2017 REVIEW: EU trade cases support balance in coil market

Trade defense measures in the European Union helped to re-establish supply-demand balance in the coil market in the second half of 2017.

The European Commission (EC) imposed definitive anti-dumping duties of 18.1-35.9% on hot-rolled coil (HRC) from China in April. The decision was welcomed by both producers and buyers, as it was expected to reduce pressure on prices.

But a second case - targeting HRC from Russia, Brazil, Iran and Ukraine - was not so straightforward. Italian steel trade association Assofermet was strongly against it, claiming the investigation might give too much market power to European mills.

Due to pressure from distributors, the EC decided to not to impose preliminary duties on the four countries, which meant definitive measures could not be imposed retroactively.

This decision drove an increase in HRC delivered from the four countries under investigation during the summer. Buyers used the opportunity to build stocks of the material, mainly from Russia, before the definitive decision was announced.

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The supportive effect of trade defense measures was a key driver behind southern European domestic HRC’s faster price growth compared with northern Europe during the third quarter of 2017.

Reduced supplies from domestic mills and changes to Italian steelmaker Ilva’s business strategy also drove southern Europe prices. Ilva used to sell coil at the lowest prices in the region, dragging domestic prices down.

As a result, the traditional €20- to €50-per-tonne gap between prices in northern and southern Europe was almost eroded by September. But southern European mills failed to sustain these higher prices due to a need to secure sales volumes.

Fixed charge measures
The EC set fixed charges in October in the range of €17.60-96.50 ($20.69-113.46) per tonne as a definitive trade defense measure on hot-rolled imports from Russia, Ukraine, Iran and Brazil.

But the imposition of fixed charges, instead of the more usual duties, did not satisfy some market participants. European steel association Eurofer was concerned the fixed charges would not stop imports from the targeted countries. Meanwhile, Italy’s Assofermet claimed the measures would result in a shortage of material.

Despite Eurofer’s concerns, only Russian steelmaker Severstal returned to the EU market. It was hit with the lowest duty of €17.60 per tonne, and was delivering limited volumes by late October. The company has not been offering HRC to Europe since, according to market sources.

From January-September, the European Union imported 5.81 million tonnes of HRC, compared with 6.13 million tonnes in the corresponding period of 2016, according to data released by Eurofer.

But while the market share of the countries under EC investigation was partially taken by suppliers from Turkey, India, Egypt and Asia, the trade measures ultimately helped the EU’s supply-demand balance, market sources said.

“By the year-end, Europe became less exposed to influence from imports,” an Italian trader said. “The market became more regionally focused, meaning that demand in Europe now has more impact on prices than influence from overseas.”

HDG and CRC
The EC imposed in August preliminary anti-dumping duties of 17.2-28.5% on hot-dipped galvanized coil (HDG) originating from China, with definitive measures scheduled for February 2018.

But while the investigation does not target HDG grades used in the automotive industry, it will still result in a significant drop of imports, according to market sources. This is because a majority of spot buyers who are focused in commodity grades of HDG have been affected by the case.

EU coated flat steel imports increased by 35.66% year on year to 4.64 million tonnes in January-September period, according to data published by Eurofer. The increase was a result of buyers’ attempts to build higher stocks of Chinese HDG ahead of the EC’s preliminary trade defense decision, according to market sources.

Prices for the material from alternative sources - such as Vietnam, South Korea, Taiwan, India and Turkey - have been too high to spur strong demand in Europe, market sources said.

Metal Bulletin’s weekly price assessment for HDG imported in southern Europe was €650-665 ($768-786) per tonne cfr main ports, and in northern Europe it was €650-670 ($768-791) per tonne cfr main ports on Wednesday December 20.

European cold-rolled coil (CRC), however, remained the most exposed to imports. That product is only protected from Chinese and Russian material, and the number of alternative suppliers remains high.

“We still have enough [non-EU] sources of CRC left,” a Southern European trader said. “So HRC and HDG have been the most active segments of flat steel market this year so far.”

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