Cracks and restructuring of global steel supply chain after the Russia-Ukraine conflict
In the four years since the outbreak of the Russia-Ukraine conflict, the global steel industry chain has suffered a structural shock. As the world’s fourth-largest steel exporter and third-largest iron ore exporter, Russia’s supply disruptions, coupled with EU sanctions, logistical restructuring, and the energy crisis, are reshaping the global steel trade landscape. This geopolitical conflict has not only driven up raw material prices but also forced countries to reassess supply chain security.
I. Soaring Raw Material Prices
Russia is one of the world’s largest nickel ore exporters, and its nickel supply disruptions directly triggered a surge in stainless steel raw material prices. In 2022, LME nickel prices surged by 250% in a single day, setting a historical record. Meanwhile, Ukraine’s coking coal production capacity accounts for 3% of the global total. The war led to a critical shortage of coking coal inventories at European steel mills, forcing ThyssenKrupp in Germany to pay a premium of €400 per ton to purchase alternative sources. The energy cost transmission effect is even more significant; European natural gas prices surged tenfold, increasing the cost of electric arc furnace steelmaking by 50%, forcing Italian steel mills to raise their rebar prices by 80%.
II. Dramatic Reshuffling of the Import and Export Landscape
Following the EU’s steel embargo against Russia, Russian exports to the EU plummeted by 92% in 2023, leading to increased exports to Turkey and the Middle East. Turkey seized the opportunity to expand its re-export trade, with exports to the EU increasing by 47%. China became the biggest beneficiary, with steel exports to the EU surging by 65% in 2023, but this triggered an anti-dumping investigation by the EU. More noteworthy is the rise of the African market; South Africa’s Kumba iron ore exports to China increased by 34% year-on-year, and the Simandou iron ore project, accelerated by Chinese investment, is expected to change the global iron ore supply landscape.
III. Project Costs Spiraling Out of Control
In Southeast Asia, the Formosa Ha Tinh steel plant in Vietnam delayed its second-phase project due to a doubling of coking coal prices, increasing the cost per ton of steel by $200. A liquefied natural gas project in Texas, USA, was delayed by 18 months due to a steel pipe shortage, incurring additional expenses exceeding $1.2 billion. The most typical example is the construction of Egypt’s new capital; the project, originally planned to use Ukrainian steel, ultimately switched to Turkish steel, resulting in a 30% cost overrun. World Bank data shows that the average delay for global infrastructure projects has increased from 8 months before the pandemic to 14 months.
IV. Supply Chain Restructuring in Progress
Faced with uncertainty, leading steel companies are accelerating the diversification of their supply chains. ArcelorMittal acquired the AM/NS Calvert steel plant in the US, doubling its North American production capacity. POSCO invested $450 million to expand its Indian plant, aiming to seize the Southeast Asian market. Emerging technologies are also rewriting the game—a hydrogen-based steelmaking demonstration project went into operation in Salzgitter, Germany. Although its current cost is three times that of traditional processes, it is considered key to future decarbonization.
This conflict reveals a harsh reality: when a basic material like steel is involved in geopolitical games, the fragility of the global supply chain is exposed. In the short term, supply chain restructuring will push up global inflationary pressures. In the long term, regionalized production and localized sourcing may become the new normal.
As Edwin Basson, Director General of the World Steel Association, stated, “We are witnessing the arrival of Globalization 2.0, where the theme is resilience rather than efficiency.” For all countries, finding a balance between cost and security will be a core challenge in the post-conflict era.
