The European Council has announced that it has adopted a 11th package of sanctions against Russia to strengthen existing EU sanctions and prevent circumvention, effective as of June 23.
The Council has tightened restrictions on imports of iron and steel goods by requiring importers of sanctioned products that have been processed in a third country to prove that the inputs used do not come from Russia.
The tighter measure is expected to have a toll on Turkish steel sector particularly in the import semis segment. In fact, most of the hot-rolled coil producers have been buying ex-Russia steel slab even despite the previous sanctions. “Turkish mills will have to have a separate account and to show that for EU exports they do not use Russian slab or flats,” a market source told SteelOrbis. “But no one forbids to roll it and to sell to local market and non-EU destinations,” he added. Traditionally, Europe is the key export destination for ex-Turkey HRC and the re-rollers also depend on EU CR/coated market to a certain extent.
In January-April, Turkey imported 842,000 mt of slab, 64 percent of which came from Russia, while in HRC segment the import share of Russia stood at 28 percent out of 1.4 million mt. Turkey’s HRC exports in total for the same period stood at only 324,000 mt and close to 50 percent of it went to Europe. “Turkey will have to be much more careful now and it means that the business becomes much less flexible and riskier,” a trader said. In addition to Turkey, Taiwan is another country, which might choose to cut slab imports from Russia since it exports to Europe slightly less than 1 million mt of HRC per year. Previously, when Russia’s full scale war against Ukraine started, Taiwan and Turkey were among the countries who increased the slab imports from Russia. Last year, Taiwan imported around 600,000 mt of slab from Russia. As a result, the number of relatively safe export markets for Russian slabs shrinks down to Latin America and China.
Similar, though a less intense impact might be seen in the billet segment. In January-April, Turkey imported close to 1.4 million mt with Russia accounting for 43 percent. The sanctions are expected to affect the smaller billet re-rollers in Turkey, who had been, in fact, the main billet importers from Russia in the recent months. However, taking into account that the longs exports to Europe have been minimal for a while now, the risks for them will be less.
The measure does not yet clarify whether the origin of the material inputs such as pig iron and coking coal in EU’s imports will be also controlled. Many market players believe that this segment might be also impacted. In that case, countries like India might be affected, where Australia is the main source of coking coal, but the share of ex-Russia material has been rising recently. At the same time, HRC exports to Europe are crucial for India. Other large Asian producers, who are not dependent on steel exports to Europe, will not be affected by the measure.
In addition, total 87 entities from China, Uzbekistan, the UAE, Syria and Armenia, which support Russia’s military aggression, are now subject to tighter export restrictions for advanced technology items.