Turkey HRC exports to EU continue to surge

Turkish hot-rolled coil (HRC) exports to the EU continued to surge in November, as traders peppered the market, particularly in Spain and Italy, with competitive material.

The country sold 2.66mn t of HRC to the EU over January-November 2018, up by 56pc from 1.71mn t a year earlier. Turkish imports in November alone were up 134pc on the year at 253,400t. The material landing in November was likely booked around September.

HRC offers from Turkey for April-May arrival are as low as €440-445/t ($501-507/t) cfr southern Europe, and around €460-465/t cfr Antwerp.

Total HRC imports to the EU rose by a fifth to 7.44mn t in January-November last year, from 6.22mn t in the same period of 2017. As a result, European flats mills are dissatisfied with the European Commission's definitive steel safeguard — a tariff-rate import quota, with a country-by-country element for all products except HRC, above which 25pc duties are payable . Tariff-free imports in February-June are due to amount to 3.35mn t, largely in line with the 3.32mn t imported over the same period in 2017 but up from the 3.3mn t in February-June 2018.

The lack of a country-by-country quota for HRC means large sellers such as Turkey can still export large volumes to the EU. And the fact that unused quarterly volumes can be rolled forward is also seen as an issue by domestic mills.

"It is up to the safeguard to try and prevent surges and undue volumetric increases in imports. It remains to be seen how this will actually play out in final measures", a spokesman for European steel industry association Eurofer said. The commission's proposal was supported by the overwhelming majority of member states at today's vote in Brussels. The structure of the quota was unchanged from Argus' previous reports.

On products other than HRC, the fact countries that exhaust their specific quota can compete for the residual, or "other countries", quota in the calendar second quarter has raised eyebrows. Investment bank Jefferies said Turkey getting access to the global quotas for flats is a "key crack" in the policy.

Domestic mills believe countries will race to fulfil their own quotas over the first three quarter of the quota, so they can access the residual quota in the fourth quarter of the period. This could lead to stronger competition to sell into the EU during that period and increase seasonal volatility.

Turkish hot-dip galvanised (HDG) exports to the EU also surged in November, and are up substantially compared with 2017. Turkey sold 63,480t of HDG into Europe in November, up from 13,120t in the same period of 2017. Over the first 11 months of last year it moved 417,000t into the EU, up by 69pc from 247,400t in the same period of 2017.

China remains the largest HDG supplier to Europe, accounting for 28pc of the 4.54mn t supply over January-November 2018, at 1.27mn t. But anti-dumping measures have resulted in its shipments dropping from 2.08mn t over the first 11 months of 2017.