Russia’s steel mills have been facing a limited impact from international sanctions in terms of their overall production in 2022. The main reason is that, while exports fell significantly and it took a while for the mills to find new export routes and to change the structure of their sales portfolio, increased domestic demand has been covering the excess supply volumes resulting from lower overseas sales. In addition, steel imports into Russia have dropped in 2022 due to the halting of supplies from Ukraine and temporary stoppages of sales from Kazakhstan, which were later resumed.
According to Russia’s Ministry of Trade and Industry, it expects a 6-8 percent decline in Russian steel production in 2022, claiming that the sector has managed to adjust to the sanctions-related pressure, particularly due to the increase in local demand especially in the third quarter of the year. “The year was uneven. The [local demand] increased from the second half and in addition imports decreased. So, yes, the key flows were turned to the domestic market and the production did not go down too much,” a Russian producer told SteelOrbis.
As for exports, the ministry stated that overseas steel sales in 2023 will remain at the levels of 2022, while not yet disclosing the expected figures for the current year. Overall, in the current year Russian exports did drop, especially in the finished steel segment. However, it depends on the product, the sector and the producer, since some of them are under direct sanctions and some are not. Particularly, for one of the large flats producers its exports dwindled this year, while another witnessed a fall of around 30-40 percent in its overseas flats sales. “The new markets had to be found, in line with loads of issues regarding payments, shipments, etc. And still with the demand discount for Russian origin and risks, and with the expensive logistics, the prices are at times not workable for Russia,” a trader said. In the slab sector, some expect a fall of around 10 percent in exports for 2022 overall from Russia, mainly because of the positive period early in the year, strong sales to China in the second quarter, persistent demand from Turkey and Southeast Asia, as well as Europe’s permission for importation of Russian slabs until October 2024.