Rapid filling of quotas will support the growth of European HRC prices

Import quotas for certain types of flat products to the EU in the first quarter of 2024 are rapidly filling up, with hot rolled coils (HRC) already exceeded, Fastmarkets reports. This situation is in line with market forecasts.

As of the end of last week, January 5, according to customs statistics, about 1.18 million tons of HRC were expected to be distributed for import to the EU in the «other countries» category, while the quota for the period was 923.6 million tons.

The main suppliers in this category to the European market were Vietnam, Japan, Taiwan, and Egypt. According to sources, Asian suppliers offered the most competitive prices.

In addition, the market suggests that the South Korean quota may be exceeded in the first quarter. As of January 5, the indicative volume of HRC awaiting allocation for South Korea was 60.3 thousand tons, which is 33% of the total quota of 184 thousand tons for January-March 2024.

Before the Christmas holidays, offers from Asian and Indian steel mills in the HRC market amounted to €645-660/t CFR for delivery to European ports (for shipment in February). Turkish mills offered products for €695/t CFR (for shipment in February), including anti-dumping duty, which is generally in line with the prices of European mills.

New offers from Asian and Indian producers may be made at a higher level, partly due to a sharp rise in freight rates amid the Red Sea shipping crisis.

Market sources suggest that the lack of competitive imports may contribute to the recovery of domestic HRC prices in Europe during January. European steel mills are offering higher prices for hot-rolled coils for February-March delivery. They expect that buyers will have few options as European plate production is declining.

According to Fastmarkets, HRC prices in the region (excluding Northern Europe) were at €695/t at the end of last week. The target supply levels for spot trading in January are €730-750/t ex-works from European steel mills.

At the same time, according to S&P Global, European hot-rolled coil producers are focused on increasing supply due to good order books through February. However, buyers remained on the sidelines and are expected to return to the market this week. Plants remained optimistic, closing some six-month contracts at target supply levels.

Due to the exhaustion of quotas for other countries for the first quarter, interest in imported materials remained weak. Buyers are hesitant to store products in ports for customs clearance in the second quarter due to high costs.

As GMK Center reported earlier, the world prices for hot-rolled coil were growing at the end of last year, the trend was expected to continue through the first quarter of 2024. In Europe, this trend was supported due to the limited supply and lack of imported products due to exhausted quotas, in the USA, the increase in order fulfillment terms and the firm position of metallurgists contributed to the growth.