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24 Jul, 2009 19:07

Steelmakers look to fire up a recovery

Russia's steelmakers have asked Vladimir Putin for help in bring the sector back from a slump. The Prime Minister has pledged to stimulate demand for steel and support on international markets.

After a dip in demand, and heavy losses, Russian steelmakers are now seeing some signs of recovery – but it's too early to talk about a full revival. Global steel production dropped more than 20% in the first half of the year, with Russian production dropping 22% in June alone.

Despite this, Tim McCutcheon, Partner, DBM Capital, says domestic steel producers have a better outlook than some of their global peers.

“In the steel industry in general the key things are the cost of production and proximity to your customers. So, in Russia steel mills are actually pretty well placed, and take advantage of that overgrowth in this part of the world, whereas in Western Europe and North America it doesn’t look so good. Probably, steel producers there are going to have a harder time keeping production volumes up.”

Prime Minster Vladimir Putin addressed Russia's leading metal producers in Magnitogorsk. Their complaints include subdued domestic demand, a lack of large infrastructure projects which could boost the industry and insufficient protection on the internal market. He said these are major problems to be solved.

“We should do all we can to protect our producers on the international markets. In many countries there is discrimination against Russian produce. There are about 30 restrictions currently in place. Russia's government should and will work to remove them and prevent similar non-market restrictions in the future. On the other hand we shouldn't shy away from protecting our domestic market from overt dumping.”

But even in the middle of the economic downturn, Russia is not withholding large investment projects. Due to the crisis the Magnitogorsk Iron and Steel works plant had to either stop or postpone several investment projects but the cuts did not affect the construction of the steel-mill-5000 designed to make plates for large diameter pipes. Vladimir Putin pressed the symbolic red button to start up the plant.

The mill-5000 has just been launched. A multi-million dollar project, this thick sheet complex has a capacity of 1.5 million tones a year. One new slab-casting machine produces high quality thick sheet rolled metal for oil and gas industry as well as for ship-building and bridge building.

A 5000 Plate Mill stamp generates the highest pressure not only in Russia, but in the world. And that means the project may not only reduce Russia's dependence on imports, but also ensure demand among global pipe-making