Russian Steel Makers Facing Rough Weather on Sanctions
Strategic Research Institute
Published on :
20 Jun, 2022, 6:51 am
Russia's biggest steel maker NLMK had told Interfax that Russia could cut steel exports 23% in 2022 & the biggest drop, 40%-50%, will be for roll. He told “The substantial decrease for rolled products is due to the fact that this type of metal product is already subject to restrictions in Europe, where most of it has been supplied. Redirecting rolled products to other markets is more difficult than redirecting semis due to other restrictions: duties, quotas and others. Slab exports might also decrease in H2 2022 due to a price correction in the iron ore and steel markets, which will lead to lower prices for slabs in China amid still-high logistics costs.”
Severstal’s Mr Alexei Mordashov told Interfax that the decline in production in the steel business is 25%-30%. He said “Our production volume in the timber business has dipped sharply, and we have noticeably dipped in steel. Output in the timber business has dropped 80%, whereas the decline in steel is somewhere around 25%-30%.”
Severstal CEO Mr Alexander Shevelev said at a session at St Petersburg International Economic Forum that the company's capacity is currently underutilized by about 20-25%. He said “That is, today we cannot attract orders and produce these products in an economically justified way, although Severstal, being a vertically integrated company, is among the top three global companies in terms of costs," he said. "But today, with the current exchange rate of the ruble, which is insanely strong, with sharply increased costs of logistics, freight, transshipment, delivery, we cannot sell to the seemingly friendly markets of the Southeast countries, the Pacific and so on. Economically it is simply not profitable.”
Media also reported that Russia may subsidies steel exports. Russian Deputy Minister of Industry & Trade Mr Viktor Evtukhov in his speech at the SPIEF said “We are revisiting the decision to subsidize the export of metallurgical products. Last year, there was no point in this: the products were exported, there were high prices, and our products flew off the wheels. Today there is a problem, so we will revisit this subsidy. Domestic demand for steel has fallen and the overly strong rouble clearly does not benefit steel exporters, so some products sometimes have to be delivered at zero margins and in some cases even at a loss.
Russia’s First Deputy Prime Minister Mr Andrei Belousov noted during the forum “Restricting exports from Russia in favor of the exchange rate would be a strategic mistake. The government, on the contrary, intends to expand the geography of export supplies in every possible way without harming the domestic market.”
However, Russian Finance Ministry is not ready to abandon the excise tax on steel, though the mechanism could possibly be fine-tuned. Russia’s Deputy Finance Minister Mr Alexei Sazanov told Interfax “This has been a long-term source of generating budget revenue; therefore, we are not ready to abandon this source in principle. Meanwhile, it is clear that the market situation has changed in recent months, with transportation costs having risen and the ruble having strengthened, which has had a certain effect. Accordingly, the price costs of metals companies have increased. Let us now look at the results of May-June in order to decide whether it is necessary to adjust the excise tax mechanism on steel in order to take into account the new economic realities.”