European steel prices skyrocketed due to broken supply
Russia is the world’s fifth largest steel producer, while Ukraine is in 14th place, the two combined account for a combined one-fifth of total steel imports into the European Union.
The price of hot rolled coil (HRC) on the European market has increased by nearly 40% in the past 3 weeks. Following the same trend, steel prices in North America and China also increased, but at a slower rate, around 7-8%.
Steel prices in Europe increased sharply, outstripping the US and European markets.
“It seems certain that prices will continue to rise in the short-term. We expect this trend to last through March and into April,” said Kaye Ayub, an analyst at consulting firm MEPS International. “Supply has been disrupted massively in Europe, and it will take quite a while to resolve that,” he said.
Russia and Ukraine are the world’s leading steel exporters, with a dominant market share, especially in European markets.
UBS analyst Andrew Jones said: “In Europe, Russia and Ukraine have pricing power over steel mills … and the loss of about 20% of finished steel imports from Russia/Ukraine has caused supply is tight in the market.
Although the sanctions by Western countries do not specifically target Russian steel companies, logistical problems and the associated impact of the sanctions have disrupted business. as well as transporting steel.
Russia and Ukraine account for one-fifth of steel imports into the EU.
In addition to fear of losing supply from Russia and Ukraine, Europe is also facing soaring energy prices due to the conflict.
The region’s steel industry has struggled with high energy costs as Russia’s implementation of a “special operation” in Ukraine pushed up oil and gas prices, pulling electricity prices up.
Steel production from electric furnaces accounts for more than 40% of total European steel production, a higher share than in all other regions.
After the conflict broke out, Spanish steelmakers such as ArcelorMittal and stainless steel maker Acerinox cut output, while Germany’s Lech-Stahlwerke stopped production in Bavaria.
The full impact of the conflict is yet to be reflected in the production data, but European steel output in January fell to a seasonal low, according to Bank of America analyst Michael Widmer. since 2009.
In February, crude steel production in the European Union fell 2.2% month-on-month, while elsewhere in Europe fell 4.8%, data from the World Steel Association showed. .
Steel production in the world, Europe and China.
New measures banning Russian finished steel products from entering the European Union are expected to take effect soon, and traders have been forced to raise prices on the view that supply will continue to shrink.
On March 12, the EU announced it would ban iron and steel imports from Russia and ban the export of luxury goods to Moscow. On March 16, the EU announced it would increase tariffs on stainless steel products from India and Indonesia, after determining they benefited from unfair subsidies, including some from China. . These moves will further tighten the European steel market.
Reference: Reuters
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