Russia sanctions impact feedstock sourcing, sales: ArcelorMittal

ArcelorMittal says the imposition of extensive sanctions on Russia by the EU, UK and US affects the company’s sourcing of raw materials and also, potentially, the markets for sales by the group’s operations in the CIS. In 2021, the group recorded $1.6 billion of sales to customers in Russia.

The group’s main CIS operation in Kryvyi Rih has been suspended after Russia invaded Ukraine (see Kallanish passim). It produced 4.9 million tonnes of steel in 2021 and 11.7mt of iron ore. The related property, plant and equipment had a carrying value of $2.3 billion on the company’s balance sheet at end-December 2021. Steel shipments in 2021 were at 4.6mt, generating $4.1 billion of sales, including $0.9 billion of sales to customers located in Ukraine.

“The Company cannot predict the duration of the idling as it will depend on the remaining course of the conflict and the establishment of safe and stable operating and logistical conditions thereafter, as well as potential repairs of any damages sustained,” ArcelorMittal says in its 2021 annual report.

The war could have a material adverse effect on the overall macroeconomic environment, potentially affecting steel and iron ore demand and prices as well as increasing energy costs, ArcelorMittal notes. The conflict, sanctions imposed and Russian reaction could have further destabilising effects on financial markets.

“In addition, sanctions may remain in place beyond the duration of any military conflict and have a long-lasting impact on the region and globally, and could adversely impact the Group’s results of operations and financial condition,” ArcelorMittal concludes.

Adam Smith Germany