EC grants three-month ban waiver for Russian and Belarusian steel orders

The European Commission granted a three-month transition period for Russian and Belarusian steel orders to be completed before the import ban on a wide range of steel products comes into force, the EC said in a statement.

Any contracts closed before March 2 for Belarus and before March 16 for Russia are allowed to enter the EU market and will be assigned to the residual quotas for particular product categories. Previously, both Russia and Belarus had country-specific quarterly quotas assigned to them for various steel products.

A Russian mill source said putting the Russian imports into the tariff-free residual quota brought some relief after the initial uncertainty over whether all Russian and Belarusian imports arriving after April 1 would be automatically tariffed 25%.

As the Russian and Belarusian quotas were shared out amongst other countries, it is possible that for some product categories the residual quotas available to Russian and Belarusian mills may be lower than the cancelled quotas previously assigned to the two sanctioned countries.

In case of some products like wire rod, where the quota for Turkey has been exhausted fast in previous quarters, the volumes transferred from Russian may be allocated fully to Turkish import, reducing the residual quota for Russia. This would mean more Russian-origin volumes would be subject to a 25% import duty.

One of the countries benefiting from the redistribution of the Russian and Belarusian quota is Ukraine. For wire rod, the Q2 tariff-free volumes for Ukraine were increased roughly 17.5% (to 112,798 mt) from the Q1 level, even though the Ukrainian steel supply has largely been halted due to the war and the allocation of the generous quota for Q2 looks questionable.

Without the significant Ukrainian supply and with reduced flow from Russia and Belarus, wire rod imports in Q2 may drop 180,000-200,000 mt, a Russian mill source said.

“At the same time, due to production problems at EU mills, another 200,000 mt [of wire rod] will be lost from the EU market. The shortage will be around 100,000 mt per month. Get ready for wire rod prices of Eur1,500/mt,” the Russian mill source said.

A European long steel producer put the latest rod prices in the domestic market at Eur1,350/mt DDP.

The EC also stated that it is continuing to review further adjustments to the safeguard measures launched in December 2021, which should be finalized in the coming months. It also confirmed that scrapping the entire safeguard system “is not on the table.”

“The original reason for imposing this measure (the continuation of the US Section 232 measures on steel, and the risk of diversion to the EU market) is still very much a reality, as concluded in last year’s extension decision of the measure,” the EC stated.

— Wojtek Laskowski