Imports of Russian FeTi Redirect from EU to Asia

Russian ferro-titanium is increasingly being directed toward Asia as EU importers — whether steel mills or intermediaries — have tightened their purchasing strategies in compliance with EU sanctions against Russian ferro-alloys.

EU sanctions against Russian ferro-alloys came into force last December but permitted contracts that pre-dated sanctions to be fulfilled until December 20th this year. After this date, all purchases, imports, or transfers, directly or indirectly, of Russian ferro-alloys will be prohibited. While EU imports are dwindling but have not yet ceased, Asian importers are capitalizing on the surplus of Russian ferro-titanium that is no longer flowing to Europe.

EU imports in January and February were broadly consistent with the fourth quarter of last year, although the number of importing nations narrowed. Imports in March dipped, rebounded in April, and in May, reached their lowest level since September 2022 at 576t.

Non-EU imports increased by a third to 235t in the first quarter and then spiked to 492t in May alone, primarily driven by higher flows to China, alongside regular importers Turkey and South Korea. China imported 100t in April, 260t in May, and 100t in June from Russia. China is no stranger to importing Russian ferro-titanium, having received several thousand tonnes in 2018-21, but it imported only incremental volumes in 2022 and none last year.

China's re-emergence as an importer from Russia both highlights and offsets, as far as Russian sellers are concerned, the EU's gradual withdrawal from the Russian market. This demonstrates a fundamental shift in flows, yet Russia's overall exports are unaffected and even reached a nine-month high in May.

Market participants are unsure why China is importing these volumes from Russia, considering its own ample production capacity and domestic cost structures. Some have posited that these imports are being re-exported, but the cost of doing so to Europe is not profitable.

Chinese ferro-titanium exports in the second quarter hit their highest level in two years at 811t, coinciding with the spike in intake from Russia, underpinning speculation about re-exports of Russian ferro-titanium. Top recipients from China included Vietnam, South Korea, Indonesia, Turkey, and the UAE.

Turkish imports from Russia have been sporadic this year, with some market participants linked to banks refusing to clear payments on Russian material transiting through Turkey.

Supply Gap in EU Market Offset by Low Demand

European producers have sufficient capacity to fill any void of Russian units, Metalnomist understands, but they will require more raw materials in the form of sponge or scrap. Scrap availability is still tight in Europe, due to either lower generation or merchants holding on to inventories, and lower machining rates in July and August may compound this issue.

Stretched raw material access and lower imports from Russia initially drove bullish attitudes among producers that prices in the EU market would increase as steel mills would be able to purchase only from certain non-Russian sources.

But these expectations have been undermined in the past month by several third-quarter tenders that have demonstrated persistent availability at lower prices from sellers keen to secure sales in a weak demand environment.

The market, therefore, is caught between supply fundamentals pointing to higher prices, due to tightness in raw materials and a pending loss of Russian supplies, and demand being insufficient to provide impetus for stronger prices.