Posted on 24 Feb 2022
The market has taken a step back in expectation of further developments in the Russia-Ukraine saga. This comes as clarity starts to emerge regarding the sanctions being imposed on Russian government officials and affiliated persons and banks in connection with recognising the Ukrainian breakaway regions as independent.
But even in these early stages, metallurgical companies on both sides of the barricades appear to have become restricted in export trade, Kallanish learns from official sources and market participants.
All 315 Russian Duma deputies who voted in favour of Russian President Vladimir Putin's decreeing the breakaway regions’ independence, and an additional 27 persons and government-affiliated entities, including several banks, will be subject to sanctions.
In an additional move, the US is sanctioning Russian sovereign debt. Germany has also caved into pressure to suspend the long-suffering Nord Stream-2 gas pipeline project certification, following the completion of construction last year.
As was expected, Russian metallurgical companies have not fallen under sanctions directly, but they may find trading more difficult. The same fate, paradoxically, appears to be befalling Ukrainian companies, amid banks' refusal to finance.
Several traders tell Kallanish that a large number of Swiss banks have stopped financing fob-based export trade out of Russia but also Ukraine’s Mariupol, namely Metinvest's Ilyich and Azovstal Steel mills, due to affiliated risks. Although there are currently no offers in the market, one way around the Swiss banks' move would be to finance through other, non-EU or US banks, or from own funds, but this would take some time to develop.
Thus far, both buyers and sellers are out of the market in expectation of more details, while being busy executing existing orders. As of Wednesday, there were no issues with carrying out existing orders among traders who spoke to Kallanish, but details continue to emerge and more time is needed for a clearer picture, they say.
US sanctions on Russian sovereign debt will theoretically increase the price of borrowing, but again, this depends on the length and severity of the conflict, and its outcome. "We have been through similar crises before, but this time it seems the West has no time for Russian deliberations,” a seasoned market observer concludes. “It appears more serious, but these are early days to cognise the full scale of the conflict and its impact on the metallurgical industry.”
Source:Kallanish
