Day: 9 November 2020

News that the European Commission accepted Eurofer’s request and will soon announce that HRC imports from Turkey will be subject to registration, a prerequisite for the imposition of retroactive antidumping duties, drew Turkish mills’ and some European buyers’ reactions.

Veysel Yayan, general secretary of the Turkish Steel Producers’ Association (TCUD), told Platts on Nov. 6 that although they didn’t receive any formal notice yet from the EC, they will not be surprised if the EC will make a decision in this regard.

“Eurofer knows no limit in protectionism,” Yayan said adding that the EC is trying to block imports from Turkey.

Ugur Dalbeler, CEO of major Turkish steelmaker Colakoglu, also told Platts Nov. 6 that, despite some news that the EU will soon start import registration of HRC imports from Turkey, no information about it reached them yet.

The EC launched an anti-dumping investigation into imports of certain hot-rolled flat products from Turkey in mid-May following a request by European steelmakers’ group Eurofer. The preliminary decision in the investigation is expected to be announced on Dec. 23 to be imposed on Jan. 14, 2021. A retroactive duty, however, can be collected on previously imported HRC from Turkey as of the time that the EC begins registering the imports, which could limit Turkish HRC exports by raising concerns among European buyers.

“The Turkish situation is an important factor for Italy, where a lot of big companies depend on them for hot-rolled coil,” an Italian service center source told Platts Nov. 6.

“In the last few weeks, some buyers decided to take a position with Turkish sellers, considering to cover the duty risk with a good price, but now with this new [import registration] situation, the real risk will be taking the duty. I think they [Turkish sellers] will decide to increase their prices to customers, in order to cover part of the damage,” the Italian source said, adding that he expects a bullish week with mills and service centers determined to increase their prices as long as [Turkish] imports remain absent.

The EC also started a countervailing duty (CVD) investigation on June 12 against allegedly subsidized HRC imports from Turkey based on Eurofer’s appeal in this regard, as Platts has reported.

The EC, which announced safeguard measures on Oct. 30 with a tariff-rate quota on steel imports from the UK into the EU from Jan. 1, 2021, also lowered other quota volumes as of January 2021, including Turkey’s.

According to the EC notice, the import quota for Turkish HRC imports has been reduced to to 313,791 mt from 337,391, while the quota for Turkish rebar imports was lowered to 58,826 mt from 75,123 mt for the quarter starting Jan. 1, 2021.

With the new quotas, Turkish mills can only ship around 1.3 million mt of HRC to the EU region within a year, a sharp year-on-year decline in export volumes, according to Platts’ calculations.

— Cenk Can, Amanda Flint

As delivery times for coil keep stretching, and mills appear to be extremely well-utilised, consultant Andreas Schneider addresses how this corresponds with sluggish steel demand. German consumption this full year is estimated to be barely 30 million tonnes, which is the lowest in 11 years.

Supply and demand have been out of sync for several months now, and what looked like a temporary phenomenon in summer has continued into autumn, Schneider writes in an article on his website Stahlmarkt Consult.

“The question here is to what extent the mills are deliberately keeping supply tight in order to strengthen their starting position for price negotiations,“ he says. The technical reasons often cited as the reason for the slow increase in production in the complex process of blast furnace control are convincing for a period of some weeks, but not over many months, he argues.

One explanation is that inventories were drastically reduced during the first Covid-19 lockdown period, so that the current need for restocking is driving repurchasing activity beyond the demand of downstream users, Kallanish understands. According to the statistics office, order intake at mills in August were approximately on the previous year’s level, although there has been not much of a recovery at industries like pipes or mechanical engineering.   

Especially in view of the forthcoming contract and price discussions for 2021, many market participants are wondering how long the unusual situation will continue, Schneider writes.

The economic impact of the coronavirus caused a -19.1% on-year drop in first-half-of-2020 production in Germany’s steel and metal working industries.

According to their association, Wirtschaftsverband Stahl- und Metallverarbeitung (WSM), the second quarter saw a relative recovery. While production in April was down -35.5% year-on-year, the difference by July had reduced to -16.7%, meaning a 25% rebound, WSM chief economist Holger Ade points out.

This development is also reflected in the sentiment of the member companies, whose expectations after a deep dive in April had returned to breakeven by the end of June, Kallanish hears. Ade notes that during the financial crisis in 2009, it took seven months before optimism recovered.

Utilisation at the companies, which had already dipped last year before the pandemic by 10 percentage points from 2018 to 78.1%, was at 68.7% in Q2. That figure is relatively high given the nearly complete temporary production stop at carmakers. WSM therefore believes the automotive lockdown has hit supplier firms with a delay, meaning inventories piled up in Q2 and production may have been kept low going forward.

For the full year, WSM expects an output drop of -12-15%. It emphasises that the dip in 2009 was considerably deeper, at -25%.

The Chinese Ministry of Commerce and the Ministry of Ecology and Environment are studying new export tax rebate policies to promote steel exports, Kallanish notes from a China Business News report.

Tong Yanchao, the director of the Project Division of the Department of Atmospheric Environment at the Ministry of Ecology and Environment, recently revealed China will introduce tax rebate measures in the near future. These will provide export tax rebates to steel companies that have completed ultra-low emissions transformations. 

The new policies are expected to encourage steel companies to accelerate the completion of ultra-low emissions transformations to obtain financial support, while reducing environmental pollution. Details have not been revealed, but analysts say this would imply differential rebates depending on whether or not companies meet emissions standards.

China’s overall exports have grown despite the impact of the Covid-19 pandemic. Chinese steel exports, however, have declined due to a loss of competitiveness. According to data released by the General Administration of Customs, China’s steel exports were 40.39 million tonnes in January-September, a year-on-year decrease of -19.6%. The average export price was $822.07/tonne, down -0.9%.

At the same time, steel imports have grown rapidly. This year, China imported 15.07mt of steel, an increase of 72.2% year-on-year, and the average import price was $813.24/t, down -31.5%.

Due to strong steel demand, Chinese steel consumption has become a pillar supporting the global steel market. More and more foreign steel producers are seeking to export to China to digest their production, and Chinese products are less competitive due to high prices. A Chinese steel market participant says tax rebates for companies that have completed the transformation will also help reduce pressure from their heavy investments.