There could be around a year's worth of hot-dip galvanised steel waiting to clear into the UK's residual quota in the coming months, after the government said it intends to impose a 15pc cap.
UK business secretary Jonathan Reynolds yesterday shocked the market, when he informed the Trade Remedies Authority he planned to ignore its advice, and impose a 15pc cap on the quota rather than the 40pc cap they had suggested after months of investigation.
UK Steel had called for the imposition of a cap on the quota following a similar move in the EU, to avoid the risk of trade diversion. A domestic producer suggests the import quotas are too big in relation to the size of the overall market; the ample EU volume is irregularly exhausted, because EU mills are expensive compared with Asian sellers.
The 15pc cap means the two main exporters using the quota, South Korea and Vietnam, can sell 12,839t/quarter into the UK without incurring duties. Traders and service centres suggest there is 18,000t of Vietnamese HDG in Liverpool port alone waiting to clear customers, and 9,000t of South Korean with another 12,000t arriving this week. There could be as much as 70,000-100,000t booked to arrive later in the quarter. This would mean around a year or more worth of steel from the two countries on its way to the UK.
Two traders pulled ex-stock offers of HDG today, expecting prices to spike, although some buyers said weak demand means this is unlikely. Vietnam and South Korea are the only real two sellers into the quota, and traders suggest it will be difficult for the other 60,000t or so to be utilised — but different supply routes often open up in response to new legislation as traders and buyers look to maintain their volumes.
"The timing of this letter, and its proposed implementation just six days later, can only be interpreted as a deliberate policy to inflict maximum financial damage on the import related sector of the steel supply chain, and runs totally contrary to the moral of free but fair trade", one senior trader told Argus. In a letter to Reynolds, the International Steel Trade Association (ISTA) said the cap should be 25pc for HDG, calliing 15pc "unworkable and punitive".
"Companies affected by these sudden changes will face unaffordable duties, supply shortages and contract penalties. Some will run out of stock entirely. This is not a manageable adjustment", it added.
There is some concern the lengthier delivery times from South Korea and Vietnam could impact manufacturing operations; some of the material is destined for an automaker, according to service centres and traders.
Peel Ports, which operates Liverpool port, had informed customers even before the new cap was announced that they needed to take delivery of steel more quickly or face higher storage charges.
Traders told Argus that if the cap remains at 15pc, it should at least be implemented from 1 October to allow the material in stock and on the water to clear without inflicting too much financial damage on the industry.
