The European Commission’s proposed revisions on the global HRC safeguard quota could hit Turkish mills’ HRC exports to the region significantly, especially next year, as Turkey is one of the main countries benefiting from the quota.
According to the EC’s revision plan, any one country can alone supply up to a maximum of 30% of the overall EU HRC imports from now on. This revision is expected to come into effect on October 1, after approval by the EU member countries.
If this revision will come into effect, it may pull down Turkish mills’ HRC exports to that region by as much as around 800,000-1 million mt in 2020, according to some analysts.
Turkey, which has been a net importer of hot-rolled coils, became a net exporter in 2018, as the country’s HRC export volumes exceeded HRC import volumes last year, with the support of strong demand from EU countries, despite the closed doors of the US market, as reported.
Turkish mills’ exported 3.91 million mt of HRC to global markets throughout 2018, while around 3 million mt of it was shipped to EU countries, according to Turkish Statistical Institute (TUIK) data sent to S&P Global Platts.
This trend continued in the first quarter of 2019, as Turkish mills’ HRC shipments to the EU region totaled around 800,000 mt — about 70% of Turkey’s total HRC shipments in Q1.
But, after maintaining its new net HRC exporter position in Q1, achieved in 2018, total Turkish HRC import volumes exceeded export volumes again for the first half, as trade flow reversed in the second quarter.
European producers’ HRC exports to Turkey totaled around 600,000 mt in the second quarter, an increase of 96% from Q2 2018, while Turkish mills exports to the EU region fell gradually month on month, amid trade barriers, stiff competition and Turkish mills’ increased input costs.
As demand from the EU has slowed and domestic demand remained sluggish, some downward adjustments also have begun to be seen in Turkish mills’ HRC prices. Some Turkish mills’ HRC offers for large-tonnage bookings fell as low as $485-$490/mt FOB, one trade source said, while a producer source said buyers have been absent over the last 10 days (see related article).
“We are under enormous pressure from EU producers offering awful low prices to Turkey. The second quarter, Turkey has dropped its export to EU by about 50%, but in return, EU has exported its export to Turkey double of what they did in the first quarter. They are today shipping more HRC to Turkey than Turkey ships to EU,” an executive of a major Turkish HRC producer told Platts.
“Turkey is a single country. However, EU is a union of 28 countries. Our share on their total consumption is around 4-5%, while their share in our consumption is 20%, meaning their impact in our market is five times greater than our impact on their market.”
The producer source said the latest decision “specifically targeted Turkey.”
“We couldn’t mention about a global HRC quota from now on. Implicitly, it becomes a country-based quota,” the source said. “They also have reduced the planned increase in tariff-free steel quotas to 3% from 5% across all product categories, which means that they are changing the rules in the middle of the game, which couldn’t be acceptable. My expectation is our Trade Ministry will respond to their move under the rule of reciprocity.”
The Turkish Trade Ministry, which launched a steel safeguard investigation on steel imports a year ago, ended the investigation at the beginning of May without taking any action, as reported.
— Cenk Can