UPDATE 2-Severstal says exports Chinese cold rolled steel to EU on low duties

(Adds details on demand outlook, background)

LONDON, Nov 1 (Reuters) - Severstal, one of Russia’s largest steelmakers, said it was exporting Chinese cold rolled steel to the European Union, instead of Russian steel, because EU anti-dumping duties on the Chinese product are much lower.

That is likely to rile European steelmakers who have long argued duties on Chinese steel are not high enough to prevent the products from coming into the EU and undercutting them.

“We’ve started buying Chinese cold rolled for our steel service centres. There are very low duties on Chinese (cold rolled) so we’re better off bringing (the steel) in from China,” said chief executive Vadim Larin.

The EU in August imposed duties of up to 22.1 percent on Chinese cold rolled steel and of up to 36.1 percent on the equivalent Russian product, used in the construction and the automotive industries.

The duties were the latest in a long line of EU trade defences in steel set up over the past two years to counter what EU steel producers say is a flood of steel sold at a loss due to overcapacity.

Larin said cold rolled steel sales to the EU accounted for around 2 percent of Severstal’s total sales, while hot rolled EU steel sales accounted for about 6 to 7 percent of the company’s total sales volumes.

The European Commission is also investigating alleged dumping of hot-rolled steel by producers in Brazil, Iran, Russia, Serbia and Ukraine. That could lead to duties imposed by April next year.

“If the (hot rolled steel) duties are imposed it will affect us. We will have to move volumes from Europe to farther regions and we will lose margins,” said Larin.

Severstal, controlled by Russian billionaire Alexei Mordashov, sells just a third of its steel in Russia. It reported a rise in third quarter core profits last week, helped by lower costs and a global recovery in steel prices.

Larin said he sees demand for steel in Russia rising some 2 percent next year versus a fall of some 6 percent this year, as the Russian economy should emerge from two tough years to record marginal growth.

Russia is the world’s fifth largest steel producer and exporter while China is the world’s largest. (Editing by Veronica Brown and Susan Thomas)