Depreciating Russian Rouble Offsets
Financial Losses of Steel-Makers
Deloitte CIS Research Centre
Moscow, 2016
Content
01 Key findings
01
02
03
Key findings
04
Overview of the global steel and iron market
05
Key trend
06
Production output trends
07
Steel consumption trends
09
Expert forecasts
11
Global trade: facts and figures
12
02
Overview of the global
steel and iron market
03
Overview of the Russian
steel and iron market
04 Steel and iron market
05 Appendix
06 Contacts
Page 06
Overview of the Russian steel and iron market 13
Key trend
14
Production output trends
15
Steel consumption trends
17
Industry specifics
18
Ferrous product exports in Russia
19
Expert forecasts
21
Page 14
02
Content
01 Key findings
04
05
06
Steel and iron market
22
The current state of the steel-making industry
23
Challenges facing Russian steel-makers in 2016
24
Business growth strategy in 2016
26
02
Overview of the global
steel and iron market
03
Overview of the Russian
steel and iron market
04 Steel and iron market
05 Appendix
Appendix
28
Top-20 M&A deals in the steel
and iron market in 2015 and 2016
28
Contacts
29
06 Contacts
Page 25
03
Key findings
01 Key findings
In 2016, political and economic events have
continued to have a lasting effect on the global
metals market. Instability and the resulting
lack of confidence can be felt both locally and
internationally.
The trends from 2015 have resulted in metal
products oversupply and weaker demand that
has triggered a further decrease in steel prices,
with prices in the steel and iron market hitting
a 10-year low:
•• In 2015, the global output was down
2.8 percent to 1,613 million tonnes*
•• In 2015, the global consumption of steel was
down 3 percent to 1,500 million tonnes.*
During the first five months of 2016, global steel
output was 667 million tonnes, down 1 percent
on the same period in 2015.
Although the manufacturing geography has
generally remained the same, the amount of
steel produced by the top-10 leaders over the
first five months of 2016 is down 2 percent.
The Indian steel-making industry has seen the
highest growth rate in 2016. In May 2016, India
produced over 8 million tonnes of steel, up 4.9
percent on the same period in 2015.
Despite a global decrease in steel consumption,
some regions have seen an increase, with
African countries taking the lead. In addition
to Africa, ASEAN countries also witnessed an
8 to 9 percent growth in steel consumption
from 1998 to 2015, second only to China.
The construction industry is a major consumer
of rolled metal products in ASEAN countries,
accounting for 73.5 percent of the demand.
*Net financial result is defined based on accounting data for all business operations of entities, representing
a difference between profit (+) and loss (-) arising out of the sales of products (work or services), property,
plant and equipment, other assets and non-operating income reduced by related expenses.
**Based on the annual survey by Deloitte CIS.
In 2015 steel output in Russia decreased
by 1.5 percent to 69.4 million tonnes. In JanuaryMay 2016, the smelters produced 28.7 million
tonnes of steel and 24.8 million tonnes of
finished ferrous products, with an annual
output down 2.4 percent and 2.2 percent,
respectively.
Top-5** challenges facing
steel-makers in 2016:
In 2015 the demand for steel in Russia
contracted by 10 percent to about 39 million
tonnes. Specifically, the demand from the
construction industry as the largest consumer
of rolled products as well as from the car
manufacturing industry dropped by 12 percent
and 25 percent, respectively.
•• Corruption (25 percent)
On the Russian market, decreasing demand
resulted in rolled metal product imports
dropping by 27.3 percent to account for 9.7
percent of the market.
Despite a decrease in demand, the smelting
industry saw its net financial result* reach a
historical high of RUB 572.4 billion in 2015,
hitting an annual growth rate of 3.2 times. A
weakening Russian rouble has boosted the
competitiveness of Russian metal products,
resulting in a sharp growth of exports and
helping steel-makers offset losses caused by
falling global prices.
