The impact of the ban on Russian coal imports on the steel industry in the EU and the UK

The European Union formally adopted its fifth round of sanctions against Russia on Friday, including a ban on coal imports.

Existing contracts must be terminated by the second week of August, which means that until then Russia may continue to receive payments from the EU for coal exports.

This week the UK said it would ban imports of Russian coal by the end of 2022.

The bulk of Russian exports are thermal coal used in power plants, but Russia also supplies metallurgical coal used in steelmaking blast furnaces.

The impact on the hard coal market is expected to be less than on thermal coal, Morgan Stanley said in a note.

Last year, Russia supplied Europe with 32 million tons of hard coal, which is about 17% of European imports, the note says.

“Given the smaller export market for hard coal and its higher cost compared to thermal coal, it should be easier to achieve a complete redirection of trade flows,” Morgan Stanley added.

Below are the responses from European steel companies to questions about the ban.

ARKELORMITTAL

The world's second-largest steelmaker said a "significant portion" of its coal consumption in Europe already comes from outside Russia. “Despite the fact that certain types of coal were supplied from Russia, we are replacing them with alternative sources or switching to alternative materials,” the message says, without going into details.

SALZGITER

Germany's second largest steelmaker said it does not buy coking coal from Russia, and very little PCI (Pulverized Coal Injection) material that came from Russia has been replaced. “Thus, stopping imports will not affect us in any way,” the company said.

TATASTIL

The British arm of the Indian steelmaker said it had suspended further coal shipments from Russia. The company has sufficient stocks of raw materials at its Port Talbot steel plant and has identified alternative sources of coal. “At this time, we do not expect any disruption to our ability to produce steel for customers,” it said in a statement.

The European division has suspended outstanding coal orders from Russia for the coming months and has begun purchasing alternative sources.

Source: Reuters