‘The European hot-rolled coil market remained quiet June 25, as buyers prepare for the start of the new safeguard import quota rules on July 1 by negotiating supply exclusivity or duty sharing arrangements.

“People are worried about import safeguard measures and the HRC coil cap,” a service center source said. “A lot of them will need to pay safeguards on the 1st of July.”

The EU steel safeguard measures include a new restriction cap of 15% on six countries that used to ship their HRC under the residual tariff-rate quota: Egypt, Vietnam, Japan, Taiwan, Australia, and Brazil.

Sources said that even though market participants are discussing adding duty-sharing clauses to contracts in which buyer and seller share the duty costs, it is unlikely to be sufficient to alleviate the impact of the new safeguard measures, and that buyers should think of exploring opportunities in countries that are not subject to the 15% cap.

“Duty sharing agreements are in discussions,” another service center source said. “But I don’t think it will be a disrupting event for quotas. I don’t think having support from sharing duties will convince buyers to buy. It’s better to find new opportunities in other countries that are not subject to the 15% cap such as Indonesia, Malaysia, and Saudi Arabia.”

Sources also agreed that demand and trading activity remained low, heading into the summer holidays.

“Real demand is down 50%-60% as compared to last year,” the source said. “The level of transaction in the European market is limited. It is a very concerning situation margin-wise and volume-wise.”