The European HRC market players, from both customers and the supplier side, have been actively discussing the impacts and short- and mid-term consequences of the country specific quotas which were finally announced on June 30, just a day before the next quota period. The system has reflected quite a bit of change with the preference given to countries with valid or soon to be FTAs, as well as the most favored nations, which are basically WTO members, while the total import steel quota volume for HRC specifically has been slashed from 7.7 million mt to 5.2 million mt. The biggest surprise came for Algeria and Malaysia not receiving a country specific quota, and having access to a very minimal tonnage of the shared quota. In addition, Indonesia, which has been selling heavily to the EU in the past year, now has only slightly below 32,000 mt per quarter to sell.
Currently, the market players are mainly busy watching and evaluating the customs clearance process for the volumes under Q3 quota volumes, which are mainly exhausted and exceeded in some cases. “No one was expecting this quota assignment. It is a disaster really. Algeria had booked approximately 70,000 mt for Q3 with traders. Now everyone is trying to cancel it,” a source told SteelOrbis. Similar concerns have been seen for Indonesian material, though for much lower quantities, while for Malaysia sources report there are no significant lots waiting at ports or to arrive within Q3.
In terms of the domestic HRC price levels across the EU, there is hardly any doubt that the offers will increase shortly, based on the CSQ effect. Some of the suppliers in Italy have stopped accepting orders above €680/mt ex-works base with the latest small spot sales closed at €675-680/mt ex-works. Some of the indications have been voiced at €705-720/mt ex-works, but not yet officially. In Spain, some of the indications have been reported at as high as €730/mt delivered, while in the northern part of the EU some of the indications have been voiced at €720-730/mt ex-works. “Some customers are expecting AM to return next week with €780-800/mt levels for HRC,” a source told SteelOrbis. Other players expect the levels might go even higher than that, although many agree that these will remain simply on paper for now. “They [mills] need to sell summer allocation first and then we will see the real price increase, once the September volume sales start. Then we will see how the producers benefit from new CSQ in terms of workable prices,” a trader commented. “Local mills already increased by €10/mt before the announcement. I personally think we will see some considerable increases over the next weeks and months,” another trading source said.
In the import segment, hardly any serious talk has been taking place this week for booking volumes, since all eyes have been on the ongoing customs clearance and taking care of the mess with certain lots under the unexpected quota decisions. Sources believe that in the short run the buyers would want to deal on DDP basis still, while the number of fresh offers is limited to South Korea at around €700-710/mt, while the indications from Turkey have been reported at around €680/mt. Some sources expect the CFR business to normalize, now when the quota risks are clearer, and specifically for Asian suppliers. The latest indications from India and Vietnam have been reported at €620-630/mt CFR (August shipment) and €580-585/mt CFR (August-September shipment), while ex-Turkey prices are evaluated at €575-590/mt CFR duty paid. In the CRC and coated steel segments, South Korea has offered €840-850/mt DDP for CRC, while Vietnam has set its HDG price at $860/mt CFR for Z100 material.