BMI View: The Russian metals sector will post weak growth over the remainder of 2014 as the aluminiumsector returns to modest growth after extensive cuts and weak prices plague the steel sector. Beyond 2015,growth will pick up as we see higher prices for aluminium and global demand growth for steel improves.
Still, we expect companies' investment plans to focus on improving plant efficiency and reducing costsrather than building new plants or expanding production capacity. Despite only modest growth, Russia willremain one of the world's largest producers of base and industrial metals including nickel, steel andaluminium.
Oligopolies To Remain In Place
Russia's metals output is highly consolidated within each metal segment, as restrictive foreign ownershiprights and established oligopolies prevent foreign competition. Within nickel production, Norilsk Nickel isthe primary producer and also a major mining company. Its vertical integration across mining and refiningcapacity will allow it to remain the largest nickel producer in Russia for the foreseeable future. Similarly,steel and aluminium production are consolidated among just a few producers including RUSAL andSeverstal. We do not expect the metals sector to diversify over our forecast period to 2018.