Proposed EU safeguard seen as too tough on importers

Quotas on EU imports of rebar and rod proposed by the European Commission to remedy dumping would be too low if they get confirmed at the levels sent to the World Trade Organization, importers said.

The EC introduced a preliminary quota on rebar last July to avoid material being redirected to the region as a result of the US Section 232 tariff on steel. Any imports beyond the cap attract a 25% tariff.

If the WTO accepts the EC’s proposed quotas, they will be official from early February. Market participants have already calculated that as soon as the quotas are put in place, rebar and rod buyers will likely be the first to fill them.

“I heard that as soon as the quotas were announced around Christmas two mills reported [deals] respectively of 70,000 mt and 60,0000 mt with February arrival from Turkey,” a trader said.

According to the document which the EC sent to the WTO, Turkey will be able to export 117,232 mt of rebar into the EU from February 2 to June 30.

When the December deals were done, Turkish rebar was at $455-$460/mt FOB while EU mills were selling the long product around Eur530/mt [$610/mt] delivered to mills.

“When there is such a big difference in prices [across regions], there is not too much to comment,” a source from a mill said, referring to the size of the quantities purchased.

“Rebar and rod quotas this year are the ones that were fully filled, so there is a need in the market for [a bigger] imports [quota],” an importer said, adding the current quota provisions for those products were insufficient.

That was echoed by other traders who said the quotas were a “present to the European mills” who produce at higher prices than some non-EU producers.

From the perspective of those EU longs producers, the quotas have also created discontent. Some mills pointed out that as soon as a specific country exhausts its quota to export to the EU, it will be able to compete for the residual quota allocated to ‘other countries’ in the following quarter, with Turkey probably taking advantage of that.

“The problem is that the Turkish economy is very weak now and prices are very competitive, so it is a problem considering how close it is to Europe and how cheap the freight costs are,” a source from a large mill said.

“As the proposed safeguards are [designed] now, Turkish exporters will benefit from the residual quotas. They should have designed the residual quotas in a way so that the leftover quota from one quarter will not [be carried over] into the next quarter as this can create also a very speculative approach in the market,” the mill source said.

The new quota system differentiates between countries, with some country-specific quotas applied annually, such as for Turkey, Russia and Ukraine, with other countries using a residual global quota applied quarterly.

From February 2, for example, Turkey would be allowed to trade 171,231 mt tariff-free until June 30, a level likely to be exhausted quickly following the big-volume trades in late December, Turkish and European sources said. The annualized rate amounts to 422,000 mt.

The Turkish wire rod quota stands at 121,331 mt for the same period, annualized to 299,000 mt.

— Annalisa Villa with Pascal Dick