EU hits Turkey with country-specific quota for HRC imports

The European Union submitted to the World Trade Organization (WTO) a notification of proposed adjustments to the safeguard measures on 26 steel product categories following its review investigation. The biggest modification is to introduce a country-specific quota for hot rolled coil products which are currently subject to a global quota. The EU intends to set for this category country-specific quotas as from July 1, 2020 for those countries whose level of imports reached at least five percent of imports in the 2015-17 period, and a residual global quota for the rest.

Turkish mills, which already are facing a AD investigation by the EU and may face a countervailing duty (CVD) one shortly, are expected to be hit the hardest by the renewed quota system which is now country-specific based. “It is a big problem for Turkey as now all mills together can sell only 345,000 mt of HRC per quarter, while previously over half a million were traded,” a market source has told SteelOrbis. Moreover, the possible retroactivity of the expected AD tax creates another pressure on sales in the short run. “Normally mills would rush to sell as the total volume is not enough for the three of them. But with the additional threats, buyers will be hesitant,” one trader stated. As a result, HRC exports from Turkey are to face a challenging situation in the coming weeks at least and this may create additional pressure on Turkish mills’ prices.

Russia, India and South Korea, being the other three key HRC sellers to Europe, are considered to be unaffected by the renewed measure since the quota volume is fine. India and South Korea are expected to remain balanced between their local market and sales to Asian and European customers. In the meantime, Russia’s Severstal now holds a quarterly quota volume which is more than the one for Turkey altogether. It is worth mentioning though that there are some reports in the market about the EU aiming at a revision of the AD rate previously set for Severstal at €17.6/mt.

Another important adjustment that is being proposed by the EU is that the quotas will be managed quarterly to ensure a more stable flow of imports and minimize the risk of an undue import surge during the remaining duration of the measures.

The EU also intends to introduce a "refined access regime for the access to the residual quota of countries benefiting from the country-specific quota". This aims to protect the smaller exporting countries and minimize the risk that quotas are crowded out by those exporters enjoying country-specific quotas.

The EU has not made any significant changes in quota volumes, in contrast to EUROFER’s request to reduce the quotas by 75 percent.

According to the EUROFER data, in 2019 the EU’s HRC imports stood at 7.61 million mt, while in the first quarter of 2020 they totaled 1.73 million mt. In particular, HRC imports from Turkey, one of the EU’s major suppliers, amounted to 947,000 mt in the second half of 2019, while with the new adjustments Turkey will be able to export only 689,781 mt of HRC to the region. During the first quarter of 2020, Turkey’s HRC exports to the EU amounted to 530,000 mt.