The recently published quotas of the European Commission for the allocation of quotas in accordance with the new regulation on trade measures were called a sensation by Italian buyers and end users of rolled steel.
Market participants tell Kallanish that they did not expect the rules to be so strict, and say that this step completely changes the structure of the supply chain, which will need to be rethought. They add that the new regulation is seen as a huge gift to EU manufacturers.
The regulatory structure is noticeably fragmented: some countries have allocated minimum quotas, for example, Australia - 11,000 tons of hot-rolled coils per quarter, while Turkey, a long-time supplier to the EU, has reduced its quotas from 390,000 tons per quarter to just 160,000 tons per year.
"You won't be able to buy a single ship in Australia. Other countries such as Japan have also been heavily sanctioned, imposing 551,000 tons per year[for HRC]and anti-dumping duties of 30%. This is a serious signal," one of the buyers comments.
Another buyer expects that the reduced quotas will be exhausted by large trading companies and European steel refiners within a few hours, making it difficult to supply steel from Asia.
Another major buyer describes the impact on imports of HRC as severe, which will have an immediate impact on prices. Some Asian producers reacted to the publication of the document by raising prices for HRC to 680-700 euros per ton (775-798 US dollars per ton) cfr.
The trading company describes this mechanism as particularly difficult, as buyers have no other alternative but to shop in Europe. "We will have very little room for maneuver. Prices will rise significantly, but the rest of the supply chain will suffer," says the trader.
All sources agree that the processing sector will not be able to cope with the expected sharp increase in prices or maintain volumes. Many end-users, including manufacturers of household appliances and the automotive sector, are implementing measures to stop production.to balance supply and demand.
Another major buyer believes that the need to rethink the supply chain will become relevant only in the fourth quarter. He explains that HRC's inventories, including his own, remain high, and there are enough to cover demand until about December.
Any price increase announced this month in Europe for September shipments is unlikely to lead to the conclusion of contracts, as all sources confirm that they currently have no need for purchases.
However, roll prices in Europe are expected to rise in the fourth quarter.
