Russian steel mills become world beaters after ruble's slide

Bloomberg reported that the collapse of the ruble, which has pushed up prices for millions of Russians as the economy slides into recession, has not been bad for everyone. The country’s steel mills are suddenly world beaters.
Producers including PAO Severstal and OAO Novolipetsk Steel pay wages and other costs, including transportation, in rubles while earning dollars or euros for exported steel. That’s allowing them to undercut rivals like ArcelorMittal, the world’s largest steelmaker, while maintaining profitability.
Mr Kirill Chuyko head of equity research as BCS Financial Group said that “This is fantastic time for the Russian steel industry. Most of the companies are enjoying the best profitability since the 2007 and 2008 pre crisis commodity boom due to the ruble’s decline.”
Even before the ruble’s 47 decline last year the industry was in good health. Output last year reached the highest since the global financial crisis as demand at home was high and started to recover in European export markets. Russia’s steelmakers have invested billions in upgrading Soviet era mills and the nation produces more than any other country in Europe, one of its main export markets.

According to CRU Group, an industry consultant, now, the ruble’s slide has cut costs for Russian mills by almost half in dollar terms. Making hot rolled coil, a benchmark product, now costs USD 244 to USD 250 per tonne in Russia compared with USD 405 per tonne in Brazil and USD 434 per ton in China.

Source – Bloomberg

Mar 10, 2015 11:37
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