Kazakhstan crushes with steel – Newspaper Kommersant No. 189 (7390) dated 10/12/2022

Kazakhstan is increasing the supply of rolled steel to the already crowded Russian domestic market. In July, the neighboring country, after a short break, supplied 150 thousand tons of rolled products and, according to Kommersant’s sources, sold rolled products at dumping prices. Such deliveries put additional pressure on Russian metallurgists, who have lost their main export market in Europe and are forced to export steel to Asia with huge logistics costs.

Kazakhstan in July tripled in monthly terms the supply of rolled products to Russia after the resumption of sales in June. According to the customs statistics of Kazakhstan for July, the volume of hot-rolled, cold-rolled and coated flat products (customs codes 7208, 7209, 7210, 7211, 7212, 7225 and 7226) amounted to 150 thousand tons. Deliveries of hot-rolled steel alone also tripled, to 95,000 tons. In annual terms, July deliveries of all rolled products increased by 30%.

Steel supplies from Kazakhstan are historically carried out by ArcelorMittal Temirtau due to the short transport distance to the Russian market. In 2021, the plant produced 3.4 million tons of steel, of which 2.6 million tons were exported, including 1.6 million tons in the Russian Federation. More than 50% of sales in the Russian Federation are hot-rolled steel. The main part (60%) was supplied to Siberia and the Urals, but a significant amount (27%) falls on the Center and the Volga region, Kommersant sources say. In May, ArcelorMittal, after the outbreak of the armed conflict in Ukraine, announced a halt in sales to Russia, but already in early July it became known about the return of Kazakh steel to the Russian market. Kommersant’s source in the industry estimates Kazakhstan’s share in total imports of rolled products to Russia at 64% in August against 47% in January-February. ArcelorMittal Temirtau did not respond to Kommersant’s request.

Boris Krasnozhenov from Alfa-Bank, citing data from Metal Expert, calls the figure of Kazakhstani deliveries of 150,000 tons per month close to reality. At the same time, in August, imports of thin hot-rolled products to Russia increased by 15% compared to July, and thick sheets – by one and a half times. Considering the repair of sheet-rolling equipment scheduled for October-November at ArcelorMittal Temirtau, we can expect a decrease in exports of rolled products from Kazakhstan to the Russian market, the expert says.

Deliveries of Kazakh steel worsen the already difficult situation of Russian metallurgists. Firstly, according to Kommersant’s interlocutors in the industry, rolled products are supplied at prices below market prices. Secondly, this intensifies competition in the domestic market, where Russian metallurgists were forced to reorient their volumes after the loss of the European market due to sanctions. In March, the Russian Steel Association estimated the volume of sanctions restrictions at 4 million tons, which need to be somehow redirected to the markets of “friendly” countries. At the same time, deliveries to Asia have a significant drawback in the form of expensive logistics. If in peacetime the route from the plant to the ports of the North-West or the South of the Russian Federation was about 1.5 thousand km, then to the Far Eastern ports it is 9 thousand km to go through the overcrowded Eastern training ground. Metallurgical companies did not provide comments.

According to Kommersant’s sources, Russian metallurgists turned to the relevant ministries with a request to resolve the issue of dumping supplies of Kazakh steel. But so far there has been no response. A possible option would be to initiate a compensatory investigation into these imports, which was already underway several years ago. In 2017, the Ministry of Industry and Trade launched a similar investigation after an appeal by the Russian Steel Association, which pointed to the presence of prohibited subsidies that contributed to a sharp increase in the supply of rolled steel to Russia from Kazakhstan. However, the investigation was then completed at the consultation level.

Evgeny Zainullin