EU to extend import permit for semi-finished steel products until 2028

The EU will extend the permit for the import of Russian slabs, which expires at the end of 2024, for another four years. The current import quota is 3.7 million tons per year, mainly used by NLMK, which has a number of rolling mills in Europe. The European authorities, having introduced quotas, fell into a trap: it turned out to be difficult to replace significant volumes of imports of Russian slabs, and it was profitable for European plants to purchase them in Russia.

The EU plans to extend the validity of import quotas for the supply of Russian slabs, it follows from messages European Council. As noted Bloomberg, we are talking about a four-year extension. “The information is still unofficial, but the extension will be for three to four years with a decrease in annual volumes,” said Platts citing a source at a European rolling mill. The current quota of 3.7 million tons ends at the end of 2024. The main supplier to Europe is NLMK: the holding supplies slabs to Belgium, France, Denmark and Italy, where the group has rolling mills. The company declined to comment. Steel slabs are used to produce flat products.

The key suppliers of slabs to Europe until 2022 were Russia and Ukraine, which accounted for up to 80% of all imports of semi-finished steel products.

A feature of the global slab market is that supplies outside its macroregion are rare. Therefore, it is quite difficult for Europe to replace Russian and Ukrainian semi-finished products.

In Europe there are supporters and opponents of quota extensions. In October, Argus wrote about the desire of NLMK Belgium Holdings (46% owned by the Belgian investment fund Sogepa, 51% by NLMK) to achieve a quota extension for four years. On November 28, Czech Minister of Industry and Trade Josef Sikela said that the country would like to extend the postponement of the ban on Russian steel imports until 2028. According to him, the Czech Republic cannot do without steel from the Russian Federation when constructing bridges. He also added that the Czech Republic is considering the possibility of increasing imports from China, but this steel is inferior in quality to Russian steel. European Steel Association (Eurofer) in December opposed the easing of sanctions. “Failure to comply with sanctions against Russian semi-finished steel products increases unfair competition and creates an unequal playing field in the EU’s internal steel market,” the association said.

The market situation speaks in favor of extending slab quotas. In Europe, demand for steel has increased amid the gradual recovery of the construction sector.

Many plants that shut down blast furnaces and converter furnaces for maintenance or because they were unprofitable have either already restarted them or are planning to restart them in the first quarter of 2024. Salzgitter, ArcelorMittal Bremen, ArcelorMittal Ghent, as well as Liberty Galati and Liberty Ostrava are planning to do this.

The slab market is not so large and is controlled by several large players, says Boris Krasnozhenov from Alfa Bank. At current prices for iron ore raw materials, coking coal, scrap metal and energy resources on the European market, the production of our own semi-finished products at sites in Europe is unprofitable, he notes. The lack of Russian semi-finished products could bring European assets to the brink of closure. “NLMK is one of the most efficient companies in the global ferrous metals sector. The supply of slab for further processing at rolling facilities in close proximity to the end consumer is a logical element of the company’s strategy,” the analyst comments.

NLMK remained the only major steel producer in Russia that managed to avoid falling under EU sanctions and also maintain access to Western markets. For other Russian companies that have developed vertical integration with access to European consumers, the situation is becoming more and more difficult: for example, LUKOIL has already been forced to sell a plant in Sicily out of its four refineries in Europe, and a plant in Bulgaria may sell in the coming months.

Evgeniy Zainullin