The total reduction in demand for Russian steel may reach 30 percent or 13 million mt in 2022, according to the Russian Steel Association, due to the sanctions imposed by Europe and the US. In addition, steel export volumes fromRussiawill also fall and its competitiveness may be hit further, as Russian Railways is seeking higher export tariffs.
The main impact of the steel consumption drop will be from the automotive industry as eight out of 14 Russian car producers have already suspended their activities, and the cumulative decline in car output is expected to be 50 percent this year, according to the association. “Demand is uneven across segments. Those industries which are tied to imported components will face a reduction. Construction is stable for now. It seems that the projects may be supported by the government later. We feel some increase in local demand, but this is just because imports have left,” a steel producer told SteelOrbis.
The Russian steel association has also said that higher volumes redirected from exports due to the sanctions to the local market will lead to declines in prices. "In order to maintain their competitiveness in foreign markets, Russiansteelmakingenterprises will redirect export flows to alternative markets, which, in turn, will require an increase in logistics costs (now freight to Turkish seaports has increased by more than 2.5 times and freight to Chinese ports has quadrupled), as well as sales to end-users at a significant discount," the association said.
At the same time, despite the expected decline in steel demand, Russian Railways has proposed an increase in steel exports tariffs more than 30 percent due to the exchange rate fluctuations and overall increases in the international market. “Russian Railways' proposal for a hike in export tariffs… will be for metallurgical companies the same as prohibiting exports and will inevitably lead to reducing the competitiveness of Russian exports," the association stated.