EU extends sanctions on imports of products, goods containing Russian steel

Importers of iron and steel goods into the European Union will have to prove that the material they have used isn’t sourced from Russia, the EU said June 23, as part of the 11th package of sanctions against Moscow.

The bloc first banned the import of key iron and steel products from Russia in March 2022, S&P Global Commodity Insights reported. In a bid to further tighten restrictions, the latest sanctions now require importers to prove that the inputs used in their goods have not originated from Russia.

According to the European Steel Association, the EU imported 3.2 million mt of steel finished products from Russia in 2020 and an estimated 3.7 million mt in 2021, when Russia was the second-largest supplier after Turkey, as reported by S&P Global.

Turkey continues to buy large volumes of Russian steel, some of which is processed and re-exported to the EU market. The EU ban on the third country steel imports incorporating inputs originated in Russia, coming into effect Sept. 30, is likely to be a challenge for Turkish exporters who depend on the sales to the EU market.

Shift to non-EU markets?

However, market players in Turkey do not expect the low-priced imports of Russian steel to stop because of the EU sanctions.

Russia remained Turkey’s top HRC supplier in the first quarter of the year at 287,500 mt, up 90% on the year, Turkish Statistical Institute data showed.

It is possible that some Turkish mills would shift the steel exports incorporating Russian feedstock to non-EU markets, while supplying the EU buyers with products originating in Turkey or other non-sanctioned countries, including Southeast Asia or North Africa, according to a few Turkish sources.

However, complete elimination of the Russian input and replacing it with alternatives to maintain the same level of exports to the EU may not be possible due to the sheer size and competitiveness of Russian material for Turkish buyers compared with other origins. This may be particularly relevant for Turkish imports of billet and slab, where Russia’s share in the Turkish imports is much bigger than for the finished products.

In 2022, Turkey’s semi-finished steel imports from Russia reached a record high of 3.2 million mt, up 1 million mt on the year. The data for January-April 2023 showed a 7% on the year drop in the imported volumes but the import level from Russia was nevertheless high at 1.12 million mt and represented 50% of the total.

The EU ban on the imports of steel products rolled from Russian semis will become effective April 1, 2024 — when suppliers, mainly of rebar and wire rod, will face curbs on any steel products rolled from Russian billet. The same measure for slab will come into force on Oct. 1, 2024, and is likely to affect Turkish exports of HRC to the EU.

Ban on car exports to Russia

Also, with the 11th package, the EU extends the ban on exports to Russia of luxury cars to all new and second-hand cars, above engine size of 1,900 cm³, and all electric and hybrid vehicles.

In addition to luxury cars, the EU has banned supplies of new and used electric cars, hybrids and gasoline cars with an engine capacity of more than 1.9 liters, Russian auto industry analysts Autostat said.

However, the ban applies only to firms/corporates, so cars from Europe will continue to be imported through individuals, while the majority of hybrid cars and EVs come to Russia from China and Korea, noted Autostat.

That said, Autostat expects a shortage of cars of all brands in the domestic market throughout 2023, and sales of new cars will take more than one year to return to their pre-war levels.

Sales of passenger cars and light commercial vehicles in Russia over January-May 2023 declined 26% on the year to 228,500, while domestic production of cars over January-April stood at 113,000, 57% lower versus the corresponding period last year.

On the other hand, sales of new electric vehicles keep rising each month, and their market share is also growing, having reached 1.2% in May with a record high 880 cars sold last month, up from the previous 861 record in April and eight times more than in May 2022.

The Kaliningrad-based car manufacturer Avtotor has started the construction of a foundry and mechanical plant. The project is in line with Avtotor’s agreement with Russia’s Ministry of Industry and Trade aimed at developing domestic production of parts and components for the car industry, especially those that are no longer supplied because of European sanctions, as well as European and American auto companies’ self-sanctioning.

The Avtotor foundry and mechanical plant, with 5,000 mt/year non-ferrous and 10,000 mt/year ferrous maximal output, will produce aluminum, cast iron, copper, steel, titanium castings, as well as magnesium alloys.

Author Ekaterina Bouckley, Wojtek Laskowski