In a recent development, European steel buyers are bracing for an increase in expenses as safeguard measures are set to impose an additional cost of €50 per ton on hot rolled coil (HRC) purchases. This comes after the European Commission's decision to extend the EU safeguard measure on steel for an additional two years, which was confirmed last week.

The safeguard measure, which includes a 15% cap per origin over the "other country" HRC tariff-rate quota, is expected to impact several European countries with a projected shortage in HRC supply for the upcoming quarter. The situation is compounded by sluggish consumption downstream, prompting re-rollers and sheet producers to attempt to recover costs. Despite these efforts, the average duty to be paid is estimated at 8%, equating to the aforementioned €50 per ton.

The market has already seen a halt in sales by one producer last week, and rumors suggest that ArcelorMittal's prices for HRC could reach €670 per ton base delivered. Other northern European HRC mills are also contemplating price hikes, aligning with the trends of re-rollers and coil derivative producers.

The increased costs are a direct consequence of the renewed safeguard quotas that began on July 1st. Buyers are now calculating the duty to be paid, with some considering the cancellation of customs clearing authorizations for a portion of their purchases to mitigate the financial impact. This strategic move could lead to some purchases being left at ports to reduce import duty payments.

The steel industry is facing a challenging period, with several Italian tube-makers implementing production cuts and planning stoppages of three to four weeks, in addition to the scheduled production cuts for July. The price increases for HRC have been anticipated since the proposal to extend the safeguard measure, and the confirmation of this extension is likely to have a lasting effect on the European steel market.