded out by those exporters enjoying country-specific quotas. In addition to keeping the unlimited access to the residual quotas in some product categories the EC proposes new restrictive regimes for certain products.

The first regime, bans exporters of organic coated sheets, non-alloy wire rod, gas pipes and cold-finished bars, with country-specific quotas, from using the residual volumes entirely during the quarter ending June 30, 2021.

The second regime limits the access to the residual quota for country-specific exporters during that quarter to only those volumes exceeding the average quota used by the smaller supplying countries during the four quarters. This would apply to stainless hot-rolled plates, merchant bars and light sections, rebar, stainless bars and stainless light sections, stainless wire rod, hollow sections, seamless stainless tubes and pipes and non-alloy wire.

Another suggestion by the EC is to split the large welded tubes category into two, separating those used in large engineering projects from those that are not. This measure is proposed to ensure the availability of large tubes for any large-scale engineering project in the EU.

The proposed changes, if adopted, should be in place starting July 1 but after a consultation period through June 11.

— Wojtek Laskowski

The new proposed changes to the safeguard system published in a note sent to the World Trade Organisation by the European Commission last week will mainly limit sales of Turkish and Indian HRC, Kallanish notes.

According to the new rules, HRC quotas will now be calculated quarterly and the largest importers will be assigned a specific country allocation. As a result volumes for Turkish and Indian suppliers will be impacted significantly.

Turkey will be able to sell slightly less than 350,000t of HRC each quarter into the European Union. In 2019 the country sold over 230,000t/month of HRC in Europe on average, according to Eurofer data. While the reduction in sales from Turkey was already visible during the first part of 2020, the new rules, together with the ongoing investigation on possible AD duties will significantly impact trade.

India, on the other hand, will receive from the beginning of July a tariff-free quota of slightly less than 170,000t each quarter. Last year the country sold to Europe around 70,000t/m of HRC.

Meanwhile Russia will slightly benefit from the changes proposed, as it will become the country with the largest tariff-free quota allocation for the period July 2020-June 2021. Russian suppliers will be able to sell to Europe over 410,000t each quarter. In 2019 the country sold on average 115,000t/m of HRC, being the second largest supplier to the EU despite being subject to AD duties.

Polish distributor Bowim says the Covid-19 pandemic impact could hamper its earnings in the second quarter, while its costs could be affected by its use of state programmes designed to support firms through the crisis.

Bowim’s consolidated shipments fell -1% on-year in the first quarter to 131,367 tonnes due mainly to sheet sales declining -4% to 48,490t. Pipe and profile sales rose 4% to 26,296t and rebar sales were up 10% to 23,687t.

Consolidated revenue fell -10% in Q1 to PLN 314.8 million ($78.7m), although the firm turned to a net profit of PLN 2.3m versus a loss a year earlier of PLN 2.7m.

The lower sales were due to reduced steel prices and the impact on demand towards the end of Q1 of the Covid-19 pandemic. Thanks to securing new markets and expanding product range, the sales volume decline was limited, the firm says.

Prices were depressed by weaker demand from the EU automotive industry, which increased competition among the EU’s sheet suppliers to find new buyers.

“From March 2020, the Polish economy began to lose momentum due to the start of the ‘lockdown’,” Bowim says in a report seen by Kallanish. “A slump in trade and the clothing industry was observed already at the end of the month. March was the first month in which everyone began to be affected by restrictions.”

“Distributors and customers were unsure of the future and so they stocked up inventory in the fear of the Covid-19 pandemic worsening, difficulties in transport and delivery deadlines,” the firm says. “Steel products trading changed – companies introduced new safety measures, such as shift rotation systems and limitations to contact between people. Increased order traffic, as well as high load capacity at processors had a positive impact on the results of many companies.”