Steel production in Russia approached record levels in 2021

Steel production in Russia last year almost reached 2021’s record levels amid a restructuring of export flows and increased supplies to the domestic market. The largest market participants expect the performance to continue in 2024, despite the slowdown in demand in the construction sector. Experts note that the main manufacturers demonstrate almost 100 percent capacity utilization.

Steel production in Russia in 2023 returned to the level of 2021, when 76 million tons were produced. In 2023, Russian metallurgists produced 75.8 million tons of steel, which is 5.6% more than in 2022, the report said. World Steel Association. Global production in 2023 decreased slightly to 1.849 billion tons.

A number of sanctions apply to Russian metallurgists. Europe, which was a key market, banned imports from Russia of hot-rolled and cold-rolled steel, transformer steel, galvanized steel, tinplate, stainless steel, and seamless pipes. A quota regime applies to semi-finished steel products.

In November 2023, Deputy Minister of Industry and Trade Viktor Evtukhov spoke in an interview “Interfax”that since the beginning of last year, rolled metal exports have decreased by an average of 10%. “We have already replaced the main lost volumes at the expense of the domestic market. Therefore, based on the results of nine months, the total production volume grows by 4.4%. At the same time, many companies worked very quickly and last year were able to redirect the main volumes of exports to new directions or segments of the domestic market,” he noted.

The domestic metal consumption market, according to Severstal estimates, grew by 7% over the nine months, to 35.1 million tons.

The construction sector grew by 9%, to 27.4 million tons, and mechanical engineering – by 12%, to 3.5 million tons. The energy sector decreased by 3% to 4.2 million tons. The company’s general director, Alexander Shevelev, at the end of December predicted an increase in demand for steel on the domestic market in 2024 by 1–2%. However, the company indicated that the draft budget of the Russian Federation for 2024 assumes a reduction in some expenditure items, which will affect key metal-consuming industries.

Kommersant’s source among metallurgists expects metal consumption to remain at last year’s level in 2024. MMK, in a commentary on production indicators, said that during 2024, cooling demand in housing construction will restrain further growth in metal consumption, reflecting the delayed effect of raising the key rate. “It is expected that demand from other industries, including the automotive industry and mechanical engineering, will largely compensate for the cooling in the construction industry and will help maintain the overall positive dynamics of metal consumption in Russia,” the company believes.

Steel production in Russia almost reached a historical maximum last year, confirms Boris Krasnozhenov from Alfa Bank.

The main manufacturing companies demonstrate 100% capacity utilization, and demand in the domestic market is growing due to increased construction volumes, infrastructure projects and the development of the industrial complex.

It should also be noted that Russian domestic prices currently show a significant premium to global benchmarks minus duties, freight costs, rail logistics and port transshipment. The premium could be more than 15% compared to the historical average of 5-7%, which will stimulate sales in the domestic market. Boris Krasnozhenov recalls that Russian companies in the ferrous metallurgy sector remain one of the most efficient in the world with the current cost per ton of hot-rolled steel about $300 per ton. In his opinion, in 2024 the total volume of steel production will most likely remain close to the level of 2023.

Evgeniy Zainullin