India may face indirect brunt of EU restriction on use of residual quota for HRC imports

India may have to deal with the indirect consequences of a proposed restriction by the EU on access to the residual steel products import quota that is allowed to Southeast and East Asian countries such as Taiwan, Vietnam and Japan, Fastmarkets heard on Friday May 31.

The EU proposes that, under the residual tariff rate quota (TRQ), no one country may import more than 15% of the total volume available in each quarter.

According to one market participant, this move would lead to Southeast Asian suppliers of hot-rolled coil, such as Taiwan, Japan and Vietnam, sending increased volumes of their HRC exports to India.

“The simple effect of this move by the EU is that higher volumes of Vietnamese and Japanese HRC will hit Indian markets,” he said.

On May 30, the EU notified the World Trade Organization (WTO) that steel import safeguarding measures will be extended for two more years, until 2026, and that it suggested imposing a limit of 15% on the maximum volume that a single country can export under the residual TRQ.

In 2023, HRC imports into Europe from Taiwan totalled 1.25 million tonnes, with 1.16 million tonnes from Vietnam and 1.09 million tonnes from Japan. But the 15% cap under the residual TRQ, if implemented, would restrict HRC supply to Europe from each of these countries to 555,555 tonnes per year.

India is attractive to all HRC exporting countries, particularly in Southeast Asia, because it allows duty-free imports of steel from that region under a free trade agreement.

“The freight costs from these three countries [Taiwan, Vietnam and Japan] to India are far lower than freight to Europe,” an official from an Indian mill said, “and the consumption of steel in India is on the rise. The next-best market [after Europe] for these countries to sell their HRC will be in India.”

The official said that the quota limit for Indian HRC exports to Europe, which is around 170,000 tonnes per quarter, would not show any significant change even if the safeguard measures were extended by the EU for two more years.

Indian mills were currently exporting very little tonnage of HRC to Europe, he added, because a number of mills have made production cuts for repairs and maintenance work on hot strip mills and steelmaking facilities.

“Indian exports of HRC to Europe will be [further] restricted with the implementation of the Carbon Border Adjustment Mechanism [CBAM],” a second market participant said, “while we may have to take more HRC imports from Southeast Asian countries.”

Published by: Suresh Nair