Russia’s invasion of Ukraine has jeopardized #steel supplies from both the major producing nations, straining an already tight market in Europe and sending world steel prices soaring from $800/ton in early February to $1,200/ton as of beginning of April. The war has also pushed companies from Europe, the Middle East and Africa to reach out to Indian and Brazilian producers even as local steel prices have jumped nearly 20% for February-March period.
▪ The war led to the cessation of iron & steel supplies not only from Ukraine, but also from russia, as country-level and company-level sanctions were applied. The procurement of pig iron and semi-finished products for the EU and the USA was affected most.
▪ According to S&P analysts, Ukraine is world’s 13th #largest #producer of #steel and 5th largest exporter of #iron ore by volume, nearly 80% of its steel output is export-oriented. The country exported 44.4 million mt of iron ore products in 2021. Ukraine provides steel to the Middle East, Turkey, the EU, Africa and the Americas.
▪ The russian invasion of Ukraine came as an unprecedented shock for the local steel industry. Most Ukrainian steel plants suspended their operations; the issue of safety came first. Now some of the producers started resuming their operation but with a limited capacity. Moreover, nearly 1/3 of Ukrainian steel capacities are located in Mariupol – Azovstal and Ilyich Iron and Steel Works. And now Mariupol is the hottest point of the war.
▪ Stoppage of steel production led to disruption in supplies of by-products. Almost all integrated steel plants in Ukraine have air separation units (ASUs), which produce oxygen and other industrial gases. Ukraine is the world’s largest supplier of noble gases including neon, krypton and xenon. All these gases are essential for semiconductor manufacturing. Globally, Ukraine supplies about 70% of neon gas and 40% krypton gas.
▪ Ukraine supplies 90% of the highly purified neon for #chip #production in the USA. The two major purifiers for russian and Ukrainian neon are in Odesa. Now it is nearly impossible to use those facilities in supply chains. Termination of noble gas supplies from Ukraine will push prices up and we will inevitably see aggravation of chip shortage.
▪ To resume supplies, it is necessary to stop hostilities and unblock the ports of the Black Sea. In such conditions, most Ukrainian steel plants can restore operations within 1-2 months. For Mariupol plants, this process will not be fast. After current hostilities in the city damage audit will be required to assess state of the plants. Also, it will take some time to restore the destroyed infrastructure in the city.
🔹 The war poses significant long-term implications for the global steel industry, including possible readjustment in global trade flows, a shift in energy trade and its impact on energy transitions, and continued reconfiguration of global supply chains.
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