The Russian authorities have officially set the quota for steel scrap exports to countries excluding members of the Eurasian Economic Union in order to protect the local steel industry. The official document, signed on August 31, implies a total allowed export volume of 1.0092 million mt of scrap for the period from September 1 to December 31 of the current year. The Ministry of the Industry and Trade will be responsible for the distribution of the quota between the exporting regions, based on the total export volumes of each within the period of January 1, 2016 to December 31, 2018, multiplied by the assigned index, which is set from 0.5 to 1.2 depending on the region.
Market players’ evaluations of the possible outcome of the trade regulation differ somewhat. Some say that Turkey can potentially be hit by the limitation of volumes. Last year, the country imported 2.518 million mt of steel scrap from Russia, which accounted to around 12 percent of the total import volume. In the January-July period this year, cooperation with Russian scrap sellers resulted in a 1.247 million mt import figure in Turkey, according to Turkish Statistical Institute (TUIK) data.
According to the sources, the potential reduction on the short sea side is more significant compared to the Baltic region. “The estimated last year’s tonnage for Rostov is around 500,000 mt. Now we might see around a 20 percent reduction,” one source believes. In this case, the potentially missing volumes from Rostov might be compensated by Romania and supplies from the Adriatic Sea, but only partially, taking into account some quality issues and insufficient volumes. In addition, Turkish mills might shift their attention to deep sea cargoes, to the benefit of suppliers. Another issue that remains unclear for now is the process of license issuance. “The bad thing is not only limitations on tonnage, but you need a one-time export license for each export shipment you make. Nobody knows how to get it,” a source told SteelOrbis.
However, some players believe that Turkey will not be challenged by the potential decline in scrap imports from Russia, taking into account that its overall requirement is nowadays less due to crude steel output cuts. “The effect will be noticeable once the situation in the finished steel segment improves, but God knows when,” a trading source said. “In addition this is only for four months, we need to see if the quotas will be prolonged,” he added. However, in the short run the whole situation might temporarily support the pricing for steel scrap in the market.
In 2018, scrap exports from Russia increased by 4.2 percent to 5.5 million mt and Turkey consumed the major part of the volume. At the same time, South Korea usually takes about 20 percent of total supplies. Although the total shipment volumes from Russian Far East ports to South Korea have been gradually falling over the past years and dropped below the 1 million mt mark in 2018, the export quota may lead to an additional decline. The index for supplies from the key Far East ports (including Vladivostok and Nahodka) has been set at 0.6. The index for export from the Sahalin region has been announced at 1.2, but it is unlikely that this will help suppliers to ship much higher volumes from it. In such a situation, Korean customers will continue focusing on purchases from Japan and the US.