Russia expects its steel sector to stagnate until 2030, market sources more pessimistic

Friday, 12 August 2022 16:57:37 (GMT+3)   |   Istanbul
       

While it is generally known that Russia’s steel sector has been suffering from the sanctions-related consequences of the war in Ukraine, the Russian Ministry of Industry and Trade assumes it will take until 2030 to adapt to the new market conditions. In the meantime, Russian mills have been adjusting production rates downwards, with the largest cuts seen in May and June, followed by a certain stabilization in July and August due to seasonally livelier domestic markets. However, the general market picture is not so bright, according to market sources, specifically due to pessimistic consumption expectations in several industries, specifically automotive and construction.

According to Russia’s Ministry of Industry and Trade, the country's steel sector will require eight years to return to the production and consumption levels of 2019-2020, particularly due to the import replacement policy, which, however, has proved itself insufficient in the past several years. According to numerous studies, Russia, being cut out of global technologies and spare parts and component supplies, will have a hard time operating many of its industries, including the steel consuming and steel producing sectors.

The Ministry expects strategy to be handled in two stages - adaptation during 2024-2025 and recovery until 2030. The main suggested measures are providing a stimulus to steel consumption in Russia and to start new infrastructure projects, including new ways of transporting hydrocarbons. According to the Ministry, after the EU banned most ex-Russia steel product imports, Russian mills were expected to redirect around 4 million mt of steel to countries in the East, but now the strategy assumes this will be 7 million mt. In addition to the end of Russian presence in some markets, further sanction packages have been making the business activities of Russian steel producers more and more challenging, specifically in terms of financing, payments, insurance and logistics. At the same time, the strong rouble was not supporting export activity. Another negative factor for Russia is that, due to the sanctions-related risks, it has to sell at a large discount to the market level. Generally, it is believed that the sanctions on Russia will not be lifted for many years, and so its export operations will remain limited while its production may be affected by the lack of technologies in terms of service and modernization.

It is expected that Russia’s steel production and exports will continue to fall in the coming years. In 2022, output may drop by 16.4 percent and that is a modest estimation, sources estimate. “They might lose 25-30 percent,” a trader said. As for consumption and exports, the most optimistic expectation is that the numbers will fall by 13.8 percent and 15.9 percent, respectively.


Similar articles

OEMK invests to expand product range and improve long product quality

27 Sep | Steel News

Russia’s local flats offers stable for October, demand sufficient

19 Sep | Flats and Slab

Russia’s stainless steel imports down three percent in August from July

15 Sep | Steel News

Russia’s apparent stainless steel consumption up 3.2 percent in H1

09 Sep | Steel News

Russia’s TMK reports record rises in revenues and EBITDA in H1

31 Aug | Steel News

Ex-Russia HRC export limited for September due to temporarily livelier domestic market

25 Aug | Flats and Slab

Ex-Russia billet prices loss $20/mt despite controversial market in Turkey

24 Aug | Longs and Billet

Russia’s TMK improves EAF efficiency at PNTZ

23 Aug | Steel News

Mechel’s output up in H1, sales mainly decrease

19 Aug | Steel News

Buyers fail to respond to higher ex-Russia billet offers

12 Aug | Longs and Billet