Steel production in Russia increased by 5.3% over 10 months

Russia increased steel production in October by 9.5% year on year, to 6.3 million tons, according to the WSA. Since the beginning of the year, production growth has amounted to 5.3%, this is the highest rate among the world’s major steel producers after India. Metallurgists are supported by a growing domestic market: consumption in construction and mechanical engineering is increasing. A negative factor is the increase in the Central Bank rate, which will lead to a slowdown in construction activity and demand for metal in the sector, experts believe.

Based on the results of January-October, Russia increased steel production by 5.3%, to 63.5 million tons, reported World Steel Association (WSA). In October, Russian metallurgists increased output by 6.3%. Among the top 10 largest steel producers, only India demonstrates higher growth rates, which over ten months increased its production by 12.1%, to 116.3 million tons. Growth in China, which accounts for more than half of the world’s steel production, is 1.4%.

According to Severstal estimates for nine months, more than 60% of Russian steel output goes to the domestic market, which has grown by 7% since the beginning of the year. The growth of metal consumption in construction was 9%, to 27.4 million tons, in mechanical engineering – 12%, to 3.5 million tons. High activity remains in the segments of individual housing construction, as well as the construction of logistics and transport infrastructure due to increased budget expenditures and investments.

In the mechanical engineering industry, production of automotive equipment, including trucks and special equipment, as well as freight cars, continued to grow in the third quarter (by 46%).

The production of wagons is growing as a result of solving problems with components, increasing cargo transportation volumes, and lengthening delivery times. Steel consumption in the energy and fuel and energy sectors is falling by 3%, to 4.2 million tons, including due to the reduction of investment programs of the “largest gas corporation,” Severstal writes.

The export capabilities of Russian metallurgists are limited, but they exist.

Deputy Minister of Industry and Trade Viktor Evtukhov in an interview “Interfax” said that historically the share of exports in the production of steel products was about 40–45%. Now, including due to a significant increase in consumption in the domestic market and a reduction in imports, the share of exports in production is about 30–35%,” he explained, noting the volume of supplies to Africa, South America and the Middle East.

At the same time, the official criticized the attempts of metallurgists to increase prices on the domestic market: “We have repeatedly discussed with colleagues at meetings: if the state meets halfway and increases the consumption of metal products for infrastructure projects by 5 million tons, there is no need to take advantage of this and, in response, willingly or unwillingly, harm the state with your own damage caused by ill-considered actions.”

An increase in the Central Bank rate in the fall could worsen the forecast for metal sales on the domestic market in 2024, primarily due to a possible slowdown in the construction sector amid rising mortgage rates. Severstal also noted in its report that the budget for 2024 assumes a reduction in some expenditure items, which will affect key metal-consuming industries.

Evgeniy Zainullin