EU Steel Buyers Grapple
with Safeguard Implications
The European Commission announced provisional safeguarding measures
on imports of steel, prior to the start of the European summer
holiday period. This created uncertainty at a time when many
domestic mills are closed for several weeks, across July and August.
Limited order volumes are usually placed, at this time. However,
MEPS predicts higher than normal market activity across the
industry, this month.
The provisional import quota system is designed to restrict the
impact of steel being diverted into the EU market as a result of the
Section 232 measures, introduced in the United States. Any steel
brought into the European region, over and above specified tonnages,
will incur a 25 percent tariff rate. The European Commission
believes that this will protect the local steel industry from
serious harm. The quotas are set for a period of 200 days from July
19 and have been calculated, on a pro-rata basis, from the average
of the tonnages imported in the years 2015, 2016 and 2017.
The European Commission has excluded five steel categories from the
provisional quotas and tariffs – stainless steel quarto plate, grain
oriented electrical steel, non-alloy and other alloy cold finished
bars, railway material and other seamless tubes. However, these
products may be included when the definitive measures are decided.
The Commission will continue to monitor the import volumes for these
products. Conclusive measures are likely to be determined in
December 2018 and will supersede the July announcement. A number of
exclusions have been made for the 122 developing nations, albeit
with exceptions for some steel categories in each country. These
were determined if their previous import volumes exceeded 3 percent
of total imports for each specified product.
MEPS notes uncertainty surrounding how the quotas will operate. Many
buyers worry about whether foreign steel, ordered now, will be
subject to the 25 percent tariff when the material is delivered to
the port. A customer will not know if the quota will still be
available, at the time of ordering the material.
An electronic monitoring system will be used to manage the quotas.
The allocation will be made on the second working day following
customs acceptance, in chronological order of the date of customs
declaration. Consequently, material booked from overseas cannot be
guaranteed to be tariff free until after it has arrived, been
accepted at customs and allocated, under the relevant quota, by the
Concerns are being raised that exports from the EU to the US would
reduce, because of the Section 232 tariffs, resulting in material
being diverted back into the European market. However, this has yet
to be realised. The large disparity between US and EU steel prices,
at present, enables steel to continue to be sold into the United
States, with the tariffs included. MEPS is forecasting a downward
domestic price correction, in the US, in the autumn of this year.
Despite this, exports, to the country, are likely to remain viable,
in the near term, particularly for flat steel products.
Imports of steel into the EU were rising prior to the Section 232
announcements. It is feasible to conclude that volumes from third
country sources would have continued to increase, with or without
the US trade barriers. The European Commission’s safeguarding
measures are expected to bring this growth in foreign material to a
halt and could result in a reduction in imports, as European traders
reduce purchases, for fear of falling foul of the tariffs by the
time the steel arrives. This may restrict the buying options
available in the market and give local producers increased pricing
European steel price increases are now forecast to extend into the
autumn, with the MEPS EU average hot rolled coil transaction value
likely to hit an almost seven-and-a-half-year high, in the coming
months. Consequently, profits at the domestic steelmakers are
expected to remain healthy, for the remainder of this year.
The upward price effects of the EU safeguarding actions are likely
to be limited. The quotas are not designed to reduce foreign
supplies but to restrict excessive growth in steel imports, which
may result from the redirection of material due to the US Section
232 tariffs. Overseas material is an important source of supply for
the EU market.
A degree of competition from third country suppliers will remain in
the EU steel market. This may be tempered by tariff concerns.
Nevertheless, if domestic mills were to push too hard for price
increases, then imports, including any tariff costs, would become
attractive to many EU buyers. The result of this would be a loss of
market share for the local producers.
European domestic steel prices are forecast to weaken, marginally,
towards the end of 2018. A negative trend in transaction values is
anticipated throughout most of 2019. Declining raw material costs,
coupled with reduced home and overseas demand, is predicted, next
year. Nevertheless, a modest pickup in steel selling figures is
possible, in the first quarter of 2019.
Source: MEPS -
European Steel Review
- August 2018 Issue
Also See: MEPS
All Products Composite Purchasing Price & Index
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