The shortage of stainless steel coils and sheets in Europe has reignited market discussions around European Commission (EC) guaranteed quotas.

Initially, some industry representatives called for tighter imports in response to the decline in demand caused by the pandemic in the second quarter of last year. However, this was rejected by the EC at that time, and the original quota remained as planned until June 30 this year.

During the first wave of coronavirus, distributors and traders reduced their purchasing activities. At the end of 2020, demand in the automotive and white goods industries has risen rapidly, quickly taking advantage of the available inventory on the market.

Buyers eventually resumed ordering materials from steel manufacturers. Many people choose to place tons of steel in local steel mills instead of purchasing third-country steel. This is due to the uncertainty of the global situation. Therefore, European stainless steel producers began to fill their orders quickly.

It was already obvious at the end of last year that the shortage of materials for several grades and sizes of hot-rolled and cold-rolled coils will become a major problem in the first half of 2021. However, Asian prices are climbing due to increased raw material costs and transportation. Due to the shortage of containers, the rate has more than doubled. This, combined with the European Community’s safeguard quotas and anti-dumping measures, prevented many European stainless steel buyers from ordering imported products to supplement their local supply.

The imposition of anti-dumping duties on materials originating in China, Indonesia and Taiwan has greatly reduced the number of hot-rolled stainless steel plates and strips entering the European market. In the first three months of this year, only 5% of the European Community's guaranteed quota quota was used. Buyers question safeguards

There is no doubt that the European Union’s safeguards and anti-dumping duties will help reduce the number of hot-rolled and cold-rolled coils and sheets entering Europe. However, in the current severe shortage, buyers question whether the local stainless steel producers have enough capacity to satisfy the domestic market. Therefore, they are also questioning whether EU guarantee quotas are still needed.

So far, the European Community has not provided any formal instructions on the renewal of guarantee quotas. However, since China's overproduction is still a concern and Section 232 tariffs still apply to the United States, these measures are expected to be extended.

Several industry observers speculated that there may be a small increase in quotas for all categories. The previous annual growth rate was between 3% and 5%. However, due to such a severe shortage of stainless steel products, there is the potential for more targeted changes to specific categories to better reflect current market demand.

Supply chain participants are eagerly awaiting EC's decision, which will be notified before the expiry date on June 30. Source: MEPS