Another month and another challenge for steel and its associated industries.
Ukraine and Russia are major exporters of steel and raw materials and the current invasion of Ukraine by Russia is fuelling price increases on the input side for steelmakers – which in turn is causing cost increases on the finished goods side as supply gaps arise out of the conflict.
- Ukraine is the world’s 13th largest producer of steel and the fifth largest exporter of iron ore by volume. It produced 21.4 million mt of crude steel in 2021. About 80% of its steel output is exported.
- The country exported 44.4 million mt of iron ore products in 2021 and imported 9.85 million mt of metallurgical coal and coke products. It raised 3.9 million mt of steel scrap, of which 616,000 mt were exported.
- Ukraine sends steel to the Middle East, Turkey, the EU, Africa and the Americas*
The importing of steel relies on a network between Turkey, Ukraine, Belarus and Russia so the impact it will have over the coming months has created uncertainty, which has inevitably led to price increases that means the construction sector will face the same challenges as has the previous two years due to Covid.
Tata Steel has advised:
- A 9% increase with immediate effect.
- An 8.5% increase 1st April.
- A 7.7% increase 1st May.
As the whole of Europe starts to see the tightening of supplies it is likely to be an export opportunity for Indian steel mills – but both flat and long product prices have seen an increase over the last month. According to data from SteelMint, prices of hot-rolled coil – a benchmark for flat steel stood at Rs 66,500-67,500 a tonne in February ex-Mumbai, compared to Rs 64,500-65,650 at the end of January. **
Russia and Ukraine have a combined export scrap total of circa 4 million tonnes of which circa 2.5 million tonnes is exported to Turkey whilst this only represents 10% of Turkey’s overall scrap imports it is sufficiently large enough for other major suppliers to be more bullish on prices. Although there are currently no sanctions on Russia from Turkey it is understood that all scrap supplies from the Baltic have been suspended – meaning the supply of scrap prices are increasing weekly.
What we have seen so far:
- Between February 23 and March 8, the UK steel price soared to great levels, including nickel costs, which increased by 97%, zinc by 16%, aluminium by 6.2%, and copper at 3.5%.
- UK steel price has risen to £250 per tonne
- Trade in Black Sea steel markets is frozen
- Turkish mills have pulled offers off-market, with slab and other raw materials supply under threat.
- Major disruptions to logistics routes required for steel and iron ore transport.
Other Considerations:
- Crude oil is at a 7-year high which will undoubtedly impact transportation costs
- The supply restriction on gas will increase energy prices impacting production costs
- Some market analysts have suggested future increases of £50 to £100 per tonne for steel over the next few months
- We await to see how badly steel supply and possible shortages may hit the UK market going forward.
