Page 147 - RusRPTJan23

Moreover, this year Russian steel exports have been hampered by sanctions on things like shipping that have both reduced exports and also clogged up Russia’s railways. Many companies are seeking to re-orientate exports to Asia by sending their goods by rail across the country in bulk.
The uptick has been driven by surprisingly strong growth in domestic construction, which made up three quarters (75%) of demand and pipes (12%).
Residential development projects have remained largely unaffected by the war in Ukraine and the leading companies in the sector have been reporting strong results. The year-on-year demand for steel in construction was up 1.2% y/y in the period.
The growth in demand for pipes was even stronger up 40% y/y in the period and this demand is likely to remain very high for the foreseeable future as Russia needs to re-orientate its entire gas pipeline infrastructure from Europe (70% of the current capacity) to Asia as a result of the sanctions.
“The main bright spot has been the energy sector, where several mega-projects have pumped up demand for pipe,” BCS said in a note. “Some notable examples are Gazprom’s pipeline initiatives, as well as local gasification programme and Rosneft’s Vostok Oil. However, the most important steel demand driver has always been construction, which has remained on a growth path thus far.”
BCS GM asks if the current trend is sustainable, and the numbers of square metres additionally planned and that already have permissions granted has been flat y/y. At the same manufacturing, which consumes about the same amount of steel as pipes, has also been very weak this year. With the risk of a construction slowdown in 2023 the future remains uncertain for the steel sector.
The European Commission proposed sanctions on Russian mining industry for 2023 in December, although the details are not clear yet. The mining industry was largely unsanctioned in 2022 as Russia is too deeply integrated in the international metals market.
The EC is proposing a potential ban on new investments in Russian mining space according to European officials under the as yet unfinished ninth sanctions package. The restrictions will have a number of exceptions for "specific products", Reuters notes. For example, so far most of Russia’s aluminium, nickel, PGM and steel production has been exempted.
One metal of special note, dominated by Russia, is titanium used in plane-making. European aerospace giant Airbus intends to divest Russian titanium supplies within months, Prime reported citing a statement from the
147 RUSSIA Country Report January 2023 www.intellinews.com