Demand for Russian steel has already declined as the EU, US and other countries have announced or are expecting tougher sanctions. By In the words of Platts, Russian metallurgists are considering a real possibility of customers refusing to supply steel from the country.
"We are operating in an area of uncertainty," Platts quoted a source as saying. “Port of Novorossiysk – the ships are loading – but I don’t know what will happen next, the situation is complicated.”
In 2021, Russia produced 76 million tons of steel, exporting about 40 million tons, mainly in the form of billets for further rolling.
Also citing an unnamed market participant, Platts says that Southeast Asian re-rollers, specifically in the Philippines, Vietnam and Indonesia, will stop buying Russian and Ukrainian billets to avoid any potential risks.
Until recently, Russian steel billets were sold mainly to the Philippines. While shipments through the port of Novorossiysk on the Black Sea seem unhindered for the time being and would likely not be affected in terms of logistics from ports in Russia's Far East, sanctions on Russian banks involved in trade finance could derail deals.
According to Platts, one of the Russian steel mills withdrew all of its offers for Asia "due to the impact of the bank problem." Referring to market participants, the agency said that the supply of Russian steel semi-finished products could be redirected to China if sanctions are expanded.
The international banking sanctions announced before Russia's invasion of Ukraine did not affect the financial structures that finance the metallurgists, Platts quotes a source at the Russian steel plant.
“There is already a recommendation from our risk management to convert all contracts into other currencies. Some companies are already starting to do this. I think this will be the first step for Russian companies if the US decides to restrict access to dollars,” the source said.
Russian news portal RBC reported that VTB, the second largest bank in Russia, sent a letter to corporate clients recommending that they temporarily not conduct any transactions in dollars and euros.
VTB was among the banks subject to new sanctions announced by US President Joe Biden on February 24.
