Russian Steel Markets Developments OECD Steel Committee Dmit - - PowerPoint PPT Presentation

Russian Steel Markets Developments OECD Steel Committee

Dmit Dmitriy iy Kolomyt lomytsyn, syn, CF CFA Russi ssian St Steel l March 201 2019

Steel demand Steel demand reco ecover ery continues y continues

Source: Russian steel, companies data

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13% 3% 1%

• 1%
• 8%
• 3%

5% 1% 1%

2011 2012 2013 2014 2015 2016 2017 2018 2019E

Recove very ry of f inve vestme stment t acti tivit vity y and cost st of f fun funding rema remains s aff fforda rdable Dema mand growth rowth (r (real disp sposa sable income me sta stabiliza zati tion, su susta stained drop rop in infl flati tion, cred redit t expansion sion) ) Bett tter r dyn ynami mics i s in construc structi tion (i (infr frastruc structure ture) ) and automo tomoti tive ve

• 2%
• 1%

5% 5%

• 1%

3%

• 2%
• 5%
• 4%

8% 5% 2% 24% 24%

• 8%

8%

• 6%

6%

• 5%

5%

• 6%

6%

• 1%

1%

• 1%

1% 6% 6% 1% 1%

• 1%

1%

• 5%

5%

• 15%

15%

Jan-18 Apr-18 Jul-18 Oct-18

Rus ussia sian n mar market et balan balance ce

Source: Russian steel, Metal Expert

• Demand recovered in 4Q’18 resulting in lower finished and

semi-finished exports

• One the largest producers has maintenance works in 2019-

2020 resulting in lower steel output by c. 1 m t pa Demand Exports

Rus ussia sian n expor xports br ts breakd eakdown wn

Source: Russian steel, Metal Expert

• HVA flat products constitute only 10% of total exports from

Russia

• More than 70% is represented by semi-finished products and

HRC that is used mainly as a feedstock for re-rolling

Semi-finished steel 54% HRC 18% Longs 11% Pipes (incl. LDP) 7% HVA 10%

PLAN SECTOR IMPLEMENTATION To increase volumes of completed housing construction to 120m sq pa vs 80m sq pa currently Real Estate Renovation program in Moscow and its possible spreading to other regions; Ministry

• f Construction to propose instruments to

reduce regulation burden. To modernize roads and double expenditure on road construction Transportation 296 projects including bridges (river Lena bridge, Volga bridge in Nizhny Novgorod, etc.) To lower mortgage rates below 8% by 2024 Real Estate Currently c.9.4% To grow capacity of BAM, Trans-Siberian 1.5x to 180mt in six years Transportation Estimated capex of RUB 550 bn ($8 bn) Rail road projects Transportation 104 projects including high-speed railroad Moscow-Kazan and Ekaterinburg – Chelyabinsk To expand capacity of the Northern Sea Route traffic Transportation Estimated capex of RUB 580 bn ($8.5 bn) Expand network of regional airports Transportation 155 sites identified incl. Chelyabinsk. Stavropol, Voronezh, Orenburg, etc, RUB 270 bn ($4 bn)

• Current capex proposal to the government related to

infrastructure spending is c. RUB 6.8 trn (~$100bn)

Planne Planned d Inf Infrastr astructur ucture e In Investments estments

Wha hat t is is ne next? xt?

Source: Russian steel, companies data

4 biggest st Russ ssian prod roducers rs are pu re public comp mpanies s wi with th GDRs s tr traded on LSE

• Ori

riented ted on posit sitive ve and tr transp sparen rent t retu return rn for for inve vesto stors rs

Ca Capex fo focus s shift shifted to mo moderniza ization ion and do downst stream m develop velopme ment

• Do

Downst stream m projec jects s to me meet dome mest stic de ic dema mand

• Digit

Digitali lization ion

• Sales

Sales channels ls (e (e. . g. . onli line sales sales plat latfo forms ms and warehouses) ses)

• Envi

Environme mental l and energy y efficien fficiency y invest investme ments Domest Domestic c de demand mand to

• pick

pick up up on

• n ne

new infras nfrastruc uctur ure e pr project

• jects

s with h lar arge ge invest nvestment ments 6

1.2 1.2 2.8 2.8 3.6 3.6 4.5 4.5 5.0 5.0 8.2 8.2 5.5 5.5 5.2 5.2 6.4 6.4 5.9 5.9 4.4 4.4 3.5 3.5 2.2 2.2 2.5 2.5 2.9 2.9 2.4 2.4 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018E 2018E

Inv Investme stments ts in Russ Russian ste steel industr stry, y, $ bn bn

Conc Concluding luding r remar emarks ks

• Russian economy continues to recover
• Steel consumption is expected to grow over the next several

years on better fundamentals and pent-up demand

• Further infrastructure investments expected
• Shift in investment focus on maintenance, eco-friendly &

energy effective decisions, improved operational efficiency (incl. digitalization), product quality

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Thank you for your attention!

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