Severstal expects Russian steel demand to recover by 3%-4% in 2021

Russian mining and steelmaking company Severstal expects the Russian steel demand to recover 3%-4% in 2021, driven by improved construction activity and recovery in the oil and gas sector, the company said in its financial results statement Feb. 4.

Severstal saw a 3% dip in Russian steel consumption in 2020, which was less than originally anticipated.

The strong upside in steel prices, steel margin expansion and higher production volumes started in the fourth quarter of 2020 should continue to have a positive impact on its results in the first quarter, the company said.

Severstal added it was unclear whether the strong pricing would continue much longer.

Many raw materials and steel prices have recently softened but remain at an elevated level compared with 2020.

In the last quarter, Severstal’s revenues were at $1.72 billion, down 7% quarter on quarter, due to lower sales volumes. Multi-year high steel and iron ore prices partly offset the lower volumes.

Severstal continued to benefit from being a vertically integrated steel producer with $710 million EBITDA in Q4, up 8.2% on the quarter, driven by cost reductions.

In its full-year 2020 results report, Severstal highlighted that its integrated slab cash cost in Q4 declined by $13/mt on the quarter, to $160/mt. In contrast, the non-integrated slab production cost increased by $23/mt to $293/mt.

The company expects to reduce its cost further in 2021 by raising its overall steel and coke production. The steel output growth will be achieved by bringing the new blast furnace no. 3, launched at the end of December, to its design capacity.

Coke production will gradually increase by the second stage of the construction of coke oven battery no. 11, commissioned at the end of 2020, with the full capacity expected to be completed in 2022.

— Wojtek Laskowski