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Vladimir Lisin, the head of Russia’s NLMK holding, which is not yet under the direct sanctions of the US, the UK and the EU, said he expects Russian flat steel output to drop by 23 percent in 2022, while the production of longs and semis may fall by 15 percent and six percent. Overall, Russian mills expect their total steel production to decrease by 15 percent this year or by 11 million mt. It is noteworthy that a deeper downturn is expected for the second half of the year,  by 9 million mt.

The international sanctions applied against Russia overall and certain steel producers directly, have heavily impacted their positions in the local and export markets. Domestically, the automotive sector has already seen a 78.5 percent drop in April, while the figure for May is estimated at 83.5 percent. The key reason is the drastic shortage of spare parts, restricted access to foreign technologies, and the overall decline of people’s purchasing power. The same reasons have affected the construction sector, where the consumption of steel has decreased by 15-20 percent. According to worldSteel estimations, local steel consumption in Russia will fall by 20 percent this year to 35.1 million mt.

As regards exports, Russian mills are struggling to find buyers since the markets in the EU, the UK, the US, and some Asian countries have forbidden or restricted imports of Russian origin. Moreover, if the mills find a buyer, their sales prices have to be much lower than prices of materials of “clean” origin, especially in the pig iron, slab, and HRC markets. While Russia receives fewer export revenues, its low-priced materials have a negative impact on the steel market balance and on the prices of related products, especially in Turkey, and to a certain extent in Asia, SteelOrbis estimates.

Steel production in Russia will certainly decline this year, but some market players assume 15 percent for all steel and 23 percent for flat steel is an optimistic scenario. According to the market information, in May some of the mills in Russia already cut flats production by around 20-30 percent, while June is expected to see further significant cuts. In the rebar segment, the low construction demand, almost zero exports, and incoming supply from the Donbass area have already led to output cuts of around 20-25 percent, sources say.