The outbreak of war in Israel could have a significant impact on Turkish and Russian long steel exports, market participants tell Kallanish.

Steel is the largest commodity group imported by Israel from Turkey, while Turkey has been Israel’s largest steel supplier since 2002. Turkish steel exports to Israel in 2022 reached 1.56 million tonnes, with rebar, wire rod, welded pipe, hot rolled flat products and construction components having the largest shares in that order.

Although Turkish steel exports to Israel declined 40% on-year in January-August to 741,851t, losing market share to Russian suppliers, Israel still accounts for around 10% of Turkey’s total exports of steel products.

One third of Turkey’s rebar exports in August were bound for Israel, while January-August rebar exports to Israel totalled 480,800t.

In the import market, Israel is a supplier of scrap to Turkey, with 275,852t shipped in August. Although the war may result in an increase in Israeli scrap supply in the medium term, it also raises the risk of material containing chemical or explosive substances.

A major Turkish mill supplying rebar to Israel says there were no problems or cancellations recorded on the first business day after the start of the war.

“In the port of Haifa, to which we are shipping, operations are reported to be continuing as usual. Our agent in Israel says there will be no payment problems as banks have no issues. However, the situation may change at anytime,” says a mill source.

Although port services are defined as essential and are therefore supposed to operate "as usual", work is being carried out according to an emergency plan and guidelines issued by the relevant authorities. Delays and disruptions are expected since some port employees have been called up by the Israeli military.

The duration of the war will play an important role in determining the actual impact on Turkey’s steel market. Turkish steel producers are concerned about the developments in the country as the possible loss of their largest export market would come at a time when Turkey’s steel industry is already struggling with high production costs and demand contraction.

Along with Turkey, China and Russia are also substantial trading partners for Israel.

The war could notably affect Russian exports, especially of longs, some market participants opine. On the other hand, Russia's exports have been steadily diminishing due to sanctions and the added burden of export taxes from October, which have been challenging to transfer to buyers given weak demand.

“Russia shipped 655,000 tonnes of rebar and wire rod for export to Israel from January to July. Also, in August, at least 60,000-65,000t were added, according to preliminary data,” a Russian trader observes.

Russian authorities ceased publishing foreign trade data in 2022.

“Business with Israel is on pause for now. Novostal M’s Abinsk and Balakovo mills were number one suppliers of rebar from Russia [to Israel]. NLMK Kaluga [now acquired by associates of Tula Steel] supplied 5,000-10,000t every month last year. The sales are now paused,” a Russian mill representative says.

“It is hard to say now,” another Russian producer representative says of the war impact outlook. Although uncertainty remains, concerns are growing regarding logistical challenges and rising freight rates due to the conflict, he adds.