Like other commodities, the price of steel in Europe has reached historic highs. The price of hot-rolled steel coil was posted on Monday during the day at 1,400 dollars per ton on the spot market, a consequence of the uncertainties linked to the evolution of the war in Ukraine.
On March 15, the European Union (EU) included a ban on Russian steel imports in a new list of sanctions once morest Moscow, which should cause it to lose “regarding 3 billion euros in revenue”indicates the communicated of the Commission, which states that “additional import quotas will be allocated to third countries for (the) compensate for”.
The first European steel site bombed
At the same time, the Russian army on Sunday bombarded the steel site ofAzovstal, one of the largest in Europe, located in Mariupol, Ukrainian MPs said. The factory is owned by the Metinvest group, controlled by one of the richest men in Ukraine, Rinat Akhmetov. According to the site manager, it was shut down shortly following the invasion began.
Metinvest is one of the most important European steel groups with the German ThyssenKrupp. It is an integrated group: it controls the entire value chain: from iron mining and coke coal (mixed with scrap metal to transform it into steel) to the production of finished and semi-finished steel. According to its latest annual report, Metinvest produced 8.4 million tons of crude steel in 2020, but also 30.5 million tons of iron ore concentrate, and 2.9 million tons of coking coal.
85% from Russia, Ukraine and Belarus to EU
Its temporary shutdown will also weigh on the European steel sector, the second in the world. “Of the 8.39 million tonnes of semi-finished steel imported into the EU and the UK in the first eleven months of last year, more than 85% came from Russia, Ukraine and of Belarus”recently underlined the British research firm specializing in the steel market, MPES International.
Especially since the steel markets are geographically concentrated. According to figures from Eurofer, the European steel producers association, Asia largely dominated with 73.9% of world steel production in 2020 (including 57.7% for China alone), followed by Europe 15.2% (7.6% for the European Union) and 5.5% for North America.
Because the war in Ukraine will have an impact not only on European demand for steel but also on its production. Already, like other sectors, the steel industry will suffer from soaring energy prices, even though that gas, oil and coal continue to be bought – and paid for – by European countriesto which must be added the increase in the price of scrap metal, iron ore and coking coal.
MPES International, assessing the consequences of the invasion, recently pointed out that the price of scrap metal imported from Turkey had increased by 30%, due to the reduction in the availability of pig iron from the CIS (Confederation of Independent States, which brings together former republics of the former USSR, but which Ukraine has since left like many other states). The firm also stresses that Russia being a major supplier of coking coal for European steelmakers, its scarcity will weigh on prices. Because even if there have not yet been official sanctions once morest Russian coal imports, European steelmakers are already looking for alternatives to distance themselves from the Russian supply. “Thyssenkrupp AG suspended its full-year guidance for free cash flow before mergers and acquisitions, citing the impact of Russia’s invasion of Ukraine on commodity prices, primarily affecting its steel and automotive supply activities”underlined John Plassard, economist at Mirabaud.
Future tensions in the iron market
As for iron ore, it too might see its market under pressure once more. Prices had risen to a record close to $213 per tonne in July 2021 before falling to move to $145 per tonne on the Chinese market on Monday. “Russian and Ukrainian miners occupy the 5th and 7th places in terms of world production of iron ore. The value of iron ore has increased by regarding 20 dollars per ton since the beginning of the war. However, developments in its prices remain dominated by supply and demand dynamics between China and Australia.While Australia remains the largest iron ore exporting country, the possibility of a recovery in steel production in China, the biggest consumer of iron ore, might limit the ability of European steelmakers to find alternative sources”warn the MPES experts.
Finally, there is rising ocean freight costs which are expected to put additional pressure, due to soaring oil prices, but also by shrinking destinations, with shipping companies also preparing to cut haulage as well. raw materials from sanctioned countries.
