At the "New Horizons in Global Steel Markets" 14th Annual Conference organized by SteelOrbis in Istanbul on November 6, Igor Sapozhnikov, chief analyst at Russian steel producer Magnitogorsk Iron & Steel Works (MMK), said that the Russian steel market outlook is positive as the basic five-year forecast of Russian macroeconomic figures indicates growth. In particular, steel demand in Russia should benefit from potential demand from the building and construction industry, the car-making industry and the pipe-making industry - these account for about 70 percent of domestic steel consumption - and also from public investments in national projects. Relative low vehicle ownership and availability of residential housing in Russia compared to developed countries will be the key for further demand growth. In the oil and gas industry, after the completion of big infrastructure projects, demand will remain sufficient due to the need to carry out maintenance of the existing extensive network and thanks to the development of new deposits. Also, government spending on infrastructure projects may be increased significantly in the coming years. Consequently, the expected average annual growth rate of apparent steel consumption in Russia in the next five years is 1.7 percent, said Mr. Sapozhnikov. As the forecast for steel consumption in Russia in the medium term is rather optimistic, MMK is aiming to focus more on meeting domestic demand, also given the growing protectionism in the global market.
Protectionist policies have increased uncertainty in the global market and have redistributed export flows, Sapozhnikov noted. The countries that have signed trade agreements with the US have strengthened their positions. In the EU, duties have reduced the market’s attractiveness for steel companies from China and the CIS, while Turkey and India have gained a relative advantage. Russian flat steel exports have declined in the past three years, while domestic demand has grown. The MMK chief analyst attributed the decline in HRC exports in particular to the increased production of coated steel in Russia. Russian flat steel exports have also declined due to falling demand from Turkey. However, Russia holds a strong position in the global flat steel market due to its relatively low costs, deriving from the possession of raw materials - its flat steel exports (including semi-finished products) totaled 33.3 million mt in 2018, marking it the third biggest exporter in the same year, after China and Japan. Moreover, according to Mr. Sapozhnikov, the quota system in the EU has not prevented an increase in imports. MMK's strategic advantage is its location in the steel consuming region of Russia, which accounts for up to 63 percent of its sales in the country. Based on the aforementioned considerations, MMK will keep using the export market to maintain the full utilization of its capacity and to improve its cost efficiency. He went on to say that, accordingly, the company will keep pursuing a flexible export policy: in case of unfavorable conditions in certain regions of the world, MMK will change its shipments to other export markets.