Severstal, one of the three major Russian flat steel producers, has been witnessing a significant rise in logistic costs when exporting its products.
Following the start of the invasion of Ukraine, Severstal was among the first mills to be sanctioned by the EU, which was the company’s key sales outlet. As a result, Severstal was forced to find alternative markets and restructure not only payments, but also logistics, which has come at a price.
“Today, we have a very competitive product [due to low production costs] but, while being absent in the European market and forced to sell to Southeast Asia and nearby countries, our logistic costs are 20 to 40 percent of the price for the finished steel,” Severstal general manager said.
Indeed, Severstal has been trading its HRC in Asia and in the MENA region and its export shipments are mainly done from Baltic region-based St. Petersburg. According to sources, the estimated freight to Turkey, which is one of the main buyers, is at around $80/mt, while the deliveries to Asia cost $120/mt minimum. During several months after the war started, Severstal was also shipping from Russia’s Far Eastern ports, but now such operations are not considered efficient due to costly inland transportation. “The rates are individual but it is higher than $100/mt [to bring cargo to Far Eastern ports]. If the freights to Asia are added, the ex-works price goes below the production cost,” a market source told SteelOrbis. As a result, the company finds it cheaper to ship from the closest port, even though since February the freight rates from the Baltic have doubled.
