Romania needs to import more than 4 million tons of steel products per year for its own needs
In the conditions of the war, Romania became the most important logistics center for Ukrainian exports of cereals and iron and steel products, which also contributed to a sharp increase in export-import operations between our countries. Compared to the pre-war level, imports of Romanian goods increased by 2.2 times and Ukrainian exports increased by 3.4 times. Our country has increased supplies to Romania mainly due to agricultural products. At the same time, the export of Ukrainian iron and steel products to Romania decreased by 30.6% – to 327.7 million dollars. Despite this, Romania is an important market for Ukrainian iron and steel, where in 2023 it exported 7.6% of the total in physical terms.
Ukrainian raw materials surpass
The war boosted mutual trade in goods between Ukraine and Romania, which contributes to the integration of our economies and the development of logistical infrastructures.
Compared to 2021 before the war, Romania's imports in 2023 increased 2.2 times in physical terms – to 1.07 million tons and 2 times in financial terms – to 1.56 billion dollars. In turn, Ukrainian exports increased 3.4 times – to 11.7 million tons in physical terms and 2.4 times in financial terms – to 3.8 billion dollars.
The greater dynamics of exports in physical terms suggests that Ukraine supplied Romania with many raw materials, in particular agricultural products with low added value.
Logistics center
Romania's most important support to Ukraine was that in 2022 the country became a logistical hub for Ukrainian exports of cereals and iron and steel products. The main role in this process was played by the Romanian port of Constanta. Most of Ukrainian exports to Romania were in transit, as Constanta was the closest and most accessible region in terms of free capacity to Ukraine. The huge flow of Ukrainian cargo allowed the port to increase its total transshipment by 11.9% y/y in 2022 – to 75.5 million tonnes of cargo and, in particular, iron ore by 46.9% y/y – to 7 million tons. Last year, the port was able to increase total transshipment by a further 22.5% – to 92 million tonnes. Total Ukrainian cargo traffic in 2023 amounted to 25 million tons, including transit grain transshipment of more than 14 million tons.
Exporters actively use this road transshipment route in Constanta. Ukrainian cargo arrives in Constanta by road, rail and barge from the Danube ports of Reni and Izmail.
Romania will work together with Turkey and Bulgaria to ensure the safety of maritime transport in the Black Sea. In January, these countries signed a memorandum on the formation of a coalition for the demining of the Black Sea. The practical implementation of the document could begin as early as April-May. That the Ukrainian maritime corridor runs along the coast of Ukraine and the countries of the anti-mine coalition, and the movement of commercial ships is threatened by drifting mines.
Logistics cooperation between Ukraine, Romania and Moldova in terms of rail links shows that, with goodwill, dialogue and investment, it is possible to increase the capacity of existing logistics routes relatively quickly.
In 2022, Romania promptly repaired a wide railway line to the port of Galati. This made it possible to transport cargo from Ukraine to the Danube port without changing locomotives.
For its part, Moldova Transit (its role should be considered together with Romania) is also actively repairing the railway infrastructure and even simplifying the transit procedure itself. The role of this country is extremely important not only for the export of Ukrainian cargo to the port of Galati, but also to the Ukrainian port of Reni. This is the only Ukrainian port that does not have a direct connection to the Ukrainian railway network. Cargo deliveries to this port transit through the territory of Moldova.
Romania continues to expand its logistics capabilities. In 2022-2023, the modernization of railway and port infrastructure was actively pursued. Earlier this year, the EU allocated 126 million euros to Romanian ports to expand transshipment and storage capacities for handling Ukrainian cargo.
Automotive communication between countries is also being actively developed. Last year, Ukraine and Romania agreed to open a new road through Bila Tserkva (Zakarpattya region) – Sighetu Marmatii, which will be designed mainly for the passage of trucks. There are currently five car checkpoints and one for ferry traffic on the border with Romania. Of these, only two release trucks: Porubnoe-Siret and Diakovo-Halmeu. Furthermore, a 450-kilometer Moldovan Autostrada is currently being built with Romanian and EU funds. It will go from Bucharest to the border with Ukraine. This road will create a new European transport corridor for Ukraine and provide another access route to Romanian ports.
Steel scale
The geographical proximity of Romania allowed Ukrainian steel mills to increase their shipments of steel products to the Romanian market in the difficult year 2022. For the same reasons, Romanian steel mills managed to increase their exports to Ukraine in 2023. According to the Service State Customs Office of Ukraine. Ukraine, in 2022, Ukrainian steel exports to this country increased by 5.5% in annual terms – to 297 thousand tons. However, last year there was a decline – 17.6% year-on-year to 245,000 tonnes, which is probably due to a general decline in steel consumption on the Romanian market.
