EU steel quota will be quarterly and national

The European Commission's definitive safeguard on imported steel will apply quarterly and country-by-country for all products except hot-rolled coil, according to sources.

All products will have a quarterly allocation rather than annual as is the case under the preliminary tariff-rate quota. It is unclear how this quota will be calculated but it is likely to be based on the average quarterly volume imported per country over 2015-17, rather than dividing a yearly quota into four.

"We all agree quarterly quotas are a bit more restrictive than annual because their implementation and working with a quarterly quota is more difficult, it is more of a burden," a Brussels-based market participant said. Logistically a quarterly quota, broken down by country, is more difficult to administer.

As the safeguard concerns fairly traded imports, the commission has to walk a thin line responding to diversion caused by the US Section 232 — which steel association Eurofer estimates at a rate of 61pc — rather than adding additional restrictions on fairly traded steel that would be detrimental to end-users.

When a quarterly quota is under-utilised, the volume is rolled over into the next quarter.

There is still a lack of clarity over whether HRC will have a quarterly or annual allocation. But in a win for buyers, the HRC quota will still be based on the 2015-17 import average and be global, as with the preliminary measures currently in place. The current quota for hot-rolled sheet and strip is only 50pc utilised, with 2.31 mn t remaining out of the initial 4.26mn t, commission data show.

Quarterly and country-by-country elements could actually have the unintended consequence of acting as a catalyst for imports, as buyers look to get in ahead of their competition for material from countries with limited availability. There is some upside to national quotas, as they allow historical suppliers to have their own volume without competing with one another, bring security of supply and predictability.

Of course, the flip-side is that for products such as rebar, China will get a much larger allocation than it can actually fill, as duties have been imposed during the investigation period for the current case — China shipped 458,046t into the EU 28 in 2015, compared with 1,655t last year. Products such as hot dip galvanised will be in a similar position because China was a big supplier until duties were imposed last year.

Eurofer lobbied for national quotas on "major exporters" to the EU to ensure "no one country unduly captures market share at the expense of other suppliers". It has recommended quarterly quotas to prevent "speculative stockpiling and disruption from front-loaded imports".

It cites the precipitous increase in shipments from Turkey in particular. Turkey represented a whopping 44.19pc of the wide-strip import market in August, at 276,497t, Eurofer data show. This fell in September but remained comparatively high at 36.39pc.

Eurofer also questions the divergence between the amount of steel imported and what is clearing customs. It said the shipping clause — meaning on-the-water material was excluded from the preliminary measure — has been detrimental to domestic mills.

Real imports were 39pc more than actually recorded under the quota to the end of October, with 9.2mn t imported and only 6.2mn t included in the quota. This may partly be down to the ability of importers to hold material at ports for up to 90 days without clearing customs, or deliver into a bonded warehouse.

"The safeguard measure has not worked, it has not supported the price," one stockholder said, whose customers are pushing for reductions despite the lower-cost material he has booked not arriving until February next year.