Stainless steel quota uptake remains high in July

Imports of steel products have been subject to European Commission safeguard measures, since their introduction in 2018. During the July 1, 2019 to June 30, 2020 period, stainless hot rolled flat products, largely, had unused volumes available. Conversely, for the stainless cold rolled category, the majority of the country specific quotas, excluding those for the USA, were fully utilised before June 30, 2020.

Steel imports of US origin are subject to a 25 percent duty, below the quota level. Therefore, any material arriving above this limit, is subject to a 50 percent duty. This has deterred European buyers from purchasing material from the United States. Imports of stainless bars and light sections, from India, exceeded the twelve-month quota volume. A small percentage was still available for Switzerland, Ukraine and the ‘all other’ category.

Global steel markets drastically changed, during the latter part of the previous quota period, as a result of the Covid-19 pandemic. Demand in the EU steel market collapsed in March, with the introduction of lockdown measures, in many European countries. In an attempt to reduce oversupply in the market, domestic stainless steelmakers are reducing output.

EC reviews safeguards

The European Commission reviewed the safeguard quotas ahead of the July 1, 2020 renewal. The changes came into effect earlier this month. However, those asking for tighter controls believe that the adjustments fail to reflect the slump in stainless steel demand. Stock levels in the market are already perceived to be too high for current sales volumes.   

Following the review, country specific quotas will now be managed quarterly, in an attempt to avoid the congestion of imports in the first few weeks of each quota renewal period. However, during the opening few days of the new quota period, which runs until September, large tonnages of certain product groups were booked in. This was especially noted for stainless cold rolled flat products and Indian stainless bars and light sections – whose quotas expired ahead of June 30, 2020.

It is likely that much of this material was ordered prior to the coronavirus-related shutdowns and has been stored at the ports, awaiting the quota renewal, to avoid duties. In certain cases, stainless steel buyers may have been tempted by the low prices offered by overseas suppliers, whose own domestic markets have also suffered, as a result of the pandemic.

Imports to fall in Q4

If the current level of import bookings continues at the same rate as witnessed during the first few days of the new quota period, it is probable that several groups will be full before the end of the month. It is likely that the country specific quotas, for stainless cold rolled flat products, excluding those for the USA and ‘all other’ countries, will be full within the next few days. Imports of stainless bars and light sections, from India, are anticipated to be full before the end of July.  

However, a slowdown in future imports is now anticipated, as orders placed with overseas suppliers were limited during the lockdown period. Stainless steel demand is expected to remain subdued over the summer months. Therefore, the uptake of the October 1 to December 31, 2020 quotas, is forecast to be reduced.