EU quotas suggest 5% annual increase until mid-2021

The European Commission has prepared a draft document on the final decision over permanent safeguard measures on imports of a number of steel products into Europe. This indicates that tax-free quotas will rise by 5% annually until mid-2021. Despite this clause, traders are expressing their concerns as the system imposes further limits compared to the temporary measures currently in place, Kallanish understands.

As an example, as anticipated the quotas for HRC will be calculated globally rather than country-based. The draft from the EC indicates that a first quota of some 3.3 million tonnes will be allocated in the February-June 2019 period. After that a quota of 8.6mt will be set for July 2019-June 2020 and one of 9mt for July 2020 – June 2021.

A similar increase over the period is calculated for all other products. The quotas for these however will be allocated to a specific country of origin for the largest importers and a general ‘residual group’ of other countries including all smaller sources.

The division into country of origin could well create new challenges for importers in Europe. A Swiss-based trader, for example, notes that for Chinese metallic coated sheets the EC is setting a 500,000t quota for the July 2019 – June 2020 period. During full-year 2018 over 1mt of such products were imported into Europe from China.

The products mostly under pressure since the temporary quotas were applied have been longs. Over 90% of the quotas set for the period ending February 2019 had already been used in mid December 2018 (see Kallanish passim). The EC is setting an overall 2.1mt quota for the period July 2019- June 2020 for wire rod specifically, while for rebar it will be 1.5mt (both divided into specific countries of origin).

All quotas will be allocated quarterly and unused quotas will be allowed to be transferred to the following quarter. Specific source countries having exhausted their quotas meanwhile will be able to use the unused tonnages included in the ‘residual quota’ group only in the last quarter of the period, Kallanish understands.