Where do Russian steelmakers invest today?
On September 12-13, the conference "Wire-Fastener" took place in Oryol. A representative of Metal Expert Consulting has presented a report “Russian Metallurgy: Current Situation and Development Outlook of Steelmaking Capacities”. Special attention was paid to the markets for finished steel products and wire products.
The reporter stressed the pessimistic market indicators, namely:
- Rapid slowdown of the GDP growth
- Lower investments into fixed capital
- Decreasing volume of contract works
- Decreasing production in ferrous metallurgy, as well as in machine-building (for instance, carmaking and production of freight railway cars)
The specific feature of Russian market is that imports of steel products are growing faster than consumption.
Imports of steel products with higher added value in Russia are growing at the fastest pace.
Russia is one of the leading importers of metal-consuming products (wire products, machines and equipment).
The above also refers to all wire products: wire, ropes. However, the dynamics of Russian imports of fasteners is the most representative:
Where do Russian steelmakers invest today? Will investments enable them to substitute some part of imports?
Production of finished long products is an absolute leader in investments. According to the plans, the growth of longs capacities will make almost 8 mt in Russia till 2015 inclusive. According to the optimistic forecast, consumption of long products will grow by mere 2.8 mt at the same period (up 5% per year).
Only 3 out of all new projects on longs production imply the launch of wire rod capacities. If all the announced projects are implemented, wire rod capacities will grow by 1 mt at the most till 2017.
There is a ready demand for high-quality wire products in Russia. However, to produce them one has to import feedstock. This restricts development of wire mills making them less competitive against imports.
Russian market has a great potential for the growth of steel demand.
However, Russian producers have fewer opportunities to reduce production costs and they often lose competitive fight in the segments of steel products.
Underinvestment of steel products with high added value is the reason of growing imports.
Next few years, steel products’ market will face significant and rapid changes, so market players will have to respond the challenges promptly.
Success of the separate companies and of the industry in whole will depend on adequate estimates of world market outlooks and right moves towards the most efficient usage of raw material potential available in Russia.
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