EU HRC outlook bullish, shortages expected following US tariff deal

The bullish outlook on European HRC prices intensified Nov. 2 following a decision by the US and the EU to replace the US Section 232 tariffs on European steel and aluminum imports with a tariff-rate quota (TRQ) effective Jan. 1, 2022. Market sources had been waiting on the outcome of EU-US discussions since the summer, with many buy-side sources fearing higher domestic prices as a result of expected material shortages, sources told S&P Global Platts.

European lead times were also getting noticeably shorter as buying activity eases and the sluggishness in automotive demand creating more steel availability.

“Lead times are shorter, and from the Section 232 announcement for European steel into the US, a lot of material will disappear,” a German distributor warned.

The aggregate yearly import quota volume under the TRQ system is set at 3.3 million mt and is country-specific, coming under 54 product categories.

Imports would also become less of a threat because of the stringent European quota system, the same source added, with ports in places like the UK at over capacity with material still waiting to be custom cleared for January.

Fewer import deals and the possibility of an exodus of European steel to the US was therefore creating concerns of a second-wave coils shortage.

The source agreed prices would increase by early 2022, with higher energy costs and other logistical issues contributing to the pricing upside.

HRC prices were heard between Eur1,020-1,035/mt ex-works Ruhr, and CRC prices were heard stable at Eur1,150/mt ex-works Ruhr.

In the Italian market, a mill source said the stabilizing period would soon transition to more upward pricing movement after the Section 232 decision.

“Mills are very interested in selling abroad to the US now [that] this agreement moves from tariff to quota system,” the source said. “US market still most lucrative.”

— Amanda Flint