A further tightening of UK steel stocks is expected amid the recently reduced import quota tariffs, Kallanish learns from trading firm All Steels.
In a note, Laurence McDougall, managing director says that while a deal was struck with the EU, the reductions for other countries are particularly severe, with the developing nation status effectively removed for many who now fall under the residual category. This means the overall reduction in quota availability is now far more dramatic.
McDougall points to the early July trade activity. “The residual quota has already been exhausted and imports from both Turkey and the EU are highly likely to max out before the end of July,” he notes.
While adjustments to some quotas have eased short-term price pressure, McDougall expects the effect to be temporary. “We expect further upward pressure very soon,” he adds.
The duties are expected to lift import prices significantly. McDougall says domestic suppliers have been slow to raise prices but expects them to want to restore better profitability with the protectionism creating a competitive advantage of about £350/tonne ($465/t) from 1 August.
All Steels expects the tightening in stock availability will be noticeable from 1 August and the step change in prices will happen simultaneously. “We are technically now moving into a new era, where companies using bulk shipping and having access to bonded warehousing will continually take in supplies early for customs clearance at the start of each new quarterly window,” he states.
McDougall noted that several quotas were fully utilised in the second quarter, before the latest reductions took effect. “In the case of Turkey the quota was exceeded, resulting in duty costs for many importers including ourselves,” he adds. “Arguably many merchant bar imports are necessary as UK supply options don’t exist so quota burn rates will be rapid and the tightening in supply will happen shockingly quick unless buyers are prepared to absorb a 50% tariff.”
It is expected that the quota exhaustion will pull forward, resulting in allowances being exhausted on the very first day of a new quarter window, with each importer paying a proportional cost of the over quota duty.
Additionally, McDougall also expects the alloy and non-alloy merchant bars and light sections quotas to be reduced further once Speciality Steel UK becomes fully operational with a return to liquid steelmaking, which the note says remains on course for the first quarter of 2027.
