Russia-Ukraine war may throw up export opportunities for Indian metal firms

Russia & Europe account for 10% of global primary aluminium supply. Russia is also the second largest steel exporter. With war threatening supply, exporting nations like India may step in to plug gaps

The ongoing Russia-Ukraine conflict may create export opportunities for Indian metal firms.

Russia holds sway in the world metals supply. According to Crisil Research, Russia and Europe together account for nearly 10 per cent of global primary aluminium supply. As far as the steel trade is concerned, it is the second largest exporter with a 13 per cent share. As worsening tensions threaten supply, exporting countries including India may step in to plug any gap.

Russia exports around 30-33 million tonnes (MT) of steel, said Hetal Gandhi, Director, CRISIL Research. “In the event of worsening  tensions and resultant supply disruptions, the deficit is expected to be filled by other export economies including India. Hence, in the short term, Indian steelmakers are likely to benefit as export potential rises,” Gandhi said.

On Thursday, Mariupol, the steel city in Ukraine, came under fire, according to reports.

“There are many steel mills in Mariupol that mainly export billets, slabs, hot rolled coils. They may not be in a position to export and that may cause a shortage in MENA countries,” said Jindal Steel & Power managing director, V R Sharma.

“The steel industry in India should ramp up production by 5-10 per cent to meet the additional demand. We should make products available not only to India but the rest of the world,” added Sharma.

In 2021, Ukraine exported around 15.26 MT of steel, according to SteelMint data.

Ranjan Dhar, Chief Marketing Officer, ArcelorMittal Nippon Steel India, said that Turkey, Middle East and Europe are traditional export destinations of Russia and Ukraine – two major exporters of steel.

On export opportunities for Indian mills, Dhar said, it is still too early to see the dynamic very clearly, but India may become a natural choice for supply if these markets get vacated by Russia and Ukraine.

However, he pointed out that it would also depend on whether additional capacity is available in India. “At this point in time, demand in India is very good. We will first focus on catering to domestic demand as always,” Dhar said.

On the non-ferrous side, aluminium is expected to be the most impacted by the ongoing geopolitical crisis.

“Sanctions on Russia will impact the metal output from the nation. In addition, Russia also supplies gas to Europe and these supplies, if impacted, will further increase the already high energy prices, forcing the European smelters to further cut production of aluminium,” said Gandhi.

That could be a positive for the low-cost domestic aluminium manufacturers. “India already exports over 55 per cent of the domestic primary metal and this may increase in the short term if supplies from Russia and Europe get impacted,” said Gandhi.

“We can tap US and Europe markets which may sanction Russian aluminum,” said Gandhi, but added that because of the geographical distance, the Gulf regions would be better suited to fulfill the demand vacated by Russia.

India, on the other hand, mainly caters to east Asian markets. “Now with the sanctions it can export even more to these regions and fill the void of Russia’s gap,” Gandhi said.

S K Roongta, non-executive chairman BALCO, however, said that it was early to assess the impact of this conflict relating to further export opportunities. “Indian aluminium producers already export over 50 per cent of their production,” Roongta pointed out.

Impact on prices

Non-ferrous metals – from aluminium to copper, zinc, and lead are expected to see a surge in prices in the near-term led by supply fears and high energy costs. Prices have been increasing since February with tensions simmering between Russia and Ukraine.

According to Gandhi, copper and zinc prices have risen 2-3 per cent in February till date owing to soaring energy prices resulting from uncertainty of Russian gas supplies; aluminium and nickel prices surged by 8 per cent each in February since tensions started escalating.

The impact on steel prices is unclear. So far, Sharma said that there was no indication of a price rise. However, Dhar pointed out that Russia supplies iron ore and coal to various markets, which could add to cost pressure.

On Friday, the S&P BSE Metal Index was up 5.91 per cent.