The possibility that the European Union will agree to extend the quota for ex-Russia slab imports for another four years has become stronger recently, according to steel market players. The issue has been actively lobbied by NLMK Belgium (NBH), a part of Russia headquartered NLMK Group, and, although there is no official European Commission decision yet, many consider the deal done.
In the eighth package of sanctions, adopted against Russia for its invasion of Ukraine, the EU had set a 7.5 million mt quota for slab imports from October 2022 until the end of September 2024, which would have been followed by a ban for ex-Russia semis imports to the EU. The granted quota mainly benefitted Russia’s NLMK Group, which is still not under direct sanctions, and therefore has been able to supply steel slab to its assets of NBH, located in Belgium, France, Denmark and Italy. As a result, NBH has been the main lobbyist of the quota extension for Russian slab, but several other European re-rollers have also joined them, citing that the ban on ex-Russia slab imports, coupled with the dwindled war-related supplies from Ukraine, would create semis shortage in the European market. Particularly, Czech Republic has been asking to allow imports of Russia’s steel after September 2024 as well.
Previously, EUROFER warned that the exemption of Russian slab imports to the EU would distort the fair competition environment in Europe, taking into account that pretty much since Russia started war against Ukraine, its products, including steel, have been traded on export markets at a considerable discount due to its toxic origin. Some of the experts evaluated the discount rate for slabs from Russia into Europe at 10-20 percent in 2022, and at even higher levels for the current year. To be fair, some of the European slab importers have been avoiding buying from Russia, including obviously Ukraine’s Metinvest assets in Europe. As a result, the slab inflow from alternative destinations, including China, Indonesia, Malaysia, India, Vietnam and South Korea has increased.
Currently, according to several sources, European Commission looks ready to confirm the quota extension for another up to four years. According to the preliminary information, the size of the quota might be reduced and to be valid for only non-sanctioned Russian mills. Noteworthy, such an amendment will not make much difference, since Russia’s Severstal had terminated its presence in European market since the beginning of the war, while Evraz had been selling limited volumes to the EU. In addition, according to import data, between October 2022 and September 2023 Europe received around 2.8 million mt of slab from Russia, which was lower than the allowed 3.75 million mt. Therefore Russia has not been even fulfilling the provided quota.
The regulations regarding flats imports to the EU might be another issue, if the European Commission extends quota period for Russian slabs. Previously, it had been believed that following a ban on Russian slab, the EU will also put a restriction on the import of flats, produced from Russian slab in other countries. Such a development would have its toll particularly on Turkey and even these days there are requests from the buyers for the certificates of feedstock origin from the suppliers.
While awaiting the official decision for the slab imports from Russia, the market is also looking forward to the expected 12th package of sanctions announcement. There is a strong anticipation that it would include the restrictions on pig iron and iron ore materials imports from Russia to the EU, the measure is expected to be disclosed shortly. “NLMK has been actively lobbying [slab quota period extension] and it triggered talks that if the EU will allow slab supply, this can be a signal that pig iron [and other key raw materials for European mills] may be banned in the 12th package of sanctions,” a trader told SteelOrbis.