Even despite its own dependence on imports and the reduction in steel production, Romania managed to increase the supply of steel products to the Ukrainian market under war conditions. Compared to the pre-war period of 2021, Romanian exports of steel products in 2023, in physical terms, increased 6.2 times – to 55.3 thousand tons, in financial terms – 4.9 times, to 63.1 million dollars.
Ukrainian exports
Ukrainian export of iron and steel to Romania is represented by many types of manufactured products. The most massive export product is iron ore, the supply of which has increased since 2021 and in 2023 amounted to almost 1.5 million tons worth 154 million dollars. In 2021, there were small deliveries of other raw materials – scrap (33.5 thousand tons) and coke (10.3 thousand tons), but they stopped in the following years.
For a number of key positions in exports of steel products in the period 2021-2023, Ukraine managed to increase supplies to the Romanian market:
- wire rod – 63.4%, to 78.5 thousand tons;
- semi-finished steel products – 3.2 times, up to 65.9 thousand tons;
- tubes – 66.4%, up to 29.7 thousand tons.
Most of these products are in transit, as Romania is a major logistics hub for Ukraine.
At the same time, during this period, the supply of the following steel products decreased significantly:
- hot-rolled flat steel – 74.5%, to 22.1 thousand tons;
- coated laminates – 70.6%, for 7.6 thousand tons;
- ferroalloys – 56.3%, to 7.1 thousand tons;
- rebar (SH 7214) – 43.3%, for 18.2 thousand tons.
The decrease in supply of certain types of steel products can be attributed both to a decrease in demand in Romania and a reduction in Ukraine's own production and an increase in logistics costs compared to the pre-war period.
Imports from Romania
Romania's main imports of steel products to Ukraine since the start of the war have been hot-rolled flat steel, coated steel and alloy steel. The supply of coated rolled products in 2023 compared to pre-war 2021 increased more than 6 times – up to 13.7 thousand tons. For the other two types of steel products there were practically no deliveries in 2021, therefore the dynamics of imports in 2023 for them is off scale.
Although Romanian steel exports increased several times during the war, their volumes remain small, even taking into account the scale of the Ukrainian market during the war. It represents just 4.5% of all Ukrainian steel imports or 1.6% of Ukraine's steel consumption in 2023, suggesting that Romania has the potential to increase steel exports to Ukraine.
Steel industry at the crossroads
Romania is a small steel producer with stagnant production dynamics in recent years. According to WorldSteel, last year the country reduced steel production by 40% per year – to 1.58 million tons, while the decline in 2022 was 22.2% per year – to 2.62 million tons. tons. Romania's steel production in 2023 represented just 1.25% (1.9% in 2022) of the European total.
The specificity of the Romanian steel industry is that its exports represent, on average, more than 90% of its own production. It turns out that the country's domestic steel consumption, which in 2021 and 2022 stood at the level of 4.3 million tons and 3.8 million tons, depends almost entirely on imports. In recent years, Romanian imports of semi-finished and finished rolled products have exceeded 4 million tons per year.
The reasons for the stagnation of the Romanian steel industry lie in both local factors and European trends. The Romanian steel sector was unable to recover from the 2008 crisis. Having reached the maximum volume of steel production since the end of the 90s in 2007 (6.3 million tons), steel production in Romania collapsed in 2009 – 2.3 times, to 2.8 million tons. Since then, steel production in the country has not exceeded 4 million tons per year, and in 2023, it fell even below the level of 2 million tons.
Between September and December last year, the Romanian steel company Liberty Galati, in Galati, stopped its only blast furnace in operation for 69 days. The reason for this was the lack of sufficient raw materials. For the same reason, the factory stopped the unit again during the Christmas holidays. The Galati plant, like other Liberty Steel assets in Europe, has systemic problems.
On the other hand, the Romanian steel industry has potential and it is too early to devalue it. Italian producer of hot-rolled steel and special profiles AFV Beltrame intends to invest 20 million euros in Romanian factories in Targoviste and Calarasi this year. In 2023, more than 30 million euros have already been invested in the renovation of these plants.
Furthermore, the Liberty Galati plant will soon undergo technical modernization – the installation of two electric arc furnaces, two CCMs and a hot rolling mill are planned. The plant's capacity after modernization will be 3 million tons of steel and 2.85 million tons of rolled products per year.
The key factor for the growth of mutual trade between Romania and Ukraine will be the development of logistics infrastructure and the growth of its capacity. Increasing the number of road crossings, repairing railway tracks and railway infrastructure, deepening the navigable channel in Danube ports, mutual investments in transit terminals and many other projects will allow Ukraine and Romania to increase the volume of commercial business and metal consumption. The Romanian steel industry has good opportunities in the Ukrainian market and the Romanian logistics infrastructure can provide good support for exports of Ukrainian steel products to other countries.
