The rapid uptake of the safeguard quotas for European Union imports was likely to drive a rebound in the prices for steel hot-rolled coil in the fourth quarter of the year, industry sources told Fastmarkets on Wednesday July 26.
As of July 25, 88% of the total quarterly allocation of 933,743 tonnes in the “other countries” category, for the period from July 1 until September 30, had been taken up, according to EU customs statistics. The remaining 113,338 tonnes would be available until September 30.
On July 17, the available balance in this category was 316,409 tonnes, so uptake has been quite fast in the past week.
Vietnam, Japan, Taiwan and Egypt were the major HRC suppliers to the EU under the “other countries” category, with Asian suppliers offering the most competitive prices, according to EU market sources.
During May-June 2023, the gap between domestic and import HRC prices was more than €100 ($111) per tonne, which helped to drive demand for overseas coil.
“HRC shipments for August-September arrivals are on their way to the EU, but obviously there will not be enough allocation,” a distributor in Italy said. “Third-quarter quota volumes are almost [fully used], so those tonnages would have to wait to be cleared through customs after October 1. [Consequently] the fourth-quarter ‘other countries’ quota is likely to dry up quickly as well.”
Currently, Asian suppliers are offering end-September or October shipment, which would mean end-November or early-December arrival.
“There will be a [scramble] at EU ports to customs-clear tonnages as of October 1, when the new quota period starts,” a trader in Italy said.
“Starting from October 2023, the risk of not fitting into the quota and paying [the resulting] 25% [in import duty] would be too high,” a second trader in Italy said. “We already see quite low interest in overseas bookings, despite some competitive offers.”
Market sources suggested that a lack of competitive imports at the year-end might support a domestic price rebound for HRC in Europe.
“The full utilization of the ‘other countries’ quotas would eliminate Taiwan, Vietnam and Japan from the market, so the EU buyers would basically be left with Turkey and India as major overseas suppliers in the fourth quarter,” a trading source in Italy said. “And neither supplier tends to give big discounts on HRC. So it is highly likely that the bargaining power of the EU mills will increase in the fourth quarter.”
The other HRC suppliers with individual country quotas to the EU are Turkey, India, South Korea, Serbia and the UK.
Among these, Turkey, India, Serbia and the UK have been using their allocations at quite a slow pace, and the prices offered from those countries were quite close to the EU market levels, industry sources said.
For example, as of July 26, Turkey had only used 12% of its 469,173 tonnes allocation for imports of HRC into the EU.
Turkey must pay anti-dumping duties on HRC imported into Europe – “and they are quite expensive,” a trading source in Germany said.
As of the same date, India had used only 30% of its 297,900 tonnes third-quarter allocation.
“India has quite a strong domestic market, [so it is] not very aggressive in exports,” a trader in the Benelux area said.
An expected shortage of overseas-origin HRC was one reason why European mills were reluctant to cut their offer prices further, despite dull demand, sources said.
“The European mills are being very prudent now,” a source in Spain said. “They are reluctant to give discounts for September-October-delivery HRC because they expect the balance of power in negotiations to shift back to them, when key overseas suppliers are locked-out of the market because of depleted quotas.”
Fastmarkets’ daily steel hot-rolled coil index, domestic, exw Northern Europe, was calculated at €656.25 ($725.58) per tonne on July 26, down by €0.63 per tonne from €656.88 per tonne on July 25.
Market sources have suggested that, starting from September, a rebound in apparent steel demand and the expected lower supply of imports might support a recovery in domestic HRC prices in the EU.
Published by: Julia Bolotova