Price growth to halt in three months: Severstal

Severstal forecasts that the rise in world steel prices will last for about another three months, says ceo Alexander Shevelev.

 “I believe that the shortage in the steel market will drive prices up for some time to come,” Shevelev says. “However, sooner or later the market should be balanced: the deferred demand will end, the supply will react to the rise in prices. Most likely, this will happen on the horizon of three months.”

Indeed, prices made a leap and are now at almost 10-year highs, Shevelev notes. He explained the growth by several factors, the main of which are good demand in China, high prices for raw materials, low inventories against the background of the fact that there were expectations of new lockdowns. Another important factor, he said, was the unprecedented low bank deposit rates in Russia and in the world.

“Given the devaluation, people have no choice but to invest in purchases – housing, cars, household appliances, which logically leads to an increase in demand and hence prices for steel,” Severstal’s ceo concludes.

When asked about the proposal by Russian pipe producers to introduce much higher export duties on scrap, he said that the situation is difficult, Kallanish notes.

“The steelmakers are experiencing a serious shortage of ferrous scrap, because many companies have not fully formed winter stocks and scrap steel shortages have already triggered a more than 25% increase in scrap prices during the fall, with prices continuing to rise,” Shevelev said. “Any government measures restricting the export of scrap metal could help stabilise the situation.”

The utilisation of Severstal’s pipe division in 2020 was not complete due to a decrease in market demand; at the moment it is reduced by -30%-50%, he observes.

“Taking into account our export plans and the fact that our Izhora Pipe Plant won the tender for the supply of 320,000 tonnes of LDP for Gazprom, we see that we will be able to ensure almost 100% capacity utilization in 2021.”