in May, Russia increased steel production by 8.8%

Steel production in Russia in May, according to the WSA, increased by 8.8% in annual terms, and since the beginning of the year increased by 1.9%. The dynamics does not correspond to the global trend: in the world, steel production decreased by 1.2% in May. Analysts note that the sharp increase in May in annual terms is explained by the low base of last year, when European sanctions began to act against the industry. Prospects for further growth in output will depend on the situation with exports, since domestic demand has already stabilized.

According to the results of January-May 2023, steel production in Russia increased by 1.9% compared to the same period last year, to 32.1 million tons. World Steel Association (WSA). Production in May increased by 8.8% to 6.8 million tons.

The growth of production in Russia goes against the global trend. According to the results of January-May, steel production in the world decreased by 1.2%, to 786 million tons. In May, the decline was 5.1%, to 161.6 million tons.

Among the ten largest producing countries, apart from Russia, only China, India and Iran are increasing production. The most significant drop is demonstrated by Turkey, where, due to the earthquake, steel output fell by 19.1% in January-May.

In 2022, Russian steelmakers faced European sanctions that forced companies to redirect their products to other markets. Steel production in Russia, according to the WSA, fell by 7% in 2022, to 71.5 million tons. The Minister of Industry and Trade of the Russian Federation Denis Manturov said at the end of May that he expects a 4–5% increase in production this year, to 74–75 million tons. According to the results of the first quarter, steel production was almost at the level of the record year 2021 — 18.7 million tons. Severstal CEO Alexander Shevelev said on June 19 “Interfax”that operating results for the second quarter will be quite strong. “We saw good demand, this demand was met. We had planned repairs in the first quarter, which ended. Therefore, we worked out the second quarter quite confidently,” he said. Other steel companies did not provide comments.

According to Metals & Mining Intelligence (MMI), blast-furnace capacity utilization in Russia in May was 93%, while in the middle of last year it was at the level of 80%. The agency’s review says that in May, Russian metallurgists kept the load at a high level due to the continued positive situation in the domestic rolled metal market. The average daily output of pig iron remained almost unchanged compared to April, amounting to about 4.7 million tons. In early May, writes MMI, MMK launched blast furnace No. 4, which was stopped at the end of 2022 for overhaul, with a capacity of 1.2 million tons of pig iron per year. Ural Steel launched a furnace with a capacity of 1.4 million tons back in March. Cherepovets Iron and Steel Works in April increased the average daily output of pig iron by 22% compared to March, the actual production volume amounted to 967 thousand tons.

It should be noted that the data of the World Steel Association are estimates, recalls Boris Krasnozhenov from Alfa-Bank, since the WSA suspended interaction with Russian steelmakers after the outbreak of hostilities in Ukraine. According to the analyst, the 8.8% increase in steel production in Russia in May reflects the low base effect of the second quarter of 2022, when Russian steelmakers faced export restrictions and problems in the field of transport and financial logistics.

Mr. Krasnozhenov believes that achieving an output of 74-75 million tons “will depend on the situation in the main export markets.”

“Growth in domestic consumption will depend on the pace of growth in investment in fixed assets and dynamics in the construction and infrastructure sector. Domestic demand has stabilized at the moment,” he comments. The analyst notes that, according to industry sources, Russian metallurgical companies have already announced that the June prices for most types of flat products, set in April, will be extended into July.

Evgeny Zainullin