Its production has dropped sharply

Russian metallurgists have finally responded to the correction in global markets, which began back in August. In September, domestic companies sharply reduced steel production, to their lowest levels since the beginning of the year (global production has been declining since May). Officially, the drop in volumes is attributed to a seasonal decline in consumption. Unofficially, metallurgists recognize the global reduction in demand for steel.

In September, according to statistics from the industry agency Metal-Courier, the total volume of steel production in Russia decreased by almost 5% compared to August - from 5.7 million tons to 5.4 million tons. The drop compared to the January results was 8.6% and almost 10% compared to the peak value in March, when the country produced more than 6 million tons of steel. In April-August, Russian metallurgists produced 5.7-5.8 million tons of steel monthly.

According to the agency, the largest Russian enterprises of the Evraz Group - West Siberian, Nizhny Tagil and Novokuznetsk metallurgical plants - in September reduced steel production by 5.7%, to 985 thousand tons. Severstal produced 906 thousand tons, which is 9.3% less than the previous month. The Novolipetsk and Magnitogorsk metallurgical plants (NLMK and MMK) reduced their smelting by 11.9 and 1.4%, respectively - to 740 thousand tons and 1 million tons. Metalloinvest enterprises—Oskol Electrometallurgical Plant and Ural Steel—reduced production by 2.8%, to 478 thousand tons. An increase in operating indicators (by 16.3%) was demonstrated only by the Russian enterprises of the Mechel group - the Chelyabinsk Iron and Steel Works and Izhstal, which produced 416 thousand tons of steel in September. At a number of smaller plants, the drop in production reaches more than 30%, and, for example, the Rostov Electrometallurgical Plant and Volga-FEST (former assets of Estar, now managed by Mechel) have not been operating at all since August.

Until September, Russian steel production was stable, while global steel production has been declining since May (by 1-2% per month). By the end of September, according to the World Steel Association (WSA, takes into account data from 64 countries), global production decreased by 5% compared to May and by 0.54% compared to August values (see Kommersant on October 26). Pressure on global consumption was exerted by risks associated with the debt problems of the eurozone, as well as the tightening of the credit policy of China, which accounts for half of the world's steel production and consumption (in September compared to August it reduced production by 3.5%). Russian metallurgists were supported by domestic demand, which in the summer was formed by peak consumption in the construction and industrial sectors, explains Lenar Khafizov from Prime Mark. But the home market also began to decline in early autumn.

Metallurgists, however, do not see any serious problems yet. “There is no talk of a recession,” said a representative of MMK, clarifying that in September there was only a slight correction. In October, production at the plant increased by 5% and will remain at the same level in November. Metalloinvest says that consumption of metal products traditionally declines in winter, but the company notes that production volumes at its enterprises did not fall, including in September. The group explains the decrease in volumes at Russian Evraz plants due to seasonal and major repairs. “The greatest influence on the market now is exerted by conservative tactics chosen by consumers (of metal products —Kommersant ) under the influence of the situation on the financial markets,” explains a Severstal representative. But, he adds, “there are no specific industrial reasons for the crisis now.” Mechel and NLMK did not respond to Kommersant's requests.

Unofficially, however, metallurgists admit that things are worse. After the seasonal adjustment, domestic demand will remain stable at least until the end of the year (many steel producers, a Kommersant source in one of the companies says, have already closed their order books until the end of the year), but what will happen in 2012 is unclear. The recovery will depend on export markets, where the decline in demand has not yet stopped, metallurgists note. For example, in Europe alone there has been a 30% excess of steelmaking capacity since the second quarter. Uncertainty also remains regarding China.

The excess supply of metal products has led to the fact that since May steel prices have fallen by 25%, to $670 per ton, and by the end of the year the price may drop to $620. The manager of one of the companies says that the decline in steel prices is already close to completion, and they will remain so until the end of the first quarter of 2012; what will happen next is also unknown. “It is possible that companies in the sector will adjust their forecasts against the backdrop of increasing uncertainty in the market and a significant reduction in prices for final products,” says another Kommersant source.

In such markets, a reduction in production volumes is a standard reaction of metallurgists, Kommersant sources say. This is done to bring supply and demand into balance. “They most likely did not see the demand for December and the beginning of next year, but they had to work for a warehouse at current prices for raw materials, which since May have not fallen in price as much as steel (coal by 19.5%, ore by 16%). - “Kommersant” ) is meaningless,” says Oleg Petropavlovsky from BKS. This means, he thinks, the decline in production may continue. In August 2008, metallurgists also did not immediately believe in the crisis, but already in September they began to stop the furnaces.

Roman Asankin

The crisis has reached Russian steel