Russia:Metallurgical companies expect fall in demand and profitability in 2016
Russian steelmakers expect a further fall in demand for steel in Russia in 2016, although the pace may slow down to 3-10% from 12% in 2015. Metal consumers have no access to cheap credit, the Russian market is not sufficiently protected against imports, and domestic price in addition to the exchange rate fluctuations and the dynamics of global prices could be increased by inflation, say steelmakers. According to analysts, the domestic demand will be primarily affected by the ruble rate.
Russian metallurgical companies began to sum up their operational results in 2015: the first companies that reported their results were NLMK of Vladimir Lisin and Evraz of Roman Abramovich, Alexander Abramov and Alexander Frolov. As the companies have different product profile in the industry – NLMK’s main revenue is brought by flat metal, and Evraz - long products, the dynamics of their steel production are also slightly different depending on the demand in various sectors. Thus, the total production of steel by NLMK was 15.85 million tons, remained at the level of 2014, the sales grew by 5% to the same 15.86 million tons, while the share of the sales in Russia fell to 39% from 43% in the previous year. Thus, the total growth of the export allowed NLMK to maintain the volumes, while the long products segment (available only in Russian assets of the company) fell in sales by 10% against the background of 17% collapse of the consumption. The Evraz’s steel output decreased by 8% to 14.3 million tons, taking into account the deconsolidation of the plant Evraz Highveld Steel and Vanadium (without this factor it fell by 5%). The Evraz’s production of rolled products in Russia and Kazakhstan declined by about 9% (mainly because of the fallen sales in the Russian Federation), the production in North America - by 12%, in the Ukraine, on the contrary, it increased by 2% due to demand for semi-finished products in the country and outside (Evraz doesn’t disclose the sales figures).
