Fitch: CIS metals and mining industry shows signs of recovery in 2010

Wednesday, 16 June 2010 17:21:12 (GMT+2)

The leading global ratings agency Fitch Ratings says that in 2010 it sees signs of a recovery in the CIS metals and mining industry, the outlook for which it rates as stable.

Accordingly, in H1 2010 Russia's apparent domestic demand growth was 30 percent year on year and for 2010 Fitch predicts an apparent demand growth of 12-15 percent year on year, with the overall industry output amounting to 65-67 million mt of steel. Companies will continue to be export-oriented, while steel prices continue to be pressured by weak demand and oversupply.

In Ukraine, for 2010 Fitch expects a slower recovery of output of 7-11 percent year on year and a total industry output of 32-34 million mt.

For the Russian and CIS steel producers rated by Fitch, the agency expects an increase in revenue of 20-40 percent year on year and EBITDAR margins of 13-27 percent depending on the producers. Companies with an organic growth strategy and conservative financial policies (such as MMK, NLMK and Metinvest) will outperform those who before the downturn made significant debt-funded acquisitions of overseas assets (such as Severstal and Evraz).
 
Fitch also notes that its ratings have not factored in state support provided by the Russian state to metals and mining companies, as most of these loans from state banks were provided on market terms.

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