NLMK has postponed projects to modernize its American division amid economic uncertainty, Vladimir Lisin, the main beneficiary of the Novolipetsk Steel Group, told reporters on Thursday. He added that the company is interested in the American market, but the imposition of duties on Russian steel semi-finished products imposes its own adjustments on the development strategy of NLMK USA.
NLMK President Grigory Fedorishin said that due to restrictions on the supply of slabs to the USA from the Russian Federation, the American division was forced to switch to billets from Canada, Brazil and Mexico.
“The company does not have a long-term contract strategy for the American division now, he continued, the company operates in spot mode. Disruption to the supply chain leads to significant risks for the company and severely worsens the project's economy, "Fedorishin said.
He recalled that earlier the investment program of the American division was estimated at up to $ 400 million.
As for the Russian steel market, NLMK believes that the trade war between the United States and China, as a result of which the United States set tariffs on Chinese goods for USD 200 billion, will have a neutral effect on Russian steel as a whole, but some adjustment is needed customs regulations to limit the possible flow of cheap metal products.
Commenting on the likelihood of the impact of the trade war between the US and China on the change in the volume of the company's supplies abroad, Vladimir Lisin noted that NLMK will be "on the spectator tribune" regarding what is happening.
Vladimir Lisin noted that in recent years, NLMK plants have increased their steel production by more than one and a half times, and currently it reaches about 14 million tons. At the same time, as noted by Grigory Fedorishin, Russian metallurgy remains export-oriented: the potential of capacities and production significantly exceeds consumption.
Answering the question about the projected growth in steel consumption in the Russian Federation against the background of the implementation of large-scale government infrastructure projects, Grigory Fedorishin said:
“We will be glad to any increase in consumption brought by national projects. The more systematically they are implemented, there are simple statistical dependencies: steel grows by 5 percent, when GDP grows by about 3 percent - such a multiplier. If national projects create a wave of economic growth, there will be 5 percent and more. ”
According to VTB Capital analysts, the implementation of national projects with a total budget of 400 billion US dollars (approximately 25.8 trillion rubles) in 2019-2025, approved in the framework of the May decree of President Vladimir Putin, will increase the demand for steel and bring an additional 2 billion in pre-tax profit (EBITDA) in 2025.
