Evraz to Boost Track Output in U.S. by 9% on Rising Rail Traffic

Evraz Plc (EVR), Russia’s largest steelmaker by output, plans to boost railway track output in the U.S. to meet local demand.

Evraz, which already has a share of about 45 percent of the American rails market, plans to boosts output at its plant in Pueblo, Colorado, by 9.3 percent to 540,000 metric tons in 2015 compared with last year, the steelmaker said in an investor presentation in London. The expansion will be possible after a $34 million modernization program, it said.

Evraz is looking to benefit from increased demand, partly driven by the boom in shale-oil production, which contributed to a 4.3 percent increase in U.S. railroad traffic this year as of June 5. The company is expanding as another Russian steel producer, OAO Severstal (SVST), seeks to sell its U.S. plants amid weaker demand from their major market, the car industry.

Evraz also plans to start exporting rails for the first time after a $600 million investment program to upgrade its plant in Novokuznetsk, Russia, it said in May. Export regions will include Brazil, Argentina, the Middle East, Pakistan, Germany and Poland with Deutsche Bahn AG, Etihad Rail and Vale SA (VALE5) among potential clients, according to today’s presentation.

Evraz sees its steel output in the U.S. and Canada combined rising to 2.7 million tons in 2015 from 2.6 million tons this year, the presentation shows. This year’s output is seen down 1.6 percent from 2013 after the company idled its Claymont plant in Delaware, citing market conditions.

In Russia, Evraz expects its steel products output to be 11.35 million tons in 2015 compared with 11.06 million tons in 2013.

The company forecasts global steel overcapacity to be at about 7 percent in 2020 down from 13 percent this year, which should support steel margins.

To contact the reporter on this story: Yuliya Fedorinova in Moscow at yfedorinova@bloomberg.net

To contact the editors responsible for this story: John Viljoen at jviljoen@bloomberg.net Alex Devine, Reed Landberg

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