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Eastern Europe

Followed by a reduction in its key rate to 14%, the Central Bank of Russia has also revised its inflation forecast to 18-23% and projected a GDP contraction of 10% for 2022. The government is easing inflation regulation measures in order to halt the US dollar/ruble rate at November 2021 levels. Meanwhile, Ukraine’s GDP is expected to decline by a whopping 45% this year.

The copper market in Russia is tight. Many construction and infrastructure projects are being put on hold owing to the crisis, import bans, absence of international investors and sanctions imposed on major national construction investor VEB RF, as well as uncertainty about the future. Cable demand has fallen significantly, with major wire rod manufacturers predicting a 22% drop in consumption.

Secondary aluminium ingot exports are struggling to find homes for metal of Russian origin; only a handful of countries - and principally China - are still agreeing to buy from Russia. Pricing the metal is another issue: with imports almost non-existent, the government has ordered a stop on using any formulas or indexes based on international commodity exchanges; instead, only local commodity exchanges’ indicators are to be applied. Furthermore, there are rumours that state regulation of prices will be next on the agenda although no official announcement has been made to date.

In addition to the expected bans on buying metal of Russian origin, many companies in Ukraine report that they are facing the same problem. As the industry slowly restarts operations, many producers are reporting that their usual customers are refusing to buy metal of Ukrainian origin for the time being.

Scrap collection is picking up in Ukraine while imports are practically non-existent. Apart from the risks of shipping to a conflict-hit country, Ukraine has also imposed restrictions on paying for imported metal - although this was subsequently waived for copper. Brass exports are currently around 30% of pre-conflict volumes, with logistics being the main issue.

West of Belarus, the energy crisis is continuing to hit the industry hard, especially with the cutting of Russian gas supplies to Poland and Bulgaria. The secondary aluminium and primary zinc industries are suffering the most; with energy accounting for up to 75% of their costs, companies are having to apply for state support. The copper industry is in a better position: with shipments to Russia and Ukraine currently impossible, the Polish market is well-supplied with copper scrap.

The disruption to logistics is huge. Many shipping lines are refusing to accept inbound and outbound shipments from Russian ports. Trucks with Belarus or Russian licence plates are not allowed into the EU, while trucks with EU licence plates cannot enter Belarus. Shipments to and from the port of Odessa in Ukraine are having to be replaced with trucking into Romania and Poland with further onward shipment out of the ports of Constanta and Gdansk.