The European Council announced late on December 18 that it has adopted a 12th package of sanctions against Russia. This time the package includes pig iron and HBI quotas for imports for 2024-2025 and a ban from 2026, while it also prolongs quotas for semi-finished products for four years. SteelOrbis has surveyed the opinions of players in the steel and raw material markets regarding the new sanctions, which in general are assessed as “toothless”, especially for the coming year, while some bigger impact will be seen from 2025.
Pig iron and HBI
After long discussions starting from the 5th package of sanctions, pig iron imports from Russia have this time finally been included in the EU restrictions on imports from Russia. Imports of pig iron in 2024 will be restricted to a quota of 1.14 million mt, and with a quota of 700,000 mt for 2025. However, even though the quotas are lower than the volumes seen for the current year, they are mainly disappointing for the Ukrainian side which had been lobbying for a full ban. “Much lower volumes are only for 2025, far from now. But for 2024 the [quotas] figures given are quite okay,” one pig iron supplier from Russia commented. “They [the EU] left the access for Russian pig iron. this is what I see,” another Russian mill said.
As for this year, ex-Russia pig iron imports to the EU are estimated at up to 1.8 million mt, with as much as 1.5 million mt going to Italy. “This year supplies increased, but 1.14 million mt is in line with the level of 2022, while 0.7 million mt is close to 2021,” a market source said.
Most market sources polled by SteelOrbis agree that the sanctions are weaker than expected and will not lead to a visible drop in pig iron or HBI sales from Russia to the EU in the coming year. However, “I think it’ll be more seriously felt from the second half of next year… especially for foundries,” a European trader said.
The EU has deferred the ban on imports of pig iron and HBI from Russia to 2026. Direct reduced iron imports from Russia will be subject to quotas of 1.14 million mt and 651,906 mt for 2024 and 2025, respectively.
The SteelOrbis reference price for ex-Black Sea BPI (including Russian and ex-Donbass material, shipped from the Ukrainian territories occupied by Russia) settled at $375-390/mt FOB last week, increasing by $12/mt on average over the past two weeks. At the moment, the offer volume is limited with only one major mill indicating offers at $400/mt FOB for basic pig iron, after sales of up to 150,000 mt in the past month. “They [the major Russian mill] are sold out and hope to get better prices in January. Donbass is still absent, working for billet. This is the only reason why the price is high,” a trader said. The current ex-Russia offers are too high for Italian buyers, who paid $395/mt CFR at the highest in the last deals signed in late November.
Slabs
The EU quotas for ex-Russia slab imports are extended for another four years, though the volume has been reduced for each of the coming years. The EU has set a total 8.5 million mt quota for slab imports from October 2024 until the end of September 2028. The volumes will gradually be reduced from 3.7 million mt per year settled for now (until October 2024), and to 2.061 million mt in 2028. Most of the volumes will be for the NLMK plants in Europe.
“[Pig iron quotas] are better than nothing, but still these half-measures are disappointing. Moreover, the recent extension for slabs imports is a bad sign [as this can be theoretically done for metallic too]. Moreover, as the ban [for pig iron] is not a full one, the Russians will be even more eager to use circumvention schemes,” a pig iron seller said. “So, the package is in effect a dilution of previous measures,” an international trader said.
“EU member states have made a historic mistake by granting further exemptions to imports of highly-carbon-intensive Russian semi-finished steel products. This decision fuels a perverse system that not only weakens EU sanctions against Russia, but also runs counter to EU climate targets,” said Axel Eggert, director general of the European Steel Association (EUROFER), adding, "If Ukrainian re-rollers operating in the EU can diversify their sources of imports of semis away from Russia, why not the few other importers?"
Apart from the prolongation of slabs imports from Russia to the EU, the measures have been extended for the same four years for HRC produced by third countries from Russian slabs, and exported to Europe. This may trigger somewhat more active negotiations by Turkish mills for Russian slabs, while the previous bookings have been covered by Malaysia, Indonesia and Saudi Arabia, as mills have been avoiding buying from Russia. “NLMK [slabs] will be in favor in Turkey. Severstal is toxic due to sanctions, while Evraz is kind of toxic too. I believe there is a tool prohibiting coils produced from Severstal slabs coming to Europe, otherwise it is direct circumvention,” a trader said.
In addition, a total 426,321 mt quota will be applied for semi-finished products of alloy steel other than stainless (HS code 7224 90) for the coming four years. The imports of square billet with weight of less than 0.25 percent of carbon (HS 7207 11) will be banned from April 2024, similar to expectations.