Russia's Largest Steelmaker Sees Global Demand Flat Next Year

  • NLMK CFO says some producers will cut supply amid price rout
  • Steel companies hit by flood of cheap output from China

Novolipetsk Steel OJSC, Russia’s largest steelmaker by output, expects little or no growth in global demand for the material next year and some producers will probably cut supply amid the rout in prices.

"This situation can’t last in the longer term," Chief Financial Officer Grigory Fedorishin said in an interview on Tuesday in Moscow. With demand declining this year, much of the industry is contending with unprofitable production while next year’s growth in demand may be “slow to zero,” he said.

Steelmakers have been hit by the lowest prices in more than a decade as China, which accounts for about half of global output, floods the market with cheap exports amid a slowdown in its economy. The World Steel Association earlier this month cut its outlook for global demand for this year, predicting usage will contract by 1.7 percent.

There’s an excess of at least 700 million metric tons of steel on the global market, billionaire Vladimir Lisin, who controls NLMK, as Novolipetsk is known, said in an interview on state television Tuesday. In Russia, steel demand may fall up to 5 percent next year, according to Fedorishin.

Like most Russian producers, NLMK is still making profits as a weaker ruble cut costs and domestic prices remained higher than those for exports. The company has one of the lowest levels of debt in the industry. It plans to take $400 million of pre-export financing from international and Russian banks in the next two weeks and has recently sold ruble bonds, which will cover its refinancing needs for about a year, Fedorishin said.

The World Steel Association expects global steel demand to increase 0.7 percent next year.

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