The Ministry of Construction complained to the Federal Antimonopoly Service about the rise in the price of rebar

The Ministry of Construction of the Russian Federation sent an appeal to the Federal Antimonopoly Service (FAS) with a complaint about the rise in prices for rebar in the past few weeks. This was announced on March 10, 2023 by the head of the ministry, Irek Fayzullin, in the Federation Council.

“Focused on world prices, it means that at first metal increased, then a group of construction resources that are non-metal,” he explained (cited by Interfax). He added that the Ministry of Construction “is not satisfied today with the increase in the price of metal, for rebar, which has occurred in our country over the past three weeks.”

Vedomosti sent inquiries to the Ministry of Construction, the Ministry of Industry and Trade, as well as to the largest metallurgical companies.

“At the moment, the FAS is analyzing the reasons for the increase in prices for rebar, for this purpose the agency has sent relevant requests to the largest manufacturers of rebar,” the agency’s press service said in a statement.

According to a source in one of the Russian metallurgical companies, the price of rebar in the domestic market of the Russian Federation has increased by 12% since the beginning of the year.

According to the industry agency Metals & Mining Intelligence (MMI), during the week from February 27 to March 5, quotations for rebar on the Russian market increased by 4,400-4,900 rubles per ton, depending on the region. The average indicative in Moscow for rebar of A500C steel grade with a diameter of 12 mm shipped from traders’ warehouses amounted to 53,400-53,900 rubles/t including VAT. Since the beginning of 2022, rebar prices in the Russian market have increased by 26%, according to the agency’s data.

The Vedomosti source connects the rise in price “exclusively with the increase in the cost of production due to the seasonal increase in prices for ferrous scrap.” In the cost of fittings produced by electrometallurgical enterprises (65% of the total production in Russia), the cost of scrap metal traditionally amounts to 65-75%, he recalls.

According to the source, the growth in the cost of ferrous scrap, taking into account delivery to metallurgical plants, from the beginning of 2023 amounted to 28.5% (from 19,300 rubles/t to 24,800 rubles/t). “Thus, given the average share of scrap metal in the cost of rebar, the increase in manufacturers’ quotations for rebar by 12% since the beginning of the year does not even cover the growth in the raw material component,” continues the source of Vedomosti.

According to Ruslom.com, an association of scrap collectors, in February, the weighted average price for grade 3A scrap in the Urals Federal District increased by 4,008 rubles per ton compared to the previous month, to 25,326 rubles per ton, taking into account the railway tariff without VAT . In the Central Federal District, the growth amounted to 1,138 rubles/t to 23,763 rubles/t.

The source emphasizes that the price per square meter in new buildings in the Russian Federation “historically does not depend on fittings.” “So, by November 2022, the cost of rebar in the Russian market compared to the peak prices of June 2021 decreased by 45%, while the price per square meter increased by an average of 31%,” he said. The cost of rolled metal, according to his estimates, does not exceed 6% of the cost of real estate.

MMI analysts believe that high export alternatives, a shortage of steel products against the backdrop of a reduction in stocks, as well as a limited supply in the primary market (including against the background of a decrease in imports) are the main reasons for the growth in rebar prices.

The export price of Russian steel square billets, from which rebar is produced, for the week from February 27 to March 5 reached $615 / t on a FOB basis (“loading on ship”) Black Sea. Thus, the growth of quotations since the beginning of the year amounted to 16%.

According to MMI analysts, the Turkish market continues to be the driver of price growth for square blanks in the region. On March 2, 2023, Vedomosti wrote about the growth in prices and volumes of billet exports from Russia to Turkey. The cost of a square billet is also spurred by the high cost of scrap from which it is produced, and the rise in rebar prices in the Turkish market after the catastrophic earthquake in February.

According to MMI, the price level for HMS 1/2 grade scrap, which is a benchmark in the market, did not change during the week from February 27 to March 5 and was at around $452-455 / t on a CFR basis (“delivery to port”) Turkey. Thus, the quote has grown by 11% since mid-January.

According to MMI, MMI’s weighted average quotations for grade 3A scrap in the Southern Federal District of Russia increased by 29% to RUB 26,555/t, excluding VAT, including railroad tariffs, and by 23% to RUB 24,055/t in the Central Federal District.

According to the head of the department of analytics for securities markets Alfa bank Boris Krasnozhenov, steel prices are also rising in China, India and Europe. In his opinion, the potential for further growth in metal prices in the Russian market and in the world will largely depend on the dynamics of prices for iron ore and coking coal, as well as on the growth rate of the Chinese economy (primarily in the construction and industrial sectors).

In general, according to Krasnozhenov, the slow growth in the global steel market can continue “for quite a long time.” According to the analyst, the main source of this increase will be Chinese steel companies, which still have to catch up with other suppliers in price dynamics.

The Russian government drew attention to the sharp rise in prices for metallurgical products as early as the year before last. In May 2021, First Deputy Prime Minister Andrey Belousov in an interview RBC said that Russian metallurgical companies increased their revenues in 2020 “many times” due to higher prices in the domestic market and “packed” the budget in terms of state capital investments and state defense orders by about 100 billion rubles.

In the first half of 2021, prices for steel products in the domestic market continued to grow following the global ones. As a result, it was decided to introduce export duties on metallurgical products for the period from August to December 2021. At this time, the Ministry of Finance was developing a mechanism for taxing the industry, which would make it possible to withdraw excess profits during a period of high prices. But, as noted by experts and industry participants, the duties did not affect the dynamics of prices in the domestic market, which continued to follow the export ones.

In addition, at the beginning of February 2022, the FAS recognized NLMK, MMK And “Severstal» guilty of abusing their dominant position in the Russian hot-rolled steel market. Companies were issued orders to stop violations, and later imposed administrative fines. The companies, having disagreed with the decisions, instructions and orders of the service, decided to appeal against them in the courts. Later, negotiations began on the conclusion of settlement agreements. The next court hearings are scheduled for the end of March 2023.