More than 1mn t of hot-rolled coil (HRC) was awaiting clearance at EU ports under the 'other countries' quota on Monday, according to customs data.
And market sources suggest the 1.04mn t will likely increase as not all customs authorities provided updates numbers as of 2 October. Some suggest the final number will be around 1.3mn t. The quota for October-December is 933,743t.
At the current amount put forward for clearance, the pro-rata duty would be equivalent to around 3pc on all imported HRC under ‘other countries'. On the day of exhaustion of a quota, the duty payable is calculated as a percentage of 25pc, the highest safeguard duty rate, based on the percentage that the quota has been surpassed by. Should the number increase, the pro-rata percentage will increase also.
Invoices for the duties payable by importers will be received in the coming weeks, which is when the final rate will be confirmed.
Since the start of June until the end of August, the Argus cif Italy HRC index has hovered at €570-610/t, and averaged at €592.54/t, meaning a €15-20/t duty at 3pc. That would bring the import price close to domestic levels.
A higher-than-expected safeguard duty payable will likely see buyers try to bring their average purchase price down — especially as they have been concluding downstream sales to end-users with a lower imported price in mind — so they could push on EU mills to decrease prices further. In addition, they could leverage the large amount of imported volume as an argument that supply is ample in the EU.
There was talk today of a large European mill selling into Turkey at around $600/t cfr or lower.
Considering mill costs, which have increased over the past couple of months, and production cuts, producers could try to resist further domestic declines. Spreads between HRC and primary blast furnace raw materials have fallen below $200/t in recent days, to the lowest level since August 2020.
Futures bounce
The CME's North EU HRC curve increased this morning, as news of the volume circulated. October increased by €10/t to €618/t on screen, while November nudged up by €5/t to €630/t. December and January both rose to €660/t, up by €20/t and €8/t, respectively. In the brokered market, a January-June 2024 strip traded at €680/t.
Derivatives market participants could anticipate the quota overfilling as giving domestic mills a more captive market.
