Posted on 27 Jul 2023
Discontent is mounting among UK hot-rolled coil importers against UK steel producer Tata Steel as the steel mill is importing significant volumes of Indian HRC to supply its own production, filling up UK import quotas.
Market participants told S&P Global Commodity Insights July 27 that industry body International Steel Trade Association is preparing a letter to the UK government calling for a resolution of the issue.
Sources familiar with the matter said the letter states that the mill is creating a situation in which steel buyers will be left to buy material from Tata at a higher price or turn to other import sources not covered under the other country quota. Indian material falls under the other country quota.
An importer said the letter lays out two options to the government. One option for resolving the situation would be to create a new subcategory for HRC for domestic production use for the mill or to increase the quota volumes that can be imported before a 25% duty applies.
"Any decision has to be made immediately," the importer said. "Tata is stopping others from buying steel and stopping imports."
Sources said Tata Steel has a 22,000 mt order of Indian HRC arriving in September for Oct. 1 clearance, with around 20,000 mt of material from India and South Korea due to arrive in the UK bought by importers. South Korea also falls under the other country quota. The new quota period starts Oct. 1 and is expected to be exceeded immediately. One buyer said Tata had confirmed the order.
Tata is also said to have received a previous order of Indian material in June to support production of its Port Talbot works while it faced production problems. Now, sources have said the incoming order is used for the production of value-added material.
"Tata Steel, like most other steelmakers, sometimes complements its own production with supplies from other sources to balance its utilisation of downstream businesses," a Tata Steel spokesperson said when asked for comment by S&P Global Commodity Insights, adding that the UK had not exceeded HRC import quotas since they have been introduced.
Although it is understood that Tata has not received material in the current quota period July 1 to Sept. 30, the quota nevertheless is likely to be exhausted soon. There are 1,106 mt left under the other country quota on July 27, turning critical where a 25% duty deposit has to be paid. The opening balance was 22.837 mt.
The Taiwan quota has also turned critical with just 161.3 mt out of an initial balance of 13.269 mt.
Traders suggested that the quota levels, particularly for the other country quota, were not large enough to begin with.
One UK stockholder cited having to wait until Oct. 1 to clear material, while other importers face the same problem.
The quota volumes for the European Union are also increasingly getting filled as more buyers turned toward EU material amid the risk of paying 25% tax once a quota is filled. As a result, 31,630 mt are still left to import until from the EU by September 30, out of an initial balance of 181,526 mt.
The UK HRC import market has been muted over the last week with buyers shying away from material that falls under the Taiwan and "other country" quotas. Those who need to buy are turning to European mills that offer officially around GBP620-630/mt DDP West Midlands.
The Platts weekly assessment for UK HRC was assessed at GBP615/mt DDP West Midlands July 27, stable week on week.
Source:Platts
