“The likelihood of ending up with more safeguard measures, as happened in 2002, is very high,” Irepas said late last week. “The EU will probably apply quotas instead of tariffs, meaning that both the United States and the EU prefer to have control over imports, rather than simply blocking them.”
The EC’s investigation was launched in response to the likelihood of material being redirected in the global markets as a result of the application by the US of a 25% tariff on steel imports under Section 232 of its trading legislation.
Quotas would be more welcome for non-integrated EU wire rod processors. Such companies depend on imports, and have argued that EU safeguarding could lead to bankruptcies by further intensifying the current shortages in supply.
EU safeguarding measures could have a negative effect on European independent distributors, market sources have told Metal Bulletin.
There is still uncertainty in the market because countries which are temporarily exempt from the Section 232 tariffs must conclude their negotiations with the US before May 1.
The difficulty of meeting this deadline could lead to a delay in the US’ ultimate decision on which imports will be affected by its tariffs, and further prolong the uncertainty in the market, Irepas said.
The EU, Argentina, Australia, Brazil and South Korea have been temporarily exempted from the Section 232 tariffs on steel and aluminium until May 1 this year.
“Buyers of long steel products are in a bind, not knowing what way to move, while they speculate on what may happen after May 1,” the association said.
Many countries are expected to benefit while Chinese steel export volumes remain low, with Irepas expecting relatively strong output in the European and US domestic markets during the spring months in the northern hemisphere.
Metal Bulletin’s price assessment on April 4 for EU domestic rebar, delivered in Northern Europe, was €550-570 ($675-700) per tonne.
“Demand in the US market is actually stronger than before [but] supply to the US is now limited by the Section 232 duties on [imports from] certain countries,” Irepas said.
Metal Bulletin’s price assessment for US domestic rebar had risen to $680-700 per short ton fob mill on April 4, from $580-600 per short ton fob mill at the start of the year.
“Global demand for steel products and ferrous scrap remains elevated,” Irepas said. “Chinese finished steel inventories were very high in February and March, resulting in price erosion, but these inventories have been sold off because some short-term loans had to be paid back to the banks by the end of March.”
China intends to eliminate another 30 million tonnes per year of steelmaking capacity in 2018.
“The international market is characterized by low to medium [levels of] competition,” Irepas said, but this could change if there is a trade war between the US, the EU and China.
