Concerns have been increasing in the CIS steel and raw material export markets after the escalation of tensions between Russia and Ukraine, when Russian president Putin recognized two breakaway regions of Ukraine as independent on February 21. Following this, Western countries have been announcing new sanctions, including on financial institutions and others. SteelOrbis has surveyed the views of officials at mills and of market sources regarding the current consequences of the conflict for steel exports from the CIS.
Sanctions against Russia
After Russia has approved its decision to recognize the two breakaway regions of Ukraine as independent, Western countries have started to impose sanctions.
Germany has halted the approval of Russia’s Nord Stream 2 gas pipeline, which has already attracted billions in investments. The UK has imposed sanctions on five Russian banks and on a number of oligarchs, while the EU has also imposed sanctions on hundreds of Russian members of parliament.
So far, there has been no major impact on ex-Russia steel exports and the financial institutions put under sanctions are not among the major ones in the country. “Sanctions against the banks are not impacting business as it is not a problem to find another bank. Clients have been taking a pause to wait for the publication of the list of sanctions. For now, they are not affecting us, so trading will continue,” a Russian producer said.
“The sanctions will most probably have an impact, but in the future. Now banks are alarmed. Some said that there will be resistance to financing Russian exports, but again no real impact as for now,” another Russian mill said.
Traders from Europe have been confirming that banks have been taking a longer time to open letters of credit for both ex-Russia and ex-Ukraine steel and for raw material exports. Also, there are possible insurance issues in the future, according to sources.
Ukraine’s steel business working normally for now
In Ukraine, where the tensions have been growing day by day, the security council has approved plans to declare a state of national emergency, in response to the growing threat of a Russian invasion. According to the preliminary details, disclosed for the moment, no restrictions are expected to be applied to Ukraine's key industries.
As of today, February 23, according to sources, the main steel manufacturers in Ukraine continue their operations without disruptions in terms of production, loading, shipments and overall logistics. Some market players, however, think that in the near future there may be a problem with raw material suppliers from Russia to Ukraine, which may lead to certain production rate reductions among Ukraine’s integrated mills. Overall, market players are closely watching the situation since there are new developments seen every day and various scenarios are being discussed. “I want to emphasize that despite how scary the scenarios might be, the SCM enterprises will continue implementing all investments which were announced in our plans for 2022, in particular, the ones in Mariupol,” Rinat Ahmetov, the SCM investment shareholder, said in the official statement.