Assofermet: Italian service centres report negative first half
Italian service centres’ sales volumes for the first half of 2024 were about 15% lower compared to the first half of 2023, Italian steel trade association Assofermet says in its market note monitored by Kallanish.
The negative trend can be attributed to persistently unsustainable prices and low margins. June saw an overall decline in demand, a situation that has been ongoing for an extended period of time.
Some end users are expressing interest in negotiating supply for the fourth quarter of 2024 and the first quarter of 2025. Their goal is to secure the current low level of quotes for these periods.
“Maximum attention is now being paid to the consequences of the amended version of the [EU] safeguard … This change is set to dramatically impact the flows of this raw material [hot rolled coil] … Our concern focuses … on the lack of availability of the raw material and the consequent difficulty in maintaining stocks at an adequate level to meet the demand from end users. This adds to the inevitable price increase that EU producers will charge, due to the reduced import capacity,” Assofermet warns.
Production shutdowns at EU steel mills in August will be extensive. This is likely to strongly penalise the downstream segment. Despite the ongoing crisis in consumption, service centres will have to accept significant price increases for steel in order to maintain production and fulfil orders. “This may result in a loss of competitiveness in international markets,” the note states.
The distribution segment is facing a tired market and low visibility. Volumes for flat products are reported to be stable, while those for beams, which typically experience a surge during this season, are currently on the upswing. Finished product demand is stagnant in general but steel prices have remained relatively stable over the past few weeks.
July is expected to be a challenging month in terms of demand and price levels due to the extended closures announced by several steel mills leading to a potential shortage of certain products, Assofermet concludes.
Natalia Capra France
EU frees up some Egypt HRC quota tonnage
Egypt has seen 10,175 tonnes of its EU hot rolled coil third-quarter safeguard quota made available, despite having oversubscribed its 141,850t quota cap immediately after the current period opened, Kallanish notes.
As of 2 July, Egypt had 176,626t awaiting allocation for customs clearance. Whether the correction stems from withdrawals from quota declarations or other factors was unclear at the time of publication. The European Commission has implemented a blocking period for Egypt’s quota between 11 July and 11 August. Total awaiting allocation as of 11 July was 339t.
Vietnam, Japan and Taiwan have fully utilised their Q3 caps under the “other countries” HRC quota, each shipping 141,850t.
About 357,750t is still available under the other countries quota of 945,665t for Q3.
The US, Libya, and Canada have 100% of their other countries HRC quota caps available.
India has utilised 74% of its HRC quota. Turkey and Australia have each filled 18%.
South Korea, the UK, Serbia, and Switzerland had low quota utilisation rates, ranging from 3% to 12%.
The European Commission capped the maximum volume a single country can export under the other countries TRQ to 15% per quarter to stabilise the market, it said earlier. This category’s early quota exhaustion had led to market imbalances and increased import pressure.
The Italian Customs Agency (ADM) introduced an experimental procedure for tariff quotas starting from April, allowing importers, if quotas are exhausted, to cancel or adjust their import operations without incurring additional duties.
| Origin | Quota 1.7-30.9.2024 | Imported | Balance | Awaiting allocation | Avaliable TRQ, % |
| Russia | not applicable | – | – | – | – |
| Türkiye | 475,174 | 84,143 | 391,031 | 570 | 82 |
| India | 301,704 | 222,210 | 79,494 | – | 26 |
| Korea, Republic of | 188,405 | 11,369 | 177,037 | 4,128 | 92 |
| United Kingdom | 157,608 | 4,972 | 152,636 | 1,099 | 96 |
| Serbia | 167,257 | 18,215 | 149,041 | 1,322 | 88 |
| Other countries, inc | |||||
| Egypt | 141,850 | 131,675 | 10,175 | 339 | 7 |
| Vietnam | 141,850 | 141,850 | – | – | 0 |
| Japan | 141,850 | 141,850 | – | – | 0 |
| Taiwan | 141,850 | 141,850 | – | – | 0 |
| Australia | 141,850 | 26,046 | 115,804 | – | 82 |
| Switzerland | 141,850 | 4,183 | 137,666 | 165 | 97 |
| United States | 141,850 | 461 | 141,389 | 1 | 100 |
| Libya | 141,850 | – | 141,850 | – | 100 |
| Canada | 141,850 | – | 141,850 | – | 100 |
| Total other countries | 945,665 | 587,914 | 357,750 | – | 38 |
| Total | 2,235,812 | 928,823 | 1,306,989 | – | 58 |
Source: EU TARIC, as of 11 July. Calculated by Kallanish
Elina Virchenko UAE
Multiple origins exceed EU HRC safeguard quota cap
Egypt, Vietnam, Japan and Taiwan have each exceeded their 15% EU hot rolled coil safeguard quota cap for the third quarter, as expected, immediately after the opening of the new quota term. India has meanwhile exhausted over two thirds of its HRC quota.
