One of the options for saving the steel business in Russia in the face of Western sanctions could be the reorientation of exports to the countries of Southeast Asia, in particular to China, Vietnam, Thailand and Indonesia. However, logistical problems and traditionally lower prices in the Asian market call into question the prospects for such changes.
“Normal sea routes through the Baltic were severely restricted, and the redirection of cargo to the eastern ports by rail is hampered by the long transport arm and congestion in this direction,” Andrey Lobazov, senior analyst at ATON, notes.
“In this case, transport costs will increase. In addition, prices in the Asian market are lower than in Europe and the US, so companies will have to reduce the cost of products in order to enter it. But now metallurgists find themselves in those conditions where survival is more important than high marginality,” says Yury Kostyukhin, Head of the Department of Industrial Management at NUST MISIS, Doctor of Economics.
In the first quarter of 2022, Russia accounted for 30% of global steel exports. Before the sanctions, the EU countries, the UK and Switzerland bought almost a quarter of Russian exports of ferrous and non-ferrous metals. According to analysts, Severstal, which received almost a third of its revenue from European buyers, will suffer the most because of the sanctions.
Experts agree that the most obvious way to address the loss of Western markets is to stimulate domestic demand for steel through increased construction activity in Russia itself.
“This can be done through the introduction of mass state orders in construction and the development of our own mechanical engineering. But this is a long process that will take more than one year,” emphasizes Yuri Kostyukhin.
Recall that the other day, a meeting was held between the heads of metallurgical companies of the Russian Federation and President Vladimir Putin, who, according to its results, s-vto-s-uchetom-nezakonnyh-ogranichenij-dlja-metallurgov.html">instructed the government of Russia to prepare an updated strategy for the development of metallurgy until 2030 by June 1. The document will take into account not only the tasks of increasing demand in the domestic market at affordable prices for products, and reorienting exports.
