Duties on Indian HRC could hurt EU producers

Potential duties on Indian hot-rolled coil (HRC) imports into the EU might do more harm than good in the long term for European mills.

News emerged this week that an investigation may be launched after a substantial increase in arrivals from the country, and despite safeguard quotas. Imports from India in January-April are just under full-year 2020 volumes, with April comprising 73pc of the overall volume for last year. The April figure is skewed by India's access to a third of the ‘other countries' quota on top of its own allocated volumes, so imports in May-June would have likely slowed, as has been the trend every quarter.

The quotas for July-September opened yesterday, and already 333,131t have been put forward for customs clearing — the quota for the country is nearly half that amount at 169,717t. A portion of this material will be subject to a 25pc duty, but some market participants had already factored in the rate, expecting imports from the country to soar, as Indian mills discounted to attract orders amid weaker pricing into Vietnam and their domestic market. Two freight forwarders in Antwerp had suggested they had around 130,000t between them to clear, with 80-100,000t also likely to clear customs at Ravenna for one customer alone.

Low European availability and high offers — at the start of January ArcelorMittal was offering at €730/t, which has increased to €1,200/t — opened an arbitrage for imports as global prices softened.

Turkey gets duties

A major turning point for the European market was the imposition of anti-dumping duties on Turkish HRC in January. Coupled with a revival in demand from EU buyers and still lower production from local producers, this extended lead times to historic lengths and prices to historic highs.

But sales have continued into the bloc in spite of the duties on Turkey — 458,732t were imported from the country into the EU in January-April. Although this is down by 30pc year on year, overall HRC imports into the EU are still higher, at 2.9mn t compared with 2.2mn t in January-April 2020.

Indian mills are among some of the lowest-cost in the world, and it has been evident over the past month that they are ready to discount seriously to sell, with offers before 25pc import duty in the €800s/t cfr Europe. With weak Vietnamese pricing, they have also been offering competitively into Turkey, attracting large orders from re-rollers. Indian mills have been turning to exports heavily as Covid-19 has weakened domestic demand. The belief they would exceed the European quota has seen them turn to Turkey, in particular. UK participants are also keeping an eye on India, as it is exempt from the UK safeguard on HRC.

There is strong concern in Turkey about the implications of a European HRC investigation into India. Historically, CIS mills have been the ones pushing down local Turkish pricing, as they are able to easily adjust prices, helped by low production costs. India only occasionally appeared, and usually with higher prices than Russia. Russia's relative absence from the Turkish market this year meant local producers have comfortably been able to raise prices and increase their market share.

Some participants now believe that Indian mills' current focus on the Turkish market might not be temporary, but the start of a new trend, especially if the EU slaps duties on India too.

Catch-22

On the one hand, as has been the case with duties on Turkey, any EU duties on Indian material might not lower imports from the country by that much. But if they do, there is a real possibility those tonnages will be redirected to Turkey instead, increasing competition for local and CIS mills.

Increased competition in the Turkish local market could make Turkey even more competitive in the export markets, primarily the EU.

Essentially, duties on Indian HRC risk damaging the domestic markets of neighbouring countries, which could filter in lower import prices in the EU from players who are able to supply serious volumes.

By Lora Stoyanova