HRC importers say EU safeguard changes insufficient to meet trade flow concerns

European importers of hot-rolled coil believe proposed amendments in EU steel safeguard measures for finished steel imports are unlikely to bring changes to the market and to reflect trade flow concerns.

On May 30, the European Commission sent a draft of proposed reviewed safeguard measures to the World Trade Organization. The document indicated that county-specific quotas will remain in place, but global quotas will be introduced for some other products, including heavy plate.

Importers claim, however, that in the coil segment the changed safeguards disregard reduced availability of HRC from Ukraine due to Russia’s invasion and the impact of sanctions against Russia on trade flows. Russia’s quota volumes have been redistributed among other exporters after the EU imposed sanctions.

In addition, the inclusion of Vietnam in the global hot-dipped galvanized quota will limit the number of sources, market participants believe. In the previous safeguard review, imports of HDG from Vietnam were not subject to the restrictions as material originating from a developing country.

“If anything, the measures that the commission proposed is only stated as liberation. In fact, it is further toughening of the measures,” a large Italian distributor said. “We now have Vietnam added into the global HDG quota. Global quotas for HRC would also make more sense, taking into the account the situation in Ukraine – they will not ship their regular volumes any time soon, export duties in India and sanctions against Russia. With weak demand like we have now, we might not see any impact, but if market followed the lockdown scenario of production stoppages and domestic shortage – lack of import will hit the buyers.”

The EC is scheduled to officially release the safeguard details by June 30, effective for one year starting July 1.

“The commission is prepared to gradually adapt the existing safeguard measures in response to the changing environment in trading of steel products,” Yuriy Rudyuk, a partner specializing in international trade with the law firm of Van Bael & Bellis in Brussels, said June 6.

“These amendments may seem minor in terms of the safeguard measures as a whole, however, for some specific product categories, we are about to see a major change in the approach,” he said.

Domestic prices for HRC have been declining in Europe since the second half of March due to weak demand. Platts daily assessments for HRC in Northern Europe declined to Eur975/mt ex-works Ruhr on June 1 and in Italy to Eur930/mt ex-works, down by Eur290/mt and Eur245/mt on month, respectively.

Indian exporters, meanwhile, have been offering only boron-added HRC into Europe in order for the material not to be subject to 15% export duties set in May. The latest offers of HRC from India have been heard at Eur800/mt CFR Italian ports, but the low price has failed to spur buyers’ interest as boron-added coil has limited use due to technical characteristics.

“I think we all hoped and agreed that global quotas for HRC would make sense,” a Northern European trader said. “But the commission decided against it, which leaves us with limited options of Asia with long lead times and global quotas, Turkey with anti-dumping duties, India with its export tax and Russia under sanction. So you can forget about it and Ukraine which can ship only small tonnages for now.”

A Turkish trader said he was not surprised by the decision to keep safeguards on HRC as they have been.

“The European Commission is usually slow in its reaction to changes,” the trader said. “And they disregarded impact of Russia, Ukraine and India situations. But in short-run there should be no changes in trade flaws.”

Rudyuk underscored how at this stage is possible to see only a rather schematic summary of the EC’s findings since the WTO notification May 30 follows a pre-determined format and it does not contain all the necessary details as we will have to wait until the second half of June when the Regulation with full details would be published in the Official Journal.

However, Rudyuk said that it is already clear that the amendments envisaged by the commission will concentrate on the three main areas. The first one is replacing the country-specific quotas by global quotas for the product categories 7 (quarto plates) and 17 (angles and shapes) due to the significant reduction in supply from Ukraine; the second main change is ending the preferences previously granted to the developing countries for the product category 4A (metallic coated sheets) where imports from all developing countries, including Vietnam, will now be made subject to the safeguard measures. The third point is increasing the liberalization rate from 3% to 4 % for all product categories.

— Maria Tanatar, Annalisa Villa