The past year has seen political unrest in Ukraine with much of the activity taking place in the East of the country. This has had an adverse effect on the Ukrainian steel industry with a large proportion of production centred around the Eastern Donetsk and Luhansk regions. In 2014, steel demand in the country collapsed by nearly 24% and the domestic steel industry, responsible for about 15% of the national GDP, has struggled to find new markets outside the nation in an environment already affected by oversupply of Chinese product as evidenced by the fact that total Ukrainian steel exports fell by 13% year on year. One major problem for Ukraine is that their largest market in 2013 was Russia and in 2014 exports to the country declined by 34% with exports for rebar, heavy sections and plates being particularly badly affected. Rebar exporters have been able to replace the 377,000 lost tonnage to Russia with a 360,000 tonne increase in exports to Egypt but the reductions in the other two products have not been replaced.
In contrast, despite sanctions and deteriorating relations with the West, the modest 1% fall in steel demand in Russia has been offset by a 5% growth in exports, driven by an increase in semi-finished steel exported to Turkey, Mexico and Egypt, along with a large increase in hot rolled coil being sent to Turkey and, as reported last time, surprisingly the USA where the depreciating Russian ruble against the strong Dollar has no doubt enabled Russian suppliers to offer products at very low prices.
Political tensions show no signs of abating over the coming year, and in 2015 Ukrainian steel demand is expected to decline by another 21%. With the vast majority of Ukrainian demand being met by domestic production, along with Egypt hinting that it may introduce measures to protect its steel industry from cheap imports, this must be a real concern for steel makers operating inside Ukraine. Despite the outlook being better than in its neighbouring country, Russia is continuing to experience its own problems with the collapse in the price of oil dramatically reducing prosperity and increasing isolation on the global stage meaning that the market for steel in the country is predicted to fall by nearly 7% this year, but Russian exporters do seem more adept at finding new markets for their steel.
With the continued slow-down in Chinese growth giving rise to ever more low-cost exports coming out of that country and a 3.8 million tonne decline in demand in Russia and Ukraine likely to lead to low cost product flooding the market, we could see a rise in anti-dumping measures from many countries in the coming year.