其他服務業Business News

Iron shipments from Russia to the EU countries in January – September 2023 increased by 40% compared to the same period last year to 1.25 million tons. This is evidenced by the latest data from the European Statistical Agency (Eurostat). In September 2023, shipments doubled year-on-year to 117,153 tons.

Russian products account for 61% of the total imports of pig iron to the EU. Other major suppliers are Brazil (272,714 tons in nine months), South Africa (230,248 tons) and Ukraine (160,942 tons). At the same time, the volume of Russian pig iron exports to the EU began to grow last year, then they increased in annual terms by 74% to 1.17 million tons.

On November 15, Bloomberg reported that the EU is discussing the next, 12th package of sanctions against Russia. In particular, it is proposed to introduce a ban on the import of diamonds, liquefied gas, chemicals, lithium batteries and cast iron. The new restrictions, according to Brussels estimates, should cause Russia $5.3 billion in damage per year.

According to the World Steel Association, in January – September 2023, the production of pig iron in the world amounted to 1.07 billion tons, which is 1.9% more than in the same period of 2022. Among the leaders are China with 675.2 million tons, India with 100.2 million tons, Japan with 47.5 million tons. Russia closes the top four producers – 46.7 million tons, which is 4.3% more than in the same period of 2022.

Geopolitical instability affects Russian exporters through sanctions and price changes in accordance with the new market reality, S&P Global analysts noted in their August review. About half of the pig iron exports from the Russian Federation traditionally accounted for the United States, where in March 2023 70% duties were imposed on most metals of Russian origin, which actually became protective. Monthly exports of pig iron from Russia to the world market, according to S&P Global, have decreased to 230,000-280,000 tons since 2022, compared to 350,000-400,000 tons in previous years. According to the industry agency Metals & Mining Intelligence (MMI), 3.84 million tons of pig iron were shipped abroad from Russia last year, a drop of 11% by 2021. Exports were carried out to Turkey, the USA, Italy, Poland, Latvia, South Korea, Japan and China.

Europe can partially replace the volume of Russian supplies with cast iron from Brazil and Ukraine, according to Ilya Kolomiets, Director of Development at MMI. But this will lead to higher prices for consumers. In the event of a reorientation of supplies, Asian markets, primarily China and India, will become a promising direction for Russia. "Some volumes can be redirected to Turkey, but this will lead to serious price pressure in this direction," the analyst points out.

S&P analysts also believe that China will be an increasingly significant buyer of Russian cast iron. But differences in the way steel is produced, in their opinion, make regular purchases unlikely. "Important factors will be the demand for steel inside China, the downtime of old capacities and the environmental agenda. Russian suppliers are also not satisfied with the low prices offered by Chinese buyers and expensive logistics," the review notes.

In 2022, after the start of the European Union, the EU imposed restrictions on the supply of a number of metallurgical products from Russia, including steel and iron products. But domestic metallurgists began to experience difficulties with sales also for products that did not directly fall under sanctions. So, in August 2023, Sergey Malyshev, Senior Vice President and Financial Director of Norilsk Nickel, noted that although the company was not subject to restrictions, its "long-standing foreign partners" actually imposed voluntary sanctions. This applies, according to him, to all aspects of business: operations, sales, logistics, financing.

In addition, in conditions of increased risks, most market participants demand discounts on Russian products. In 2023, the price per 1 ton of pig iron from Russia, according to S&P, was $108 lower than when supplied from Brazil on similar terms. So, according to the June indicators, the price of cast iron on the FOB basis ("with loading on the ship") The Black Sea was $355 per 1 ton, while Brazilian cast iron is shipped at $437 per 1 ton.

To reduce this difference, Russia must either regain access to the American market, or reduce the output of pig iron by half – both scenarios are unlikely, S&P notes. Most Russian companies are reducing pig iron exports by increasing steel smelting and redistributing volumes to Turkey, Europe, Asia and the Middle East, according to agency analysts.

The MMI and S&P price data differ slightly. According to MMI, indicative quotations of cast iron in Italy in mid-November were $375-390 per 1 ton on the basis of CFR ("delivery to the port") or $340-350 per 1 ton FOB Black Sea, and quotations of the offer for Russian cast iron were about $10/ton higher. In Turkey, the demand prices for Russian cast iron with a low manganese content are about $380 per 1 FOB Black Sea (about $405 per 1 ton on the basis of CFR), for ordinary pig iron – $10-15 per 1 ton lower.

According to MMI, quotations for Russian cast iron, which grew in the first quarter of 2023, then began to decline and fell until October amid declining demand on the world market due to the negative situation in the rolled steel segment (the agency does not give dynamics). But thanks to the rise in scrap prices and a reduction in the supply of pig iron from Russia, exporters were able to raise prices again, and MMI predicts their growth by the end of this year.

The largest Russian producers of cast iron are Severstal, Metalloinvest, NLMK, Evraz, Ural Steel and PMH. These companies did not respond to requests or declined to comment to Vedomosti, as did the press service of the Ministry of Industry and Trade. The representative of MMK clarified that the holding does not export pig iron now (uses it as a raw material for steel smelting).

The EU market is attractive for Russian companies due to proximity, developed logistics, good demand and high prices against the background of a decline in their own production, said Alexey Kalachev, an analyst at Finam. But in the long term, European metallurgy will reduce the use of cast iron, switching to technologies for producing iron with a smaller carbon footprint, Kalachev believes. He believes that there is a shortage of cast iron and the introduction of a cross-border carbon tax (an EU regulation in which the manufacturer must pay additional fees for greenhouse gas emissions. – Vedomosti) will serve as the main drivers of prices in the EU market, which make investments in technologies for obtaining direct reduced iron (i.e. without the use of cast iron with a high carbon content. – "Vedomosti") more attractive.

Source: https://www.vedomosti.ru/business/articles/2023/11/26/1007797-rossiiskie-metallurgi-uvelichili-eksport-chuguna-v-es?utm_campaign=newspaper_27_11_2023&utm_medium=email&utm_source=vedomosti