The EU’s definitive steel safeguard review is increasingly expected to lead to a country-by-country quota for product category one, hot-rolled coil (HRC), according to sources close to the European Commission.
European steel association Eurofer has been a major proponent of switching HRC to a country-by-country quota, but there could also be a lobby of exporters to Europe in favour of such a move. Turkey and Russia’s Severstal have been the largest beneficiaries from the global quota, but potentially at the expense of other regions with more stable, long-standing volumes.
The EU’s steel safeguard is designed to secure established, fairly traded import flows, rather than reduce them. It is also primarily designed to stop redirection of material previously destined for the US — Turkish shipments to the EU rose by over 53pc on the year to 1.4mn t over the first four months of 2019.
Turkish mills are likely to argue that moving to country-by-country quotas would not reflect market dynamics or the fact they are filling the supply gap left by exporters to the EU affected by anti-dumping duties. They would also allude to increasing European exports to Turkey, which has traditionally been the biggest overseas market for EU sellers.
Eurofer has requested quarterly quotas, but these would likely be more restrictive than the commission would like. Once the quota becomes critical — meaning 10pc or less of the volume is remaining — duties become payable. So a quarterly system could reduce imports more than desired by the commission. Around 373,300t of the global HRC quota is currently available, meaning 82pc of the 2.09mn t is utilised.
Quotas for product categories 4A and 4B, representing hot-dip galvanised steel, are also expected to be amended. Importers had asked for the quotas to be global, in line with HRC’s, but this does not seem likely should they move to a country-by-country basis. European mills suggest structural-grade galvanised steel is being sold using the automotive quota, circumbventing an existing duty on non-automotive grade Chinese galvanised steel.
EU wire rod allocations are also likely to be amended to become more favourable to consumers. As with HRC, the argument is that the market is dynamic and the quota does not reflect the latest volumes.