By John Helmer in Moscow
Russian steelmakers in Moscow have confirmed that their export surge towards China, on which the revival of Russian mill capacity is currently based, is now threatened by an anti-dumping (AD) inquiry launched by Beijing.
According to an unconfirmed report from Interfax China this week, Beijing has ordered an AD investigation against Russian flat steel imports. Three Russian exporters — Novolipetsk, Severstal, and Magnitogorsk — decline to comment on the record, but they acknowledge knowing of the Chinese government’s trade move. One mill executive said that, for the time being “we have heard about the investigation starting. We don’t know the details. We are trying to find out.”
The Chinese move strikes at one of the most sensitive growth points of Russia’s current steel position, which is boosting mill output and increasing the proportion of steel exported abroad, mostly to China. Chinese imports in the first quarter have enabled Russian mills to lift production, and take the global lead among steel exporters.
It is believed in Moscow that Beijing may be retaliating against Russian anti-dumping moves against Chinese steel imports. The most recent of these was initiated by the Russian trade ministry in late March against stainless steel products, and was lobbied by the dominant Russian stainless producer, Mechel; Mechel’s Asian export market is primarily one for coal, not steel.
A representative of the Chinese steel industry association is reported by Interfax as having mentioned the new AD investigation in an interview with local press. Industry observers now concede that a serious steel trade row between Russia and China is brewing.
Alfa Bank steel analysts Barry Ehrlich and Dennis Vodnev told clients in Wednesday’s bank report: “Our view has been that protectionist retaliation from countries losing market share to Russian imports will begin much earlier in this cycle than in the post-1998 period. Unlike in 1999, Russia is not viewed sympathetically in most foreign capitals making it easy for domestic lobbies to push through measures to defend their markets.”
Alfa warns that with Russian hot-rolled coil volumes running to China at about 100,000 tonnes per month in the first quarter, and total steel exports, including slab, at the 500,000-tonne level for the three-month period, the risks of a cutoff of trade by Beijing, and loss of revenue, are particularly serious for Novolipetsk and Severstal. Ehrlich and Vodnev also report they expect “no influence on steel prices, except in China where it may help steel prices to rise; and a negative impact to overall sentiment for the Russian steel sector.”
Novolipetsk declined to respond to questions on the Chinese AD move. Last month, the company warned publicly that Chinese imports of Russian steel during the first quarter cannot be expected to sustain the production and sales recovery in the current quarter.
Early last week, Evraz, the largest of the Russian steelmakers, confirmed that it plans to restart an idled blast furnace at its Zapsib (ZSMK) mill in Siberia next month. The decision reflects rising steel demand in China, the company claimed. According to Evraz’s Chief Financial Officer, Pavel Tatianin, “ZSMK may successfully compete with the Chinese steel producers due to technical upgrade conducted on ZSMK facilities in 2005-2007.”