MAGNITOGORSK, Chelyabinsk Region — Magnitogorsk Iron & Steel Works, or MMK, said Thursday that it saw encouraging signs of a recovery on the steel market, but the company is also preparing for a dip in demand later this year.
“We see some reasons for the revival of demand on the market. The bottom has been reached, and now we are seeing a rebound” Vladimir Shmakov, MMK vice president for sales, said at a news conference organized for a small number of reporters.
“We have felt some revival beginning this month, and we expect it to go on like that in August,” he said.
But he also said he expected some slowdown in the fall. “We expect some slowdown on the market in the third and fourth quarters,” Shmakov said. “But we certainly do not expect a second wave of the crisis. We will never go back to that bad satiation we all found ourselves in during the fourth quarter of 2008.”
Many Russian steelmakers were loss-making in late 2008 and early 2009.
MMK, now Russia’s biggest steelmaker by volume, will produce 830,000 tons of steel in July and will keep production at that level in August, Rafkat Takhautdinov, vice president for strategic development, said at the same news conference. MMK produced 1.9 million tons of steel in the second quarter, and it expects to produce 8.4 million to 8.5 million tons of finished products this year, down from 10.9 million in 2008, he said.
“We see exports and domestic prices rising as the demand grows,” Shmakov said. “We mainly export hot-rolled coil to the Middle East and Europe and sell mainly hot-rolled coil and rolled section in Russia.” MMK sells two-thirds of its products in Russia.
Takhautdinov said MMK was not planning acquisitions this year and would concentrate on current projects.
The company’s biggest project is a massive plate-steel plant, known as Steel Mill-5,000, which Prime Minister Vladimir Putin is expected to open July 24 when he travels to Magnitogorsk for an annual meeting with all of Russia’s major metals producers. The mill — which will make plates of up to 4,850 mm in width that are used by the pipe industry, ship builders and for bridges — will produce 300,000 tons by the end of the year. MMK has invested 40 billion rubles ($1.26 billion) in the project.
MMK is also going to open a second color-coating mill next week, which will have an annual capacity of 200,000 tons, as the demand for the product has exceeded the supply, the company said.
“Polymer-coated steel is in high demand, despite the crisis,” Alexander Raskopov, who led construction of the polymer-coated steel mill, said at the production site. “We currently produce 17,000 to 18,000 tons of color-coated steel per month, while we get orders for 29,000 tons.”
MMK chief financial officer Oleg Fedonin said the second quarter was better than the beginning of the year. Revenue in the first half of 2009 by Russian accounting standards amounted to 56 billion rubles, with sales totaling 9 billion rubles, he said.
MMK has repaid a 5.8 billion ruble loan to Gazprombank and is going to begin talks on early repayment of 4 billion rubles to VTB and 6.5 billion rubles to Sberbank, Fedonin said.
The company’s current net debt stands at $965 million, Fedonin said.
MMK’s MICEX-traded shares rose 6.8 percent Thursday after Bank of America-Merrill Lynch named it as a top pick in the Russian coal and steel sector, Bloomberg reported.
n In line with the overall market optimism, Novolipetsk Steel, or NLMK, said Thursday that its second-quarter finished product output rose 18 percent quarter on quarter to 2.5 million tons.
“At the end of the second quarter, demand improved both in the domestic and export markets with a corresponding revival in the pricing environment,” NLMK said in an e-mailed statement.
“[The domestic increase] in demand is primarily driven by consumer restocking coupled with a seasonal revival in the construction sector,” NLMK said. “We also expect higher demand in the export markets as orders in July and August improved.”
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