According to the agreement, it is foreseen that 27 EU countries will export their steel and aluminum products to the USA within the scope of the quota to be determined, without applying customs duty, and only the portion exceeding the quota will be subject to 25% tax. On the other hand, the EU side is expected to reduce the additional customs duties it imposes on many US products.
The method the US will use to determine the quota to be applied for the EU is not yet known. However, the US imports of steel products from the EU under Section 232 will remain at 2.9 million tons, down 37% (1.7 million tons) in 2021 (according to annualized data from January-August) from 4.6 million tons in 2017, the year before the measure. being calculated. In other words, the figures show that the US imports from the EU in 2021 will remain at a level of approximately 1.7 million tons lower than before Section 232.
What could be the effects of the decision on the steel industry and its markets?
With the decision, it is foreseen that the EU will export to the USA within a certain quota without being subject to customs duty. However, it is an important question mark to what extent the EU, which is insufficient to meet its domestic demand, can increase its exports to the USA. On the other hand, the high prices in the US seem to be at a sufficiently tempting and convincing point for EU manufacturers to move from their domestic markets to the US market.
The possibility of additional supply, which is not subject to customs duty, in the US market will cause some easing in prices in the US market, which is disconnected from the world. Currently, HRC price hovers around $1900/t in the US and $1120/ton in the EU.
Similarly, if there is a significant increase in exports from the EU to the USA with the decision, considering that the EU will maintain the quotas, some strengthening will result in the prices in the EU market.
Currently, the EU's production is insufficient to meet its consumption, and the EU27 region is still a major net importer of steel, despite import-limiting quotas. According to the size of the export volume to the USA, it can be expected that new additional supply and supply bottlenecks will emerge in the EU market and this will create new export opportunities for steel exporters in countries exporting to the EU, such as Turkey. However, considering that the EU will maintain its steel import quotas, the increases that can be achieved in exports to the EU will only be within the framework allowed by the quotas. With the decision, it seems likely that the quotas applied by the EU will become a bigger problem for steel users in the EU in the coming period in terms of sustainable supply and prices.
The "Global Arrangement on Sustainable Steel and Aluminum" study aims to develop a common mechanism for the decarbonization of steel.
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