China exhausts EU import quota for automotive-use coated flat steel

Chinese suppliers have already exhausted their annual quota for imports into Europe of hot-dipped galvanized coil (HDG) grades used by the automotive industry, just a few days after the start of the new quota period.

The HDG grades traditionally used by European car-makers fall into product category 4B of the region’s safeguard measures.

The full annual quota allocated to material from China for the period from July 1, 2019, to June 30, 2020, was 527,164 tonnes. This means that any material from China that might be exported to Europe before the next quota period begins will attract import duty at a rate of 25%.

Automotive producers will either have to buy material from domestic European suppliers or look for alternative sources outside the EU, such as South Korea, Taiwan, India or Turkey.

The combination of reduced availability of HDG from China and production cuts at some European flat steel mills will probably to be used by European steelmakers to try to achieve price rises, according to market sources.

Fastmarkets’ weekly price assessment for steel hot-dipped galvanized coil domestic, exw Northern Europe, was €580-610 ($654-688) per tonne ex-works on July 3. The prices have been comparatively steady in recent months due to limited trading activity.

A price increase, however, remains unlikely due to the generally slow trading and the expectation of a further seasonal market slowdown in the second half of August, according to market sources.

End-users, including automotive manufacturers, are negotiating long-term contracts with European steelmakers and prices are likely to go down, sources said.

“Car producers and other big buyers are trying to achieve a decrease of at least €40-60 per tonne in contracts for the second half of the year, but mills hope that the decrease will be smaller, due to the rise in raw material costs,” a Northern European producer said.

Demand in the automotive industry, the key consumer for flat steel, recovered slightly in May, after a negative trend over the previous eight months.

The European Commission (EC) increased the quotas for imported steel products by 5% year-on-year from July 1, one year after the preliminary safeguard measures were set.

The EC initiated a review of its steel import safeguard measures on May 17 this year.

The current safeguard mechanism increases the level of tariff-free quotas for each product category by 5% year-on-year from July 1, 2019 - the end of the first quota period.

But because the measures in place have failed to reduce imports into the EU, according to the region’s mills, European steelmakers have asked the EC to make several changes to the trade restrictions.

These include the removal of the 5% yearly increase in quotas as well as implementation of new country-specific quarterly quotas for imports of products in category 1 of the safeguard measures.

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