•• Currency risk (40 percent)
•• Shortcomings of government regulation
of the industry (40 percent)
•• Low foreign investment appeal (36 percent)
02
Overview of the global
steel and iron market
03
Overview of the Russian
steel and iron market
04 Steel and iron market
05 Appendix
06 Contacts
•• Lack of qualified managing staff (25 percent)
Top-3** factors that could potentially drive
development in steel-making companies:
•• Lower labour costs (37 percent)
•• Higher local demand in Russia (36 percent)
•• Lower production costs (36 percent)
Top-5** priority growth strategies for
steel-makers in 2016:
•• Expansion into new markets (83 percent)
•• More efficient production
and technologies (77 percent)
•• Business development through
organic growth (73 percent)
•• Higher prices for end products (67 percent)
•• New product launches (67 percent)
04
02
Overview of the global steel and iron market
Overview of the global
steel and iron market
01 Key findings
02
Overview of the global steel
and iron market
Key trend
Production output trends
Steel consumption trends
Expert forecasts
Global trade:
facts and figures
03
Overview of the Russian
steel and iron market
04 Steel and iron market
05 Appendix
06 Contacts
05
Overview of the global steel and iron market
Key trend
01 Key findings
02
Metal products oversupply and a weaker demand triggering a further decrease
in steel prices that hit a 10-year low in the steel and iron market.
Overview of the global steel
and iron market
Key trend
Production output trends
Steel consumption trends
In many countries, metallurgy is one of the
key manufacturing industries. It also has a
significant impact on related manufacturing
sectors. Production and consumption
of rolled metal products are among the
essential indicators reflecting the situation
in the metallurgy market and the global
manufacturing economy. The period from 1999
to 2014 saw global steel production grow more
than double while the global population only
grew by 21 percent. This trend shows just how
important metal is; it is mined, smelted and
traded.
Expert forecasts
In 2015, the growth in production and demand
for steel that had been continuing for six years,
reversed, resulting in:
•• Steel production down 2.8 percent to 1,613
million tonnes*
•• Demand for steel down 3 percent to 1,500
million tonnes*
The trends from 2015 have resulted in a
situation of metal products oversupply and a
weaker demand triggering a further decrease
in steel prices that hit a 10-year low in the steel
and iron market.
Global trade:
facts and figures
03
Overview of the Russian
steel and iron market
04 Steel and iron market
05 Appendix
06 Contacts
In 2016, political and economic affairs have
continued affecting the global steel production
market, with the resulting instability and lack of
confidence felt both locally and internationally.
06
Overview of the global steel and iron market
Production
output trends
Figure 1. Steel production dynamics
for 2007-2016 (million tonnes)
1.16
1.00
1.00
1 348
1 343
1.07
0.92
1 238
1 433
1 537
01 Key findings
1.06
1.01
1 649
1 559
1.01
1 670
0.97
1.002
0.99
02
Key trend
1 615
1 613
Production output trends
Steel consumption trends
667
Global steel output reached 667 million tonnes
during the first five months of 2016, down 1
percent on the same period in 2015 (Figure 1).
It is worth noting that the year-on-year gap
is down to a minimum, with China as a major
contributor. In May 2016, Chinese smelters
produced 70.5 million tonnes of steel, up 1.8
percent on last year. At the same time, the
analysis of the first five months of 2016 shows
that China’s output is down 1.6 percent on the
same period last year.
The forecast until 2017 has been adjusted to
reflect recent developments on the market.
According to the survey among analysts of the
steel-making market, 2017 would see steel
production grow by no more than 2 percent.
Steel-making geographies are generally
unchanged, with the Top-10 steel-making
countries remaining the same (Figure 2).
It should also be noted that the output
of the Top-10 countries suffered a decrease
of 2 percent for the first five months of 2016.
2007
2008
2009
2010
2011
Global production of steel, million tonnes
2012
2013
2014
2015
2016 5M
Global trade:
facