Steel Market: The Impact of Russia’s Invasion of Ukraine

Steel Market: The Impact of Russia’s Invasion of Ukraine

Read Time: 5 Minutes

Russia’s invasion of Ukraine will impact the global steel market, particularly in Central Europe. Both countries export steel and other metallurgical products. While China accounted for more than half (53%) of the world’s steel production in 2021, Russia and Ukraine produced 5%, or 97 million tons of steel. Because of the war in Ukraine, the impacts will be felt in terms of supply and price on the buying side, and supply chain disruption and costs for producers. Another impact is a drive toward alternate energy sources and reduced carbon emissions.

Steel Production Interruptions

Ninety percent of steel plants in Ukraine have suspended operations; many are damaged or destroyed. For example, Azovstal and Illich Steel, both controlled by Metinvest, in Mariupol, are severely damaged and account for about 41% of Ukrainian steel production. Even after an end to the conflict, these plants may not go back to the status quo. For example, if a blast furnace is destroyed, it is likely to be replaced by an electric arc furnace(EAF) in order to reduce carbon emissions.

Ukrainian access to the seaborne markets has been interrupted or disrupted by destruction of ports or by Russian Navy blockades. Seaborne shipments have essentially stopped. Western sanctions have affected Russian shipments. Rail operations for Ukrainian and Russian producers are affected, and sanctions have halted or severely reduced Russian shipments to Western Europe.

Both Russia and Ukraine are significant suppliers of steel, iron ore concentrates, iron ore pellets, coal, merchant pig iron, merchant HBI, and DRI. In addition to Central Europe, the Middle East, North Africa, Turkey, and the U.S. are affected, particularly for pig iron, DRI, and HBI. Steel re-rollers, both in-house and independent, in Turkey, Italy, Bulgaria, and the U.K. are not getting slabs and billets. Pig iron prices have increased substantially worldwide (920-950 USD/ton FOB SE Brazil).

Impact on Specific Companies

Some companies are more impacted than others. ArcelorMittal’s Ukraine unit closed temporarily. ArcelorMittal Huta Katowice, South Poland, a producer of half of Poland’s steel, will probably struggle to get in-house iron ore from Ukraine and will have to switch to seaborne supplies. Unfortunately, Poland’s importing infrastructure is inadequate and costly.

Liberty Steel, which has Romanian and Czech Republic mills, may have issues sourcing iron ore and/or scrap. The Romanian mill also uses pellets from Ukraine and/or Russia. However, it has a history of using seaborne supplies (from Canada and Brazil).

Moravia Steel in Czech Republic may also have to go to the seaborne market.

U.S. Steel Kosice in Slovakia may have difficulties getting iron ore, particularly from the seaborne market. It has been dependent on Ukraine and/or Russia.

Voestalpine consumes Ukraine ores but also gets ores from the seaborne market. It too may need additional supplies from the seaborne market.

SSAB should not be impacted because it has a domestic iron ore supplier, but it may have a coal dependence on Russia.

Salzgitter Flachstahl should not be affected because, in general, its ores and coal come from the seaborne market.

Celsa may have supply chain issues. DRI and HBI are basically dried out, and scrap prices are increasing.

In the Far East, Nippon Steel, and some Chinese producers and traders that have bought iron ore pellets from Ukrainian and Russian producers, will also need alternatives.

Impact Across the Globe

Another impact affects merchant pig iron users in Turkey, the U.S., MENA, and Southeast Asia. Slab and billets and slab re-rollers in Europe, including Metinvest’s in Italy, Bulgaria, and the U.K., plus other re-rollers in Turkey and MENA, will be impacted because Russia and Ukraine export these semifinished products. Turkish consumers are asking the government to pressure steel producers to ramp up pig iron production, and billets and slabs. Egyptian consumers are also struggling to get semifinished products, particularly billets. The Middle East will need to change habits because it has been using steel and metallurgical products from Russia and Ukraine.

European long steel producers could halt production because of costs. They’re also hindered by scrap, pig iron, DRI, and HBI supply. The stoppage of long steel production will depend on energy and raw material prices. Some mills are limiting production, and energy surcharges are being imposed. Inventory levels are expected to decrease through summer. Long steel prices are increasing, particularly in Germany, with supply well below demand.

This situation could accelerate the reduction of iron ore dependence, with an effort to embrace alternatives, and not just electric arc furnaces but also “green steel” using hydrogen as an energy source. There’s a learning curve for hydrogen steel production, and it will take time before production is carbon neutral, but that process has begun.

Less Future Dependence on Russian Steel?

Because of Russia’s invasion, companies are either never returning to Russian dependence or it will take significant time. China will modernize. In a centrally planned economy controlled by the government, its steel is a national security industry. The country has specific targets to limit pollution, modernize facilities, and modernize mining, with a peak of carbon emissions by 2030, and neutrality by 2060.

China’s steel production is expected to remain about the same as in 2021 (1,033 million tons of crude steel). Latest projections are a demand of 985 million tons of steel and supply of slightly 1 billion tons. China should continue to be an integrated steel producer for the next few years; it has a relatively modern blast furnace structure. Nevertheless, it will also increase electric furnace production. For the time being, the market sentiment in China is depressed by COVID-19 restrictions and doubts about the impact of the stimulus packages.

We’ll see a trend in the Atlantic and China — for several years — toward the consumption of higher iron ore grades. If you want green steel, you need quality materials. In the short term, the pellet price will stay strong because Metinvest and Ferrexpo in Ukraine are for the most part out of the market. The same applies to Lebedinsky GOK in Russia. The blast furnace pellet price differential is assessed to be for the Atlantic at $82/dry metric ton, up from $65/ton before the war. For the time being, the price differential between blast furnace pellets and direct reduction pellets is not conducive to the necessary investment, particularly in greenfield plants. It is clear, however, that the industry’s push toward green steel production will give support to DR pellet demand.

U.S. scrap prices are stable or down. Pig iron prices are strong. There are few alternatives to Ukrainian and Russian supplies. The U.S. imports 63% of its steel from Ukraine and Russia. As mentioned before, the FOB pig iron price in Brazil has doubled, and Brazilian producers seem to be sold out. With DRI and HBI, it’s complicated. Russia’s Lebedinsky GOK is out because of logistical, political, and legal implications. If you have a continued Russia relationship, you will most likely have problems with the U.S. Justice Department.

What happens in the U.S. will depend on the economy and COVID-19’s trajectory. There are inflation fears and interest rate uncertainty (most likely to increase). The infrastructure program will also impact steel prices. One thing that has been underlined, not only by the war but also the pandemic, is the consequences of globalization. There could be a new paradigm, not only because of supply chain limitations but also because there will be rearmament, particularly in Europe, led by Germany, which recently reversed its traditional defense policies.


About Joaquim Eleuterio

Joaquim Eleuterio is Chief Executive Officer and owner of FeConsult and Trading and a fellow of the International Iron Metallics Association. Previously, he was Partner and founder of EDULIS Corporate Management. Prior to this, Joaquim was Chief Executive Officer of AM Mining and Marketing Director at ArcelorMittal Group and Vice President Sales and Marketing – ArcelorMittal Mines Canada, Managing Director – ArcelorMittal Ore Sales Canada, and Managing Director – Quebec Cartier Mining ArcelorMittal Ore Sales Canada. Before this Joaquim was Director Business Development at Vale.


This steel industry article is adapted from the GLG teleconference “Steel Market: Impact of the Russian Invasion of Ukraine.” If you would like to speak with steel industry experts like Joaquim Eleuterio, or any of our approximately 1 million Network Members, please contact us.


List of Questions Asked During the Teleconference:

  • Could you give us a general overview of how the steel market is currently operating?
  • How are the key players in Europe going to be impacted by this conflict?
  • What’s your outlook on supply and demand trending considering the conflict?
  • How do you anticipate demand in China for 2022?
  • How is pricing going to be impacted by region in your opinion?
  • What would be your outlook for key costs of production in 2022?
  • Could you just give us a brief outlook on the U.S. market?
  • I wanted to yield the floor over to you to leave us with final thoughts on potential stress opportunities, as well as any items that we didn’t yet get to cover.

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