MMK: Main factor to support steel demand in Russia will be public projects

Friday, 09 August 2019 17:48:29 (GMT+3)   |   Istanbul

We talked to Sergei Ushakov, sales director at the leading Russian steelmaker MMK about the changes in market dynamics resulted from trade measures.

You attended METEC Düsseldorf at the end of June. What was the main focus this year and how did you benefit from METEC?

The МЕТЕС international exhibition is the largest specialised forum in the world which covers all the areas of technological processes in metallurgy. It is an extremely prestigious and important event for suppliers from around the world. At our stand, visitors had the chance to become familiar with the wide range of products and technological capabilities of MMK - one of the leading metals companies in Russia.

MMK has been continuously developing and implementing a large-scale modernisation programme and adopting the production of new innovative products which are in demand in the market, such as thick plate for the oil industry and for ship-, bridge- and machinery manufacturing; high-quality cold rolled and zinc-coated sheet for the automotive industry, part of which is made from high-strength steel, and new coated steel products. We are ready to offer all these products to consumers in the European market, which is one of the most promising regions for our sales abroad.

Connecting with market participants must be important especially at this time of uncertainty fuelled by protectionism everywhere. What is your take on the EU safeguard measures on steel imports? Do you expect any changes in the quotas after the review the EU launched in May?

Uncertainty in the global markets naturally prompts many countries to protect their key industries, in particular the iron and steel industry. A clear example of this is the introduction of special protectionist measures. Quotas in the EU should protect the EU market from the potential sharp increase in imports. The results of the special protectionist measures show that for some products, such as reinforcement steel, the existing quotas are not enough. Therefore, it is possible that for some categories of metal the quotas might be increased under pressure from EU consumers.

How have your exports been affected by trade measures in general, including the ones both in the US and in the EU? Have you observed any trade diversion?

2018 was challenging for steelmakers around the world. Regional markets were closing, which was a global trend, and this resulted in the reorientation of global trade flows, a decrease in global trade volumes, and growth in competition among steel exporters. As a result, MMK decreased its export sales and reoriented its sales volumes from traditional export markets such as the Middle East and Turkey to Southeast Asia, as well as increased its sales to the Russian domestic market.

This year, on the one hand we see some improvements following the cut in duties for imports of steel to the US from Turkey from 50 percent to 25 percent, which led to the revival of demand in the Middle East. On the other hand, the trade war between the US and China is gaining momentum. Therefore, our key exports are currently focused on the traditional sales markets for MMK.

Do you think Russia needs further measures to protect its own domestic market?

Protection of the domestic market from dumping, subsidised or sharply increased imports should be carried out on a continued basis, in accordance with WTO rules and local legislature in relation to protection measures. Unfair imports affect the normal course of trade, hurt local industries and should be eliminated.

How do you see demand and price trends in your domestic and target markets?

In the long-term on a global scale, demand will continue to significantly lag behind supply. There is no basis for a significant expansion of demand at the moment. At the same time, we see that currently in the global market in general the premises for a possible change in pricing trends and for price growth due to more expensive raw materials have formed.

In terms of the Russian market, this year we see positive trends in demand for metal. We believe that the consumption of metal could grow by 1.0-1.5 percent in 2019.

In the coming years, the key factor for growing demand in metal in Russia will be state national projects. Target parameters of the national projects programme include RUB 25.7 trillion (around US$400 billion) to be allocated by the government by 2025. Next year, implementation of these projects will give an additional boost to the Russian metals market - the growth rate for metal consumption could increase by 0.6 of a percentage point to 1.5-2.0 percent year on year. MMK is the largest supplier of a wide range of metals to the Russian market. Therefore, we see solid opportunities to grow domestic sales in the coming years.



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