EU imports to date in 2018 have been running ahead of the rate implied permitted by the safeguard quota. For the second half of the year it is therefore likely that this import rate will fall.
Whether prices will increase depends upon whether that decrease in import supply is offset by falls in demand and/or drawdown of inventory. Both are expected, but in some products marginal supply from either imports including a 25% tariff or domestic sources may be required.
Upside risk to price forecasts results for some products
Data for EU imports from third countries is currently updated to May. This shows that for 2018 to date EU imports have been running at a volume level that if annualised would exceed the 200-day quota based on the 2015-17 average for most products, in some cases by a large degree.
In that light we ran some calculations on what kind of reduction this might imply for the rate of imports in H2 2018, and how this compares to:
- An expected h/h decline in EU steel consumption.
- A likely de-stocking cycle, beginning upon the post-summer receipt of orders recently placed. We understand that in the past month there has been a lot of buying from non-EU (and indeed EU sources) as inventory levels have become depleted.
The run rate overage is greatest for long products.
For carbon flats it seems possible that the EU will experience market tightness in coated sheet and to some extent HR flats during the second half. De-stocking may be able to fill the gap in HR products.
Supply for all products will be available but at the margin it may need to come from either/or the domestic mills or the import market including an import tax (e.g. of 25%). This could push prices higher.
For CR coil and reversing mill plate there should be sufficient supply to meet demand.
We will revisit our price forecasts in this light and there may be some upward revisions.
