We continue to monitor the impact of the Russian invasion of Ukraine on steel prices (and other commodities). In that vein, on March 15 the European Commission, the executive body for the European Union, implemented an import ban against Russian steel products currently subject to safeguard measures.
EU moves forward with steel import ban
The restrictions will result in €3.3 billion ($3.62 billion) in lost export revenue for Russia, the European Commission claimed. They are also part of a fourth package of sanctions that the European Union has brought against the country. The sanctions have followed after Russia’s invasion of Ukraine that began in February.
“Increased import quotas will be distributed to other third countries to compensate,” a statement by the European Commission said.
The E.U.’s quota for Russian steel imports for Q1 2022 totaled 992,499 metric tonnes. The quota included hot rolled coil, electrical steels, plate, merchant bars, rebar, wire rod, rails and welded pipes, the European Commission stated.
Russia had used an average 43% of its quota as of Feb. 22.
“Then the clock stopped,” one analyst stated.
European Commission President Ursula von der Leyen initially announced on March 11 plans to ban “key” iron and steel imports from Russian into the 27-member bloc.
“This will hit a central sector of Russia’s system, deprive it of billions of export revenues and ensure that our citizens are not subsidizing Putin’s war,” von der Leyen said in a statement then.
As countries announce new sanctions and trade restrictions against Russia, the MetalMiner team will continue to analyze all the relevant developments in the MetalMiner weekly newsletter.
Traders not concerned by sanctions, but steel prices rise
The new sanctions have not created concern for traders. They had already started avoiding Russian steel earlier in January and February over concerns of a Russian invasion and prospective sanctions.
Hot rolled coil steel prices in Europe have nonetheless continued to rise as a result of the war.
Mills in northern Europe have offered, and in some cases transacted, hot rolled coil at about €1,300 ($1,420) per tonne exw in the past two weeks, one trader stated.
He warned, however, that there is neither a clear date on rolling and delivery. Furthermore, there is no certainty of availability.
“Getting a price is one thing, getting an allocation is another,” the trader added.
Southeast Asian mills are now offering HRC at $1,360-1,380 per metric tonne cfr Europe, the trader said. That is up from $1,200-1,220 last week on higher shipping costs.
Freight rates from that region are now approximately $200 per metric ton, up from $160-170 last week. Lower exports from Europe have meant that ships are returning to Southeast Asia almost empty.
Freight on the same route in December 2020 checked in closer to $45, the trader added.
For additional analysis of recent developments in the metals world, download the most recent Monthly Metals Index (MMI) report.
EU sanctions NSCP
On Feb. 25, the European Union also sanctioned the Novorossiysk Commercial Seaport Group (NSCP), one of a number of Russian entities involved in shipping to be hit with sanctions. The sanctions have thus made ships more reluctant to approach Russian ports.
Semi-finished slabs and billets are not covered in the sanctions, however, as they are not subject to safeguard measures.
One source told MetalMiner Europe does not have enough feedstock for iron ore. There have been disruptions on deliveries from Ukraine, which is a major supplier of the raw material into Europe.
Semis would also allow steelmakers to roll finished products in the event that they are not able to further produce steel, the source said.
Supply disruptions from Ukraine
U.S. Steel Košice in Slovakia, in addition to steel mills in Romania and Poland, are particularly vulnerable to disruptions in Ukrainian iron ore shipments, as they are next to Ukraine, the source stated.
There are also rail lines in Poland and Slovakia, respectively built in the 1970s and 1960s, for the delivery of ores from predecessor state Soviet Union.
Some plants in Italy, including Marcegaglia, import slabs for rolling into flat products. Much of that material had previously come from Ukrainian mills, however, the source noted.
As sanctions, supply disruptions and rising costs continue to impact metal-buying organizations, it’s vital they brush up on best sourcing practices.
Ukrainian metals association calls for exclusion of Russian members from Worldsteel
The Ukrainian metals and mining association Ukrmetalurgprom also appealed to the World Steel Association (Worldsteel) on March 13 to exclude all Russian members. The association accused steelmakers there of financing the war effort.
The request would have to go before Worldsteel’s five-member executive committee and then to all members for approval, under articles of association, a spokesman for the Brussels-based body told MetalMiner. The wider board includes representatives of each of the steel companies, which totals about 160 members.
Worldsteel is unlikely to grant Ukrmetalurgprom’s request, however, the spokesman stated.
“They have to remain non-aligned and neutral in all geopolitical activities,” he added.
Russian share of E.U. iron and steel market
Russian iron and steel imports into the E.U. totaled €7.4 billion ($8.1 billion) in 2021. That represented 7.4% of imports totaling almost €160 billion ($175 billion), the European Commission stated.
Russia cast and rolled an estimated 76.7 million metric tons of steel products in 2021. That is up 3.5% from 74.1 million metric tons in 2020, information from MCI stated.
For 2021, about 32.5 million metric tons went to the export market. Of that, the European market occupied top place for in 2021 at 9.66 million metric tonnes. That accounted for 30% of total exports, MCI data also showed.
That volume represents a 58.6% increase year over year from about 6.1 million metric tons, the source stated.
Russia began its invasion of Ukraine on Feb. 24. President Vladimir Putin described it as a “special military operation” to stop the genocide of ethnic Russians, to de-Nazify as well as to demilitarize the country.
Mariupol, one of the key ports for the export of Ukrainian steel products, has come under heavy bombardment by Russian forces. There have been reports from there of high casualties.
Mariupol is on the Sea of Azov, which leads to the Black Sea.
The Russian military has also taken city of Kherson. There are also reports of heavy shelling on Mykolaiv, each of which are ports further west in Ukraine and closer to the Black Sea.