Black Sea ceasefire could benefit Ukrainian steel, Russian coal exports: observers

The 30-day agreement between Russia and the US allowing safe navigation in the Black Sea, announced March 25, will help restore access to the world market for Ukrainian and Russian agricultural and fertilizer exports, reduce the cost of shipping insurance, and expand access to ports and payment systems, observers say.

"Definitely not immediately, not in one week, but the sea corridor will become safer and theoretically the expenses on insurance, and freight [costs] can be reduced and more ships will operate in Ukrainian ports, which can improve access of Ukrainian cargo to world markets," Stanislav Zinchenko, CEO of Kyiv-based iron and steel consultancy GMK Center, told Platts, part of S&P Global Commodity Insights.

The US and Russia agreed to the Black Sea ceasefire, along with a halt on attacks on Ukrainian energy systems, after three days of talks in Riyadh, Saudi Arabia. The ceasefires are effective back to March 18.

"The problem for [Russian] steel producers is low prices, general protectionism and Chinese exports, which are plentiful," said a Moscow-based analyst. "Of course, sanctions prevent selling in foreign currency, and freight rates are high due to military risks, but [the agreed-upon Black Sea ceasefire] will not solve the problem radically.

"It could be more positive for coal producers, though, because if freight fees lower, part of [Russia's] coal can be transported with a somewhat better economy, adding $3-$4/mt, but it is still too early to be confident," the analyst added.

According to the Russian Price Indices Center, the share of logistics, sea and land combined, in the final price of Russian thermal coal comprised 84% in 2024, with netbacks being somewhat better for met coal. Unless coal prices rise, the exporter can reduce transportation costs only by owning some of the logistics infrastructure, according to the center.

Platts' assessment of premium low volatile coking coal plunged by 40% last year from $332/mt CFR China in the beginning of January to $198/mt in the end of December, and since then, the price has weakened further to $175/mt on March 25.

The fall in coal prices on world markets was largely the reason why the loading of coal on the Russian Railways network was decreasing on a year-on-year basis for most of 2024. As a result, Russia's exports of coal, metallurgical and thermal combined, fell 9% in 2024 to 197 million mt as larger supplies to China could not offset 37% and 39% drops in exports to India and Turkey.

The situation really needed to be assessed, an Italian importer said. Not only must Ukrainian commercial ports be free of Russian attacks, Ukraine will also need to increase its production. Because there are still sanctions against Russia, once stability is restored and some sanctions are lifted, it will be a game changer for the steel trade, the source said.

Platts assessed CIS export billet at $451/mt FOB Black Sea March 25, stable on the day based on indications from market sources.