Turkey nearly exhausts EU rebar quota

Turkey has almost exhausted its rebar quota into the EU after 1,410t cleared customs in the past 24 hours, leaving only 79t of its allowance remaining.

CIS countries are also reaching critical stages in rebar exports to the EU. Ukraine has only 45,251t remaining, with 336t awaiting allocation — only 28pc of its original allowance of 160,848t. While slightly more restrained, Russia has only 40pc remaining on the 241,998t allowance it was given on 1 July. This is expected to change over the next month or so with the arrival of winter in Russia and CIS mills needing to redirect rebar sales to the export market.

Turkish wire rod exports into the EU are also close to critical, with just over 30pc currently available. The original quota was 312,081t but as of today, 100,528t are remaining with 991t awaiting allocation.

As Turkish rebar prices remain relatively flat, it may be more viable for producers to sell wire rod on export to the EU while the quotas last, especially given the high demand in the market. Over the past six months, the Argus fob Turkey rebar assessment has lost almost $80/t, going from $480/t on 10 April to $401.30/t yesterday.

Turkey was previously the largest exporter of wire rod into the EU, with 929,150t in 2018. The quota system has raised concerns from EU integrated wire rod processor association Eunirpa that its members will be unable to source the material to meet their requirements, given that the quantities they require are generally unavailable within the EU.

"There is a well-documented shortage of wire rod on the EU market due to an increase in consumption and captive use," Eunirpa said in July. "EU producers are simply not able (or willing) to supply us with the volumes of wire rod we need to operate under normal business conditions."

Turkish wire rod exports to the EU totalled just 360,222t in the first seven months of 2019, trade data show. This will also decrease sharply as Turkey uses up its remaining 100,000t for the second half of the year and the first half of 2020.

China, Turkey and Russia's export pace for merchant bars looks likely to leave their quotas exhausted before the end of the period. Although not yet near the critical level, with just 26pc of the quota period elapsed, China has used 32pc of its 427,536t allowance, Turkey has used 42.4pc of its 295,302t allowance and Russia has exhausted 34pc of its original 243,820t allowance.

In the rebar market, Moldova is outstripping the quota period with 38pc of its 72,752t quota exhausted within 26pc of the elapsed time. At current speeds, having used only 25pc of its allowance, Bosnia and Herzegovina looks to be the only country with an individual quota that will not have to tap into the "other countries" quota for rebar when it opens on 1 April.

Similarly, Ukraine and Switzerland will likely be able to benefit from the wire rod quota at the end of the period, having used only 11pc and 17pc, respectively. Russia has used 32pc of its original 316,074t, Belarus 40pc of its 250,620t and Moldova 30pc of its original 187,848t.

Flats

Turkey's organic sheet quota is also critical, with only 575t remaining of an initial 56,161t. South Korea and Taiwan have been more restrained in exporting organic sheets but they both look set to exhaust their quotas before the end of the period. Currently, South Korea has 140,021t left of its 265,842t original allowance while Taiwan has 47,202t of an 82,246t allowance remaining.

China exhausted its 527,164t allowance of automotive-gauge galvanised steel on the same day the quotas opened. Taiwan's auto-grade galvanised steel is also nearing a critical stage, with 50,698t of 126,675t left. South Korea has also used just under half of its auto-grade galv allowance, with only 331,764t remaining, meaning it looks like the "other countries" quota of around 80,000t per quarter will be tapped into.

It seems several countries will run out of their allowances for various products before the end of the period, should exports continue at the same pace. For example, Ukraine has exhausted 33.79pc of its 263,197t allowance for cold-rolled coils (CRC) and 33.71pc of its 873,702t plate allowance.

As its domestic steel market flatlines, Turkey is increasing its market share of CRC exports into the EU, going from just 92,839t in 2015 to 336,951t in the first seven months of 2019 alone. This seems to be at the expense of the CIS region. Russia exported just 2,543t of CRC to the EU in 2018 compared with 903,098t in 2015.

The Argus Black Sea steel CRC and plate fob assessments have tumbled in the past six months. On 10 April, CRC stood at $550/t fob, while today it is down $90/t at $460/t fob. Similarly, plate is at $505/t fob today, down $75/t on $580/t fob on 10 April.

The entire hot rolled coil (HRC) allowance renews each quarter at just over 2mn t but weak automotive demand means around 770,000t were available at the end of last period. Since 1 October, several shipments have arrived. But unless there is a significant uptick in the EU automotive industry, the quota looks unlikely to be exhausted before the end of the period, with 1,989,063t remaining and 679t awaiting allocation.