Severstal, one of Russia’s largest steel producers, expects apparent steel consumption in the country to return to pre-Covid 19 pandemic levels in 2021, Maxim Semenovykh, the company’s head of corporate strategy, said during Capital Markets Day last week.
Steel consumption in Russia to rise to 43.8 million tons
The company expects steel consumption in Russia to reach 43.8 million tons, up from 43.6 million in 2019, before the pandemic outbreak. Apparent steel use was estimated at 42.5 million tons in 2020.
Key trends in Russia’s steel-consuming industries
- Post-pandemic recovery, pent-up demand. Downturn in railroad machinery.
- Investment in LNG plants, increased oil drilling, pipeline projects.
- Low mortgage rates and government programs support demand
- Growing household demand for custom homes
- Development of logistics chains for online retail. Pandemic-related slowdown in commercial construction
- Increased infrastructure investment according to Complex plan
Severstal continues to state in its outlook for 2020
In Q4 2020, an increase in steel prices was driven by a supply deficit in the global steel market with revived demand in ex-China. Raw material prices have risen, supported by a widening of steelmakers’ margins and an increase in production q/q.
It is unclear how long the high prices for steel and raw materials worldwide will last, but Severstal expects that the positive dynamics in steel and raw material prices observed in November and December 2020 will have a positive impact on the first quarter 2021 results.
Russian domestic steel demand down only 3% in 2020
Russian domestic steel demand decreased by only 3% y/y in 2020, and demand within Severstal’s product range decreased by 2%. The construction sector showed growth of 1.5%. In 2021, Russian steel demand is expected to recover by 3-4% y/y, driven by improved construction activity and a recovery in the oil and gas sector.
Severstal competitive due to low costs
Despite a number of potential headwinds in both export and domestic markets, including possible further waves of COVID-19 outbreaks, Severstal’s low cost position allows it to be competitive and the Board remains confident in the resilience of the company’s business model relative to its local and global peers.
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