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Russia Metals Report Q4 2009Published by: Business Monitor International Published: Oct. 1, 2009 - 53 Pages Table of Contents
AbstractSteelmakers in Russia have suffered from a massive decline in orders from the construction andautomotive sectors, although output was expected to improve in H209 and a recovery should be wellunder way in 2010, led by exports, according to BMI’s latest Russia Metals Report.According to data from the World Steel Association (WSA), Russian crude steel output fell 26.8%year-on-year (y-o-y) to 31.83mn tonnes in the January-July period of 2009. Meanwhile, the RussianFederal State Statistics Service (FSSS) reported that the manufacture of basic metals and fabricatedmetal products was down 24.3% over the period. However, while crude steel production was down18.4% y-o-y to 5.02mn tonnes in July, it was up 3.1% month-on-month (m-o-m), according to theWSA. The decline in steel output followed trends in industrial production, which fell 14.2% y-o-y inthe first seven months of 2009 and 10.8% y-o-y in July (up 4.7% m-o-m). The cuts in output come at atime when average prices are set to fall by 50% y-o-y, leading to a decline in operating margins -despite efforts to cut costs through measures including reining in capital expenditure, reducing theworkforce and limiting shifts. However, Q209 production figures released by Russian steelmakers have encouraged a sense ofcautious optimism. Growth in output is being led by exports, which have partly offset the decline inthe domestic market. In response, some countries have considered imposing protectionist measures tostop the surge in Russian steel exports, although BMI does not believe this poses a significant threatto the industry. Russian export markets are highly diversified and a smattering of tariff measures isunlikely to have a major impact. BMI forecasts a 2.7% rise in exports in 2009 to 29.98mn tonnes,while imports are forecast to fall by a third to 4.11mn tonnes. However, falling prices in externalmarkets will result in the trade surplus narrowing by around 20% to US$12.96bn. Modest growth in orders and improved financial results prompted steelmakers to resume operations atplants that were temporarily closed earlier in the year. At the same time, new capacity is comingonline. In August 2009, a heavy plate mill came online at the Magnitogorsk Iron and Steel Works(MMK). The mill has capacity of 1.5mn tonnes per annum (tpa) and produces plates of up to4,800mm wide. It is producing pipe-grade material for large diameter pipes for the oil and gas sectoras well as material for the bridge construction, mechanical engineering and ship-building industries. By Q309 there were signs that some Russian producers were keen to raise production to pre-crisislevels as demand recovered. BMI does not believe the conditions are right and that pre-crisis levelscannot possibly be sustained. As such, Russian metallurgical companies will struggle to reach marketequilibrium. In spite of the signs of a recovery or stabilisation in Q209, BMI still believes that theRussian metallurgical industry will decline in 2009, with crude steel output undergoing a 17.6%contraction to 56.44mn tonnes owing to the state of the economy and serious weaknesses in endmarkets,notably the automotive and construction sectors. The long-term situation is more worrying in the aluminium industry, despite RusAl’s efforts to limitlosses and cut debt. A serious accident at a turbine room at the Sayano Shushenskaya hydroelectricplant in mid-2009 has disrupted power supply to two smelters in Siberia, leading to a potential loss ofannual aluminium production of at least 500,000 tonnes. RusAl executives have indicated that it couldtake two to three years for electricity supply to return to normal. While the loss of output will not posea problem for RusAl while it seeks to reduce output, it will hamper the company’s ability to take fulladvantage of a recovery in the aluminium market and its growth potential will be severely curtailed. Get Full Details About This Report >> |
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