Russian Steel Billet Exports to Turkey Stall on Black Sea Shipping and Rail Constraints

Russian steelmakers have cut exports of steel billet through the Black Sea, and deliveries to Turkey — one of the main buyers of Russian semi-finished steel — have come to a near standstill, Pravda.ru reported. The outlet attributes the disruption to shipping risks in the region and to restrictions on rail movements to the port of Novorossiysk.

The interruption carries weight because Turkey's billet supply leans heavily on Russian material. Russia's share of that market exceeds 29%, according to data cited by Pravda.ru, which makes the current disruption critical for Russian companies. A stoppage of that scale sends Turkish re-rollers looking for replacement tonnes and leaves Russian mills holding volume they cannot easily place.

Vessel shortage turns offers nominal

Analysts at BigMint report that offers from Russian producers have become sporadic and are frequently nominal, because sellers cannot guarantee delivery periods amid a shortage of ships. For a re-roller feeding a rolling mill, a price without a firm arrival window is not a tradable offer: billet is a working-capital item bought against a production schedule, not a speculative position.

Rail constraints on the approach to Novorossiysk compound the problem, restricting the ability to build cargoes at the port even when tonnes are available at the mill. Alternative routings — through the Baltic or via Georgia — are described as uneconomic because of the cost of the logistics involved.

A Russian discount that is not clearing the market

As of 22 August, Russian billet at ports was assessed at $463-465 per tonne FOB, $3-4 below the level of the previous week. Asian billet delivered to the port of Marmara, freight included, reaches $495-500 per tonne. Against that backdrop, Turkish importers have begun buying steel from China and India.

• Russian billet: $463-465 per tonne FOB as of 22 August, down $3-4 week on week
• Chinese and Indian billet: $495-500 per tonne delivered to Marmara, freight included
• Russia's share of the Turkish market: more than 29%

The arithmetic is unusual. The gap between the Russian FOB assessment and the Asian delivered price is roughly $30-37 per tonne, and freight from the Black Sea to Marmara is a fraction of the distance from Asia. On a delivered basis Russian material should therefore be comfortably the cheaper option. Turkish buyers are paying the premium anyway, which prices the value of a cargo that actually arrives on schedule.

Up to 8 million tonnes at stake

Maxim Shaposhkov estimates losses on the southern export direction in the second half of the year at 7-8 million tonnes. Redirecting that volume in full to other markets would be difficult, he says; realistically no more than half of it could be placed elsewhere.

Pavel Gamov points to the obstacles in shifting flows to Southeast Asia: long delivery distances and tough competition from local producers. Using Baltic ports as the principal channel is not workable because of high tariffs and freight rates. To return to Turkey, Russian companies would most likely have to offer discounts, which would reduce their margins.

Oleg Yemelchenkov notes that a halt in exports combined with weak domestic demand will worsen the position of Russian steelmakers. He also flags a longer-horizon risk: if Chinese and Indian suppliers entrench themselves in Turkey through long-term contracts, recovering those customers will be difficult even once the logistics ease.