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Turkish steel exports to EU to reach quota levels soon, sending shivers into Asian markets

More pressure mounted on Turkey’s steel export sector, with the EU’s steel quota against Turkish origin shipments currently standing at a balance of just 20,672 mt from the yearly 301,538 mt total that was given, figures from the European Commission showed.

The validity of the quota currently stands for the period of July 1, 2019 to June 30, 2020, according to the EC. It is also expected to be retroactively reduced to 295,794 mt on October 1 by the EC, following a quota review process.

Amid an already bearish steel and scrap market, news of the quota reaching its limits were sending more shivers down East Asian mills, as expectations of recovery now seem even “more unlikely,” East Asian sources said.

“If Turkey cannot export [steel products] to the EU, that would mean prices might drop down sharply again,” a Vietnamese mill source said.

“This is scary, that would mean Turkey might start to look into Asia or Middle East to sell their products too,” a Taiwanese mill source said.

The ailing steel industry in Turkey has caused a diversion in regional billet flows, leading to more Russian and Middle Eastern billet coming into East Asia, and ultimately pressing down scrap prices, as reported by Platts previously.

European buyers of Turkish steel now have to provide a 25% financial guarantee on any orders as the quota has fallen below 10%. If a buyer’s cargo cannot be allocated to the quota because the quota has been exhausted, then the buyer will have to pay a 25% duty on the imported rebar. This will reduce the attractiveness of Turkish export prices for European buyers, even if Turkish mills are offering material at 30-month lows, ranging from below $410/mt FOB to $415/mt FOB.

Last week, a European buying source booked a 6,000 mt cargo with “ultra-quick delivery” for $420/mt FOB Turkey, the source told Platts.

“Of course, this booking comes with a higher risk since there is now less than 20,000 mt of the quota available, but we’re taking it now as I think there is a good chance that we will manage to import all of it,” the buying source said at the time.

“If we were to wait for a lower price, which I think everyone agrees will be available by end of this week, the risk [of paying a 25% duty] would have become too high,” he added.

However, the reduction of anti-dumping and countervailing duties on some Turkish mills, following a preliminary review by the US Department of Commerce, could lead to some further rebar sales into the US market.

Mills’ rebar shipments to that country fell to just 18,400 mt in H1, sharply lower than 212,700 mt exported in the same period of 2018.

“The Turkish mills have been very careful in recent weeks amid the revisions in the AD, CV duties but now the decision is out, we fear they may sell at a lower price into the US too,” a competing Spanish mill source said.

The reaching of quota levels further points to additional pressure on Turkish scrap — eyed as the benchmark for steel scrap — as harsh competition in the export market for billet and rebar encourages Turkish mills to put further pressure on scrap prices — a strategy that has so far been successful.

“There won’t be an improvement until Turkish local demand and consumption comes back,” a Turkish steelmaker said on the price outlook for scrap.

While some Turkish buyers have indicated a further drop to $215/mt, both a steel consultancy and a US recycler suggested a price for HMS 1/2 (80:20) at $200/mt by the end of the year was possible, as Turkish mills struggle to sell sufficient volumes into export outlets.
Source: Platts

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