UK steel traders fear business closures and job losses as a result of the planned 60% reduction in tariff-rate quota volumes and increase in the out-of-quota tariff to 50%, Kallanish learns.
“The quota changes are not going to fix anything,” says one trader. He queries the proposed hot-rolled quota levels versus actual demand levels, suggesting domestic producers cannot fulfil all the volumes.
“It’s going to be so risky [to import]. It’s tremendously complicated especially with CBAM coming on the back of this. You almost have to expect to pay the 50% tariff,” he adds. “If the HR price goes up in excess of 50%, that’s over £900/tonne [$1,198t], which is going to filter through into all manufacturing products. We’re going to witness inflation, or we import finished goods and shut down manufacturing.”
Another trading source says the changes are concerning for their business. “We don’t want to get caught out, what’s the point in taking that risk?” he says. “The quotas will halve my trading activity and output. Is it enough to sustain my business?”
“The next six months will see such a strain on supply. UK downstream manufacturing will suffer, especially if fabricator costs go up 50% in the next few weeks,” he concludes.
Julian Verden, chairman of the International Steel Trade Association (ISTA), says the association is “astounded” by the provisional detail of the new measures, which were announced as part of the Steel Strategy.
“The new quota numbers suggest that importing steel once these measures are fully in place will be in practical terms nearly impossible for many products and origins as managing quotas, estimating balances and thus the duty risk of 50% will make pricing uncompetitive for the final end users,” he warns.
He sees this could lead to reduced activity, investment and exports of finished products. “This inflationary move is completely unaffordable in the current uncertain environment. ISTA remains committed to supporting UK steel production but is also fully behind the downstream steel using industries and believes this can be achieved with a blend of imports and domestic production rather than a blockade,” Verden concludes.
Another market participant describes the changes as “non-sensical”, and hopes the UK is “posturing” in an attempt to get the EU around the table to negotiate. “[The changes] are not thought through properly. There has been no thought to downstream. This appears to be wholly 100% aligned to steel mills,” he tells Kallanish.
He also queries whether some stockholders who rely on imports will be able to survive. “If this is the new norm, then prices will escalate, domestic producers will fall over, and the UK will lose a huge amount of manufacturing and jobs to foreign shores,” he concludes.
Meanwhile, Laurence McDougall, managing director of All Steels Trading, says there is no clarity without the formal publication of the details of the new measures.
He also queries whether end-users would be able to absorb significantly higher steel prices, while competing against imported finished goods that are not subject to equivalent duties. “Without addressing this imbalance, there is a risk that domestic steel consumption will fade away unless the government closes the loophole,” he warns.
With EU-origin material included in the quotas, this could equate to additional costs in the region of £300-400/t, McDougall adds. He sees immediate market adjustments as unrealistic and therefore price increases will be staged, a strategy employed by some producers since the start of the Middle East conflict.