Egypt, Vietnam, Japan and Taiwan have each had their allowance capped at 141,850 tonnes for Q3, after the European Commission introduced a hotly contested amendment to the Category 1 “other country” quota, alongside extending safeguard measures to mid-2026.
According to EU TARIC data, as of 2 July, Egypt has 176,626t awaiting allocation for customs clearance, while Vietnam has 208,880t, Japan 209,403t and Taiwan 228,520t. Tonnages exceeding the quota will need to pay duty to enter the EU market or be subject to costly storage until the following quota period.
Based on feedback from buyers interviewed by Kallanish, the average duty to be paid will amount to approximately 8%.
Indian HRC, meanwhile, has 209,807t awaiting allocation out of a total quota of 301,704t. Because Indian mills were largely out of the export market in the second quarter due to maintenance, the remaining quota may not get filled quickly.
South Korea, which almost exhausted its Q2 EU HRC quota, has only 1,386t awaiting allocation so far in Q3.
On Category 16 – wire rod, whose other country quota has also been capped at 15% per origin, in other words, at 18,413t, Algeria already has 27,702t awaiting allocation. Egypt has 7,858t awaiting allocation, South Korea 10,745t and Indonesia 14,965t.
Various speakers at Kallanish Europe Steel Markets 2024 in Milan last month lamented the lack of notice given by the European Commission that it plans to implement the 15% cap. The other country HRC quota had been exhausted within days for consecutive quotas, and several buyers had already ordered material from the impacted origins before the Commission notice was published in late May.
Adam Smith Poland
EU prolongs steel safeguard measure until June 2026
The European Commission published today an implementing regulation confirming the extension of the current steel safeguard measure for two more years, until June 2026.
The regulation also adjusts the functioning of the measure, to adapt it to market conditions.
This decision follows an investigation requested by fourteen EU Member States, which showed that the safeguard measure continues to be necessary to prevent or remedy serious injury to the EU’s steel industry.
The European Commission explains that the prolongation and adjustments are justified by a combination of factors that resulted in significant import pressure on the Union market:
- high levels of global steel overcapacity and the surge of exports from China to third countries, notably in Asia, resulting in increased exports from those third countries to the EU;
- the increased number of trade defence measures and other trade restrictive measures imposed by other third countries, and;
- the significant reduction of demand in the EU.
Next steps
The technical adjustments will enter into force on 1 July 2024.
The measure will expire on 30 June 2026, eight years after its first imposition, which is the maximum application period of a safeguard measure allowed under EU and WTO rules.
The Commission may still review the functioning of the measure before 30 June 2026 if it considers that further adjustments are necessary.
Buyers expect European HRC offers to rise following proposed changes to safeguard measures
European buyers expected an increase in hot-rolled coil offers on June 4 following the changes proposed by the European Commission to safeguard measures.
The European Commission announced May 30 that it is considering a 15% cap for a single country over the Tariff Rate Quota volume for HRC initially available in each quarter. European authorities are scheduled to announce definitive measures by June 30.
The proposed changes are expected to limit volumes coming from Japan, Taiwan and Vietnam, sources said.
“Demand for import is low due to the new safeguard clause,” an Italian service center said. “This for sure will have an impact on HRC imports from Japan, Vietnam, Taiwan.”
Buyers are expected to turn to an alternative import, either material from the Middle East or buying more coil from European mills.
In addition, market sources expect an increase in offers from European mills and non-EU suppliers that are not impacted by the safeguard changes.
“The amended measures make imports more complicated, it is unclear how the new measures would be implemented,” another service center said. “And European mills will use this situation to finally push prices up.”
Import offers from Turkey have been heard at Eur590-610/mt CIF Italy and from Asia, at Eur610/mt CIF Italy.
Platts assessed domestic prices for hot-rolled coil in Northwest Europe at Eur630/mt ex-works Ruhr on June 4, unchanged on the day.
Tradable values have been reported at Eur630-635/mt ex-works Ruhr with majority of data reported at Eur630/mt ex-works Ruhr.
Offers have been heard at Eur640-660/mt delivered Northwest Europe.
Platts assessed domestic prices for hot-rolled coil in South Europe stable on the day at Eur625/mt ex-works Italy on June 4.
Market sources estimated tradable values at Eur620-630/mt ex-works Italy and offers at Eur650/mt delivered Italy.
Maria Tanatar
EC implements 15pc cap on HRC other countries quota
The European Commission is implementing a 15pc cap on any individual country selling hot-rolled coil into the quarterly other countries quota of its steel safeguard.
This effectively caps any country selling into the other countries at 141,849t/quarter for the rest of this year: the other countries quota for July-September and October-December will be 945,664t.
