After weeks of escalating political tensions, Ukrainian fears of a Russian invasion came to fruition on 24 February 2022. European steel markets are rattled, as the repercussions of the war begin to spread across the globe.

Western nations are responding to the invasion by imposing economic sanctions on Russia, as well as Belarus for its role in allowing Russian troops to advance on Ukraine through its territory. The sanctions having the greatest impact on international steel markets are those which obstruct the access of Russian banks and businesses to financial systems. The inability of Russian enterprises to receive payment for energy and steel will cause significant reductions in the availability of these essential commodities.

Consequently, European steel buyers are facing the prospect of severe upward pressure on finished steel values. Price volatility is expected to be a feature of the market in the short term. Nevertheless, four key drivers of steel prices are emerging:

• Energy prices
• Steelmaking raw material costs
• Supply of semi-finished and finished steel products
• Consumer spending and investor confidence

1. Sanctions cause Russian oil and gas prices to skyrocket

2. Cuts to raw material supplies will apply further upward pressure

3. The CIS steel supply chain is shutting down

4. Consumer and investor confidence is diminishing

European steel market clouded by uncertainty

Most European steelmakers are backing away from the market, in order to evaluate the supply and cost of both energy and raw materials. Western sanctions could continue ramping up, and Russia is likely to impose retaliatory measures, adding to the current market volatility. Nevertheless, early price indications for March represent substantial increases, month-on-month.

Furthermore, the war is highlighting the fragility of global supply chains, and the inextricable interdependence between nations. In the long term, an accelerated transition to renewable energy, and a shift in Europe’s oil and gas supply base, is envisaged.