Gas crisis may push up steel prices

Gas crisis may push up steel prices

As the natural gas dispute between Russia and Ukraine entered into its third day, some news agencies began reporting that the shipments to Russia's European customers are resuming. Russian gas company Gazprom has also reassured that the gas supplies to Europe would return to normal by tomorrow. Yet the conflict is not over and it may have a serious impact in the region. Russia charges $50 for one thousand cubic meters natural gas to Ukraine, while the price charged for the European countries is in $150-200 range. Now Russia wants to quadruple the price for Ukraine. The cold winds between Russia and Ukraine have been obvious since “the orange revolution”, when Viktor Yuschenko, who supports closer relations with Europe came to power. Now, if Gazprom quadruples the price charged for Ukraine, that would mean the collapse of Ukrainian economy and industry. Gazprom officials say that the mentioned price increase would also be effective for Bulgaria, Romania and Hungary. Meanwhile, Ukraine has the opportunity to steal the natural gas, block the gas lines or ask for an higher crossing fee for the natural gas passing from Ukraine and going to Europe. Looking at the issue from the steel industries side, we can say that Ukraine's steel industry would be deeply affected from a potential increase in natural gas prices. As a result, Ukrainian steelmakers would definitely have to increase their prices for both domestic market and exports or shut down their plants. Besides, Gazprom has began constructing North European Gas Pipeline, in order to transmit natural gas to Germany, Great Britain, the Netherlands, France and Denmark through Baltic Sea. Furtermore, Ukraine also announced agreements with Turkmenistan on natural gas supply. These projects will definitely increase the demand for tubular products.