Buyers and exporters to the EU are trying to reduce the risk of purchasing "other countries" hot-rolled coil (HRC) under the 15pc single country quota cap.
They are discussing adding duty-sharing clauses to contracts, and commitments from sellers to not exceed their quotas.
Mills from the same countries, in the meantime, are deciding whether it would benefit them to allocate the quarterly quota between themselves, in a similar way to South Korean producers, or adopt India's approach, where each seller has tried to maximise its market share.
Participants are preparing for a turbulent lead-up to and start of July, and trying to estimate how much duty will be payable on imports mainly from Japan and Vietnam, but also Egypt and Taiwan. Sources expect that October arrivals could also be above quota allocations.
In order for purchasing to resume, amid all the uncertainty, buyers are demanding that sellers provide some guarantees that they would not sell excessively in the EU. But feedback from mills has so far been mixed — Vietnamese sellers have said they cannot be held responsible if exports to the EU are higher than the roughly 142,000 t/quarter allowed duty-free, and they were not willing to share duties with buyers, according to participants.
Some buyers said they have enquired with Egypt about committing their full quota to them with a firm bid. But controlling Egypt's quota may be more complicated, as often the mill sells on a fob basis to traders, which may in turn sell to Europe or not, market participants said. Some sources said the producer is allocating volumes per buyer depending on the relationship and historical tonnages purchased. Co-operation between Taiwanese mills could be more straightforward, as export certificates are issued by the Taiwanese steel association, according to a seller, in which case volumes can be tracked and monitored more easily. One source said mills will look to sell higher grades and specialties in lieu of commodity HRC to compensate for the reduction in volume to the EU, but maximise the revenue generated.
In Japan, mills have been discussing sharing the allocation between themselves, but each seller is reportedly pushing for a larger portion of the quota, even those that have sold very low historical amounts to the EU previously, placing the most active mill under further pressure. There have been suggestions that Japan could try to ramp up its exports of other products to compensate for the loss in HRC — it is often already the lowest-priced supplier of cold-rolled coil (CRC).
Buyers and traders are continuing to urge the EU to allow for a grace period in the meantime, so that the material due to be cleared on 1 July is subject to the old regulations. But it appears that the European Commission, which has not yet officially confirmed that the safeguards have been passed as proposed, is not going to take those requests into account. Sources in Brussels suggest that no grace period has been included in the regulation.
