Steel price movements in the past 1 year (Source: Trading Economics)

Ukraine is the world’s eighth largest producer and third largest steel exporter. Iron ore and other mineral resources are also abundant in the soil of Ukraine. As a result, when the conflict first took place, steel prices took a significant jump. For example, hot rolled coil (HRC) has increased from $974/ton to $1,185/ton in just over a week. Rebar also hit $753 on March 7 after closing at $694 on the day the conflict started.

In April, Stanislav Zinchencko, CEO of the Kyiv-based commodity website GMK, commented on the matter. Specifically, he mentioned that the conflict has significantly affected the supply chain, rendering 90% of steel production capacity inoperable. According to him, the conflict has reduced export opportunities because Russian military ships blockade the Black Sea.

“About a third of Ukraine’s steel capacity is located in Mariupol – Azovstal and Ilyich,” said Zinhecko. At that time, this was the hottest area of ​​the conflict. This effect caused production capacity to remain an issue. unpredictable problem.”

A double problem for global steel supply

In response to all difficulties, Ukraine continues to produce steel, but at a lower capacity. Examples include Zaporizhstal, Ukraine’s fourth largest steel producer, and Kamet Steel in Dnipro. To date, both institutions have seen little impact from the conflict. For that reason, they are still producing as much as usual. In fact, in an effort to boost the country’s economy, the administration of US President Joe Biden lifted tariffs on Ukrainian steel exports in early May.

It all boils down to Ukraine, but it’s important to remember that there are two sides to the issue. Firstly, Russia is still the world’s third largest steel exporter, exporting about 33.3 million tons in 2018. Second, within the framework of the sanctions package, the US and Europe have banned steel imports from this country. in an attempt to deal an economic blow, limiting Moscow’s revenue.

Russian steel mills are also selling at low prices (Image: Bloomberg)

In addition, the unusual flow of cheap Russian products is shaking the steel trade in Asia, weighing on prices and prompting a key producer in the region to warn of countermeasures. Trade pay may occur.

China is still the biggest driving force for the steel industry

China is now ambitious to increase its ability to control iron ore prices. According to Reuters, iron ore prices are fluctuating between optimism and pessimism about the economic outlook of top importer China. But in addition to short-term fluctuations, long-term uncertainties are emerging.

China is promoting a plan to centralize iron ore procurement, in which state-owned steel mills are creating a new business to strengthen their bargaining power.

This is not the first time China, which buys about 70% of its iron ore volume from sea, has tried to expand its control over the iron ore market more. This makes the relationship between the operators and the Chinese steel mills become more severe as the two cannot find a common voice on the price.