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Exports of iron ore pellets from Russia to the European Union (EU) countries in 2023 decreased by 21.3% to 1.19 million tons. This is evidenced by data from the European Statistical Agency (Eurostat). This is the minimum figure for the last five years. In monetary terms, shipments fell even more – by 38% to $419 million.

At the same time, in December last year, exports increased by more than 4 times year-on-year to 127,600 tons. Russia remains the main supplier of pellets to the EU countries, providing 45.5% of total imports. Other major suppliers in 2023 included Libya (410,000 tons), the United States (390,000 tons) and Venezuela (240,000 tons).

Pellets are a product of iron ore enrichment used in the production of cast iron, which in most cases is processed into steel.

In March 2022 As part of the fourth package of sanctions, the EU banned the import of rolled steel from Russia, as well as fittings, welded and seamless pipes. The EU has a quota regime for Russian metallurgical semi-finished products, which include pellets. According to the Ministry of Industry and Trade, the restrictions affected the export of 3.9 million tons of finished steel products, 200,000 tons of pipe products and 700,000 tons of steel billets – for a total of $3.7 billion in value terms.

Nevertheless, Europe remains the main market for Russian suppliers of metallurgical raw materials. Total exports of iron ore pellets from Russia fell by 69% to 2 million tons in 2023, according to data from the industry agency Metals & Mining Intelligence (MMI). Domestic production, according to MMI, decreased by 2% to 47 million tons during this period.

Metalloinvest (part of Alisher Usmanov's USM Group) is Russia's largest and the world's second largest producer of pellets. In the first half of 2023 (the latest available data), the company reduced the production of this nomenclature by 12% to 11.6 million tons. Metalloinvest explained the negative dynamics by changing the structure of sales of commercial products, which was due to the needs of the iron ore raw materials market.

During a meeting between President Vladimir Putin and the heads of Russian manufacturing enterprises in August 2023, Metalloinvest CEO Nazim Efendiev (left his position in December 23) expressed concern about restrictions on the European market. He noted that although domestic demand allows the company to sell almost 90% of its products in Russia, the question arises about further plans to increase production. In December 2023, the governor of the Kursk region, Roman Starovoit, announced that Mikhailovsky GOK (part of Metalloinvest) had restored the volume of pellets shipments. Instead of exporting to Europe, they go to Russian metallurgical enterprises, he added. Efendiyev said that Metalloinvest sees prospects in the markets of friendly countries where there is a shortage of iron ore raw materials. As an example, he cited a project to build a new roasting machine with a capacity of 5 million tons of pellets in Algeria, which the company is implementing jointly with Uralmashzavod. Vedomosti sent questions to the metallurgical holding.

Severstal is the second largest producer of pellets in the Russian Federation. A representative of the company told Vedomosti that the company plans to increase the share of pellets used in iron smelting. For these purposes, construction of a complex for the production of these semi-finished products with a capacity of 10 million tons of pellets per year has begun on the territory of the Cherepovets Metallurgical Combine (CherMK). After the launch of the complex, which is scheduled for 2026, 90% of the blast furnace charge (a mixture of starting materials) will be pellets, 10% – other iron-containing components, the source explained.

He added that the products of the new production will be fully used for domestic consumption at CherMK, and after the launch of the plant in Cherepovets, pellets from the company's Karelian enterprise will be sold.

Andrey Shevchenko, Managing Partner of TK Solutions, says that the demand for pellets in the country is due to an increase in steel consumption from the military-industrial complex, infrastructure and housing projects.

The demand for steel in Russia in 2023 increased by 7% and amounted to 46.3 million tons, according to Severstal data. In particular, demand in the construction industry increased by 9%, in mechanical engineering by 14%, and in the automotive industry by almost a third. But an increase in the Central Bank's key rate, as well as tightening credit conditions, will put pressure on the level of future consumption, the company warned. According to the World Steel Association (WSA), in 2023, steel production in Russia decreased by 5.6% to 76 million tons.

But in January 2024, output increased by 1.2% year-on-year to 6.2 million tons, and the positive trend continued for the ninth month in a row, the WSA wrote.

Dmitry Smolin, Senior analyst at Sinara Bank, believes that in 2023 it was more profitable for metallurgists in Russia to use iron ore concentrate instead of pellets. Their price on the domestic market in 2024 is 9568 rubles per 1 ton on the basis of FCA (loading on the seller's transport at the specified location) against 8721 rubles per 1 ton of concentrate on the same terms. But it is important for manufacturers to maintain the optimal proportion in the mixture of raw materials, the analyst emphasizes.

Global pellet production by 2030 may grow by 56% compared to 2019 and by 40% compared to 2022 – up to 175 million tons, according to the forecast of the analytical company World Steel Dynamics.

Source: https://www.vedomosti.ru/business/articles/2024/03/07/1024145-eksport-okatishei-v-es-upal?utm_campaign=newspaper_7_3_2024&utm_medium=email&utm_source=vedomosti