Rapidly-filling safeguards quotas may support EU HRC price increase in early 2024

As expected by the market, allocations for imports of certain flat steel products to the EU in the first quarter of 2024 have filled up rapidly, with quotas already exceeded for hot-rolled coil and automotive grades of hot-dipped galvanized coil, Fastmarkets heard.

As of Friday January 5, around 1.18 million tonnes of HRC in the other countries and regions category were awaiting allocation to enter the EU in the first quarter of 2024, while the quota allowance was 923,594 tonnes, according to EU customs statistics.

Vietnam, Japan, Taiwan and Egypt were the major HRC suppliers to the EU under that category, with Asian suppliers offering the most competitive prices, according to EU market sources.

On the same day, indicative HRC awaiting allocation for South Korea was 60,304 tonnes, 33% of the total allowance of 184,008 tonnes for January-March 2024. Sources suggested that the South Korean quota was also likely to be exceeded.

Before the Christmas break, HRC offers from Asian and Indian mills were heard at €645-660 ($706-722) per tonne CFR to European ports, for February-shipment coil. Turkish mills were offering February-shipment HRC at €695 per tonne CFR, including the anti-dumping duty, which is broadly in line with EU mills.

New offers were to be made at even higher levels from Asian and Indian mills, partially due to freight rates spikes amid the acute Red Sea shipping crisis.

Other individual quotas for HRC for Turkey, India, Serbia and the United Kingdom were filled by less than 5% each as of January 5.

In general, Turkey, India, Serbia and the UK have been filling up their allocations at a slower pace, and prices offered from those countries were close to EU market levels, industry sources said.

Market sources suggested that a lack of competitive imports could support a domestic price rebound for HRC in Europe during January.

“The European mills are being very relaxed now,” a source in Germany said. “They are firmly offering higher prices for February-March delivery HRC because they expect buyers to be short of options with [flat steel] output [in Europe] being reduced domestically and key overseas suppliers are locked-out of the market because of depleted quotas.”

Fastmarkets calculated its daily steel HRC index domestic, exw Northern Europe at €695.00 ($760.43) per tonne on January 5, flat day on day but edging down by just €0.42 per tonne from €695.42 per tonne on Wednesday January 3.

The index was down by €0.50 per tonne week on week, but up by €17.50 per tonne month on month.

Targeted offer prices for January spot trading were reported at €730-750 per tonne ex-works from EU mills.

Meanwhile, the full quarterly quota allocated to hot-dipped galvanized coil grades used by the automotive industry from China for January 1, 2024, to March 31, 2024, was 126,603 tonnes. This quota was exceeded just a couple days after the new quota period started on January 1, with indicative amount awaiting allocation at 197,882 tonnes as of January 5.

The HDG grades traditionally used by European car-makers fall into product category 4B of the region’s safeguard measures.

Any material imported on top of the quota allowance will be a subject to 25% duty, according to EU safeguard measures.

Published by: Julia Bolotova