The Black Sea and Azov Sea have become a severely restricted area for commercial maritime operations following the intensified and continuous war-related attacks on port facilities and various vessels. As a result, along with the ongoing issues with logistics costs and the extended lead times currently seen in the regions commercially and geographically linked to the GCC and Iran, the Black Sea and Azov Sea area, according to experts and market players, is becoming critically unstable as well.
The main seaports of both Ukraine and Russia have been basically blocked in terms of cargo operations, which is a major threat to grain shipments, while it also looks likely to create imbalances in the steel and raw materials markets, in terms of supplies from the region. Shipowners are refusing freight offers due to the low possibility of obtaining insurance and given the additional logistical costs. “Every hit on a bulk carrier or a tanker automatically increases the cost of freight for the whole basin since shipowners include the risk of the full loss of the asset,” one experts said, as cited by Russian media.
As a result, in terms of raw materials and steel products, there is hardly any offer for BPI, HBI or billet from Russia now. Specifically, Turkish buyers are concerned not only regarding their future purchases, since they have been relying on cheap Russian materials with short lead time, but also regarding shipments of previous bookings. “Freight ex-Novo for 5,000 mt of billet is up to $50/mt to Turkey's Black Sea region, so no mills can export even with the value of the rouble helping now. There are a lot of problems. I do not think the situation will be healthier soon,” a trader told SteelOrbis. “BPI will also be very hard to load anyway. I don't think many traders will take such risks,” he added.
For BPI alone, the “normal” monthly volume sold from Russia's Black Sea region is around 250,000 mt and, even though the allocation may now be down to 200,000 mt due to some mills not being interested in sales, it is still considered a big volume and the only temporary solution is to stock material at ports and at plants. Some limited tonnages of ex-Russia BPI have been traded to the Far East from ports in that area, but demand is limited in this destination and, also, producers are restricted in terms of railway transportation. So, as one source commented, “Maybe not this month, but soon mills will have to cut production as all this storage is not free,” a source said.
Unless the situation in the Black Sea is stabilized, which is largely not expected to be seen in the short term, Turkish importers might be under pressure to find replacements for the missing and delayed shipments. “I think local billet will be more easily moved, which we already saw last week with Kardemir's higher sales. But it is not an option for slab, so Turkish HRC mills might find themselves buying more scrap. Overall, if the situation remains critical in the Black Sea, Turkey's semis capacity utilization rates may rise, but limited finished steel demand will put a ceiling to that,” a Turkish market player stated, sharing his opinion.
The blockage of Ukraine's southern ports in the Odesa region, as mentioned earlier, is critical for grain exports. However, in terms of the steel industry it is also affecting mainly pig iron and iron ore shipments and, potentially billet shipments, which recently have been a bit rare. While the recent strikes on vessels resulted in Ferrexpo announcing production stoppages, some commercial cargoes are being redirected, sources reported. “Around 10 vessels have been hit [near Odesa]. Everyone is trying to go to Izmail or, the ones who have railway carriers, are going to Constanta,” a market player told SteelOrbis. “Insurance companies [unofficially] have refused to provide coverage for the main ports and have increased the rates for the Danube,” he added.