If no grace period is granted, sources suggest this could lead to significant duties being incurred on 1 July, as many countries will have more than 15pc of the other countries volume in transit to the EU.
The commission decided against any other individual country quotas on HRC, the notification said.
The commission has been carrying out its review of the steel safeguard for months now. Market sources had anticipated Vietnam would get its own quota, while in recent months there have been suggestions Japan actively asked for its own quota.
The liberalisation rate has also been reduced from 4pc to 1pc.
The commission also notified the WTO the safeguard would be extended for two years, meaning there will be a brief six-month overlap between the safeguard and the imposition of the financial component of the carbon border adjustment mechanism (CBAM).
“The commission also established the surge of imports from certain new origins was related to growing overcapacity in certain regions as well as to the significant pressure exerted by a strong increase in Chinese exports to certain markets,” it said in the notification. China has been exporting record volumes of HRC this year, with significant tonnage going into nearby markets, such as Vietnam.
The changes to the safeguard are subject to approval by member states, and the commission will hold consultations from 29 May until June 10 on the proposal.
CBAM complications, safeguard hinder steel activity: Assofermet
The normative framework of the EU Carbon Border Adjustment Mechanism (CBAM) and safeguards on steel imports is hindering the daily activity of Italian and European steel companies, says Italian steel trade association Assofermet.
The challenges in filling CBAM reports, the economic repercussions expected from the mechanism starting in 2026, as well the safeguard measures in force from 2018 are a deep concern for Assofermet’s many members.
The European Commission (EC)’s Directorate General for Trade and the Directorate General for Taxation and Customs Union asked the association to highlight the critical issues of the mechanism to help with drafting the final version. “It has been assured that our perspective will be taken into account, especially for the future evolution of CBAM … Agreeing that CBAM will also generate increased costs for downstream end-users in the steel supply chain, it was pointed out to the Commission that if certain finished products … are not included in the mechanism, the European industry will lose competitiveness, given its global role,” Assofermet warns in a note sent to Kallanish.
The association notes an open-minded attitude from Italian authorities to listen to the problems of the entire steel supply chain stemming from regulations and willingness to continue dialogue on the regulatory framework. While the first quarterly report deadline for CBAM has passed, the safeguard on steel imports is currently set to expire at the end of June 2024. “There are no official updates yet on a possible extension after the first half of this year,” Assofermet concludes.
31 January was the deadline for importers to submit their first report detailing emissions as part of CBAM. The European Commission nevertheless announced this week that due to a technical incident, it is offering the possibility to request for a 30-day delay for submission (see Kallanish passim).
During the ongoing transitional phase of CBAM, European importers of steel need to file quarterly reports in the European Commission system, starting from those for the fourth quarter of 2023. During the transitional period, importers are required to report on the quantity of imported goods and resulting direct and indirect emissions. No payments will be due. The transitional phase is planned to conclude at the end of 2025.
Natalia Capra France
Salzgitter expects safeguard non-renewal, Section 232 reapplication risk
“It will then be possible to import steel products into the EU market from July 1, 2024 onward without any restrictions by tariff quotas, which will likely drive up import volumes,” the steelmaker said in last week’s second-quarter earnings report.
EU steelmakers have in recent months voiced fears over the potential expiration of safeguard measures in mid-2024, with the EU’s Carbon Border Adjustment Mechanism (CBAM) due to come into full force only on 1 January 2026. This would leave an 18-month gap that would see the EU’s market unprotected, Kallanish notes.
According to WTO rules. safeguard measures can be implemented for a maximum of eight years and then must be rescinded for the same duration as they were applied before they can be re-applied.
Their renewal is likely to depend much on whether the EU and US can agree a steel trade pact, the Global Sustainable Steel Agreement (GSSA), which is currently under negotiation. If no deal is agreed by the October deadline, the US could reapply Section 232 duties on EU steel. “The various negotiation positions are currently still very far apart, which makes arriving at a consensus by October 2023 difficult. The loss of preferential market access to the US would considerably hamper exports again,” Salzgitter says.
As for the EU’s sanctions on Russian steel, importing steel products of Russian origin processed in non-EU countries will be prohibited as from October 2023; importing semi-finished products will no longer be possible starting with October 2024.
“Risks arise from the new sanctions to the extent that the long transition periods through to autumn 2024 continue to facilitate Russian steel imports that are frequently offered at prices significantly below the customary market price level. Owing to the complexity of the directive and the difficulty in its implementation, this risk continues to prevail and may lead to distortions in the market on the back of low prices for Russian steel products,” Salzgitter observes.
The German steelmaker saw shipments drop 3% on-year in the second quarter to 1.32 million tonnes.
Adam Smith Poland
