International credit rating agency Fitch Ratings has announced a negative outlook for the Russian steel industry. The rating agency expects a further decline of two percent in domestic steel consumption in Russia in 2016, driven primarily by weakness in the construction sector which could translate into long steel consumption declining by five percent year on year in 2016.
Fitch pointed out that flat steel consumption in Russia will at best remain stable on a year-on-year basis as a result of continued demand for pipes, especially large diameter, which are used in oil and gas pipeline construction. The negative outlook is also due to the expectation of that other end-using sectors such as automotive, machinery and electrical equipment will remain weak.
Export markets were supportive in 2015, keeping Russian steel production in line with the 2014 level. However, antidumping measures taken by EU authorities against Russian steel producers to protect domestic steel sectors from cheap imports may intensify, Fitch noted.
According to Fitch, there is a risk that Chinese exports will stay at high levels in 2016, constraining the recovery of prices. Weak pricing has been partly compensated for Russian steel companies by the weak domestic currency, and so average EBITDA margins have remained resilient.