The EU has banned Russian steel, but how will it get it now?
Russia is one of the largest steel exporters in the world. This week, the European Union dealt another blow to the Russian economy by banning imports of Russian steel, and the repercussions will be felt in a multitude of industries.
“It’s really an industry that’s been very active in trade policy…ever since,” said Lydia Cox, who studies international trade and macroeconomics at Harvard.
According to her, the ban on Russian steel includes an increase in the amount of steel that EU members are allowed to import from other countries.
“So in a way they’re trying to kind of just reallocate where they buy their steel from, but not necessarily reduce the amount of steel they import,” she said.
But sourcing steel elsewhere might be easier said than done. Russia is an important player in the world market for certain types of steel that can be further refined. Much of this steel is destined for the EU.
Malan Wu, head of steel research at Wood Mackenzie, said countries that had imported from Russia would compete to make up for that lost steel.
“The supply will be tighter, more people will be looking for it, and the logistics have also been disrupted. And by putting tighter supply and higher demand, you get a higher price,” Wu said.
Lately, when steel prices rise, it’s because of countries imposing tariffs to protect their domestic steelmakers from being undermined by cheaper imports. This is different.
“With a higher tariff, if you desperately need the product, you can just pay a little more for it, you know. That’s just [a] tax. But with a ban, if you suddenly can’t get it at all, you could be stuck,” said Chad Bown, senior fellow at the Peterson Institute for International Economics.
By disengaging from Russia, the EU relinquishes influence over an aspect of the country’s steel industry that concerns European countries: its carbon footprint. The steel industry represents between 7% and 10% of greenhouse gas emissions in the world.
According to some, the fastest way to decarbonise is to stop making steel in the traditional way – from iron ore – which is the main method for Russians.
“That’s the dirty thing. Digging materials into the ground and turning them into steel is the dirty part of the industry,” said Daniel Cooper, who teaches mechanical engineering at the University of Michigan.
EU officials had hoped to persuade Russia to clean up. But Morgan Bazilian, director of the Payne Institute for Public Policy at the Colorado School of Mines, said that is now taking a back seat.
“Will we get that kind of attention and prioritization to focus on these hard to decarbonise sectors like steel right now? No, we don’t. It has fallen off the priority list, at least in the short term. Bazilian said.
Industrialized countries may not need to import Russian steel. An industry analyst said that by investing more in recycling, they could meet 80% of their own needs by 2050.