Steel in the pour – Kommersant

Steel production in Russia increased by 1.9% in April, and the capacity utilization of metallurgical companies is close to the maximum. Companies, despite problems with exports, were able to redirect supplies to the domestic market, where steel is used for construction projects. According to experts, steelmakers are getting an additional impetus from the weak ruble, although the prospects for exports cannot be called positive.

In April, Russia increased steel production in annual terms by 1.9%, to 6.4 million tons, reported World Steel Association. According to the results of the first four months of the year, there is a decrease by 0.6%, to 25.1 million tons. World steel production decreased in April by 2.4%, to 161.4 million tons.

Russian metallurgists are gradually restoring capacity utilization.

Industry agency Metals & Mining Intelligence estimates the capacity utilization of ferrous metallurgy in Russia in April at 94%, which is three percentage points higher than in March. For comparison: in the middle of last year, the load was at the level of about 80%. The agency’s review says that the domestic rental market remains positive. Metallurgical companies continue to increase capacity utilization, taking them out of repairs. In early May, MMK launched blast furnace No. 4, which was shut down for overhaul in December, with a design capacity of 1.2 million tons per year. Ural Steel launched a blast furnace with a capacity of 1.4 million tons in early March after repairs last year. Cherepovets Iron and Steel Works increased the average daily output of pig iron in April by 23% compared to March.

A representative of Severstal confirmed to Kommersant that the current level of capacity utilization is indeed stable, the load is close to full. “The recovery is due to the fact that we managed to reorient significant volumes from export destinations to the domestic market (now about 80% of our sales are in the Russian market), and we see significant support from the domestic market, primarily from the construction industry,”— he answered. Metallurgists are facing high logistics and equipment costs, he said, and prices are still well below pre-crisis levels, which is hurting profitability. “An additional deterrent that we have encountered is a shortage of personnel for blue-collar jobs against the backdrop of import substitution. And this is despite the fact that, according to a study by the Ministry of Labor, vacancies in the industrial sector are leading in terms of demand and salaries, often overtaking IT specialties. If we talk about Severstal, since 2021 the average salary in the company has increased by 30%, to 117 thousand rubles,” he said. The rest of the major metallurgical companies did not comment.

In the Russian flat and long products market, supply and demand are relatively balanced, there are neither deficits nor accumulation of surpluses, there is good demand for coated steel, says Boris Krasnozhenov from Alfa-Bank. According to him, the main metal-intensive industries have reached a normal level of consumption, but a significant increase in apparent demand from end consumers is not expected in the near future. At the same time, metallurgists received some support from the weakening of the ruble and lower raw material costs due to cheaper scrap metal, coking coal and iron ore raw materials.

Export remains a problem. In Turkey, domestic demand is weakening, and the supply of cheap hot-rolled steel from China is also growing, the expert says.

Quotations of hot-rolled steel on the FOB Black Sea basis may fall to $550 per ton and below. Domestic demand is also falling in India ahead of the rainy season, and activity in the European market is extremely low. “Problems could arise if the price of hot-rolled steel falls well below $500 per tonne on an FOB basis, but this price level makes about 50% of the world’s steelmaking capacity unprofitable,” says Boris Krasnozhenov, noting that he expects the situation with demand in China to improve in the second half a year.

Evgeny Zainullin