The European Commission’s safeguard measures could temporarily achieve the opposite of their intention, meaning a temporary flood of imports until the duty-free quota has been filled, European coil market participants say.
Market observers previously told Kallanish this could be the case, calling the EC’s definition a “… greyhound principle” of ‘first-come-first-served’. However, so far the import flood has not materialised, or not been observed – at least not for coil, the most popular import product group.
According to one manager, the quota limit is 4.2 million tonnes, and it could be exhausted at any time, even while one’s cargo is still at sea, meaning neither buyer nor seller is legally safe. “You cannot get a grip on this with your customary accounting,” he says. In many cases, one cannot avoid that contracts will be broken due to the circumstances. “This is really an explosive matter,” he adds.
Another buyer at a big stockholder agrees about the prevailing insecurity: “The Asians are afraid they will hit the limit while the load is on the way,” he explains. But he believes that “…you are on the safe side with all that lands in the EU this year still.” He, too, wonders why a run on the duty-free allocation has not kicked in yet.
According to the former manager, the run should be just around the corner. So far, he has noted increasing offer activity, but under the wrong conditions. “We have had some ten offers, but rejected them all because they went by ArcelorMittal’s yardstick,” which attempts to lift EU domestic mills’ prices to €580/t ($670) for HRC from a previous upper level of €550. Buyers say that €560-565/t is the realistic maximum at present.