Traders have had to reroute steel cargoes destined for the EU market over the past couple of weeks, after the implementation of the bloc's new import measures from 1 July, which saw substantial cuts to free allocations and tariffs doubled to 50pc.
The technical details of the quotas were announced only on 30 June, leaving participants no time to react to the changes. Contracts signed months ago and cargoes either already at sea on their way to the EU, or at EU ports, now faced substantial over-quota duties. Tariff rates remain unclear due to a two-week import blocking period that the EU imposed.
Market participants reported traders rerouting cargoes to avoid the new EU tariffs. In some cases, orders have been outright cancelled, although this is probably limited to volumes yet to arrive in the EU. Some sources said that although importers could choose to delay customs clearance until the following quarter instead of cancelling, warehouses at ports are already full of material, and the next quota period could see similar volumes put forward for clearance. And some steel products would be stored uncovered outdoors, leaving them susceptible to deterioration over the three-month period.
The rerouting of orders involved Indonesian and Thai hot-rolled coil (HRC) cargoes, according to market participants, some of which have been offered to north Africa instead. Indonesia, which had become a key supplier of coils to the EU over the past year — imports in April alone exceeded 200,000t — was granted a 31,000t quota per quarter.
Certain Turkish plates, now under the scope of the HRC quota and set to clear this autumn, have also been offered to non-EU customers, a source said. The changes to the Turkish plate quotas, which previously allowed higher-thickness sheets to import under plate classifications, have also created issues for suppliers, especially in Antwerp, where a large portion of the material was previously imported. The sheets would now need to be imported under the HRC quota, which was substantially reduced — EU customs data currently shows that Turkey is by far the most oversubscribed country quota for HRC, with over 370,000t pending customs clearance as of 14 July, more than double the 160,000t actual quota.
On cold-rolled, market participants reported that a vessel from Brazil, which was granted a 3,534t quota per quarter in the EU, was being redirected to the UK.
Market participants also said contract terms have been renegotiated, with some traders attempting to convince customers to accept some of the liability for out-of-quota tariffs. Waiting for the next quarter to clear material, an approach that buyers previously took, is not feasible in most cases due to the limited size of some country quotas, a trader said.
The import disruptions have contributed to some additional demand for domestic EU production, with buyers having to fill some holes in their inventories. Most EU mills have jumped on the opportunity to capitalise, increasing offers by around €50/t over the past week. Increases so far have been contained by seasonal factors, coupled with a generally weak economic backdrop and overall sufficient stocks.