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Russian steel production grows
Russia’s steel industry continued to grow in the third quarter of this year, judging by Q3 production reports published by domestic steel makers. Their strong performance and rising prices on the Russian steel market give hope that growth will continue in the fourth quarter.
Magnitogorsk Iron and Steel Works (MMK), one of Russia’s leading steel producers, reported a net profit of RUR 11.2 billion (about $416 million at the current exchange rate) in the third quarter of 2006, up from RUR 8.9 billion in the second quarter and 71 percent more than in the third quarter of last year. From January to September, the company’s net profit amounted to RUR 26.7 billion (about $991 million), up 11.4 percent on the year.
MMK spokeswoman Elena Azovtseva told RBC Daily that the improved performance was due to rising steel prices combined with lower costs. She said the company was increasing production, both through enhancing the effectiveness of its existing facilities and the acquisition of new facilities. Dmitry Skvortsov, at Bank of Moscow, believes MMK’s increased profit was also due to lower coal prices. MMK’s performance was typical of the whole industry, says Denis Nushtaev, an analyst at IFK Metropol.
Growing production becomes the norm for Russian steel makers. Evraz Group, Russia’s largest steel company, reported a 25 percent year-on-year increase in steel production in the third quarter of 2006, to 4 million tonnes. In the first nine months of this year its production rose 17.6 percent to 12 million tonnes. Pig-iron production increased by 29 percent to 3.2 million tonnes, and rolled steel production was up 26 percent at 3.7 million tonnes. “The group’s Russian assets - Nizhny Tagil Metal Works and West Siberian Metal Works – reached the record production level of 1989,” PR Director Nikolai Kudryashov told RBC Daily.
Evraz attributes its production growth to a construction boom fuelling the demand for the group’s products. To meet the growing demand, the company is taking measures to increase the effectiveness of its production facilities, and it is also buying new assets. “A new blast furnace was put into service in September,” Kudryashov said.
Producers of flat rolled steel report production growth, too. Novolipetsk Steel Works (NLMK) raised its steel output by 5.9 percent from July to September 2006, to 2.2 million tonnes. It also produced 2.2 million tonnes of pig iron in the third quarter, up 17.6 percent on the year but 3 percent less than in the second quarter. NLMK spokesman Anton Bazulev said the decline in pig-iron production was due to planned repairs. The company expects to produce 9.2 million tonnes of steel in 2006.
Meanwhile, steel prices are rising not only on the domestic market but on foreign markets as well, boosting the profits of Russian steel makers, which export up to 50 percent of their production, says Dmitry Skvortsov, at Bank of Moscow. Yuri Vlasov, an analyst with Renaissance Capital, said all steel companies receiving operating profits from steel sales, will show better financial results in the third quarter.
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