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14 I Companies & Markets bne July 2018
Ukraine steel exports swell amid worries over impact of
US sanctions
bne IntelliNews
Ukraine's external exports swelled by 19.6% year-on- year in April on the back of booming metals exports that surged 65.8% y/y to $1bn – the sector’s best result since August 2014.
Buoyant global demand has kept commodity prices high.
The global price environment became more favourable for Ukrainian exporters in the first quarter of 2018, mainly on the back of higher prices for ferrous metals, iron ore, and grain, despite some downward adjustment seen on some markets
at the end of the quarter, according to the National Bank of Ukraine (NBU).
Global steel prices remained high, boosting iron ore prices as well, and were driven by the ongoing restrictions on steel pro- duction in China. In addition, a benign business environment, the strengthening euro, and effective antidumping policies in European countries have helped maintain robust demand for steel products (especially from Austria, Germany and Italy), while also pushing up the prices of these products.
"The prices of steel products edged down in the latter half of March, as China gradually stepped up its steel production," the NBU said in its April's inflation report. The introduction of import tariffs on steel and aluminium by the United States was an addi- tional factor, and provoked a mixed response from the market.
Meanwhile, Ukrainian metallurgical enterprises are seriously concerned about the changing situation in the global metal products markets due to US 25% duties on steel imports, in particular, from the EU.
In March, the US imposed additional import tariffs on steel (25%) and aluminium (10%) with a view to protecting its domestic market. Although these tariffs apply to all countries, a temporary exemption was granted to Canada and Mexico, which will apply until a new NAFTA deal is signed.
Tariffs were also suspended for the EU, Australia, Argentina and Brazil until early May, while talks continued. Other countries can negotiate exemptions by convincing the United
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States that their products are unique for the US market, and pose no threat to the country’s national security.
According to the Ukrmetalurgprom association, Washing- ton's decision of was expected, but it carries significant risks for Ukrainian steel products. If steel supplies to the US from Ukraine make up 1.3%, then to the EU they are more than 30%. Moreover, a few weeks ago Turkey also announced a protective investigation after the introduction of protective measures by the US, the association believes.
The head of the association Oleksandr Kalenkov believes that the markets of the EU and Turkey are the priority for the supply of Ukrainian steel products. "More than half of total exports of Ukrainian steel products worth over $5 billion fall under the risks of protective measures of the EU and Turkey," Interfax quoted Kalenkov as saying on June 1.
At the same time, the NBU believes that there will be little direct impact on Ukraine from the Washington import tariffs imposed on steel and aluminium, since in 2017 the US accounted for only about 2% of total Ukrainian exports, and about 6% of exports of ferrous metals and products made of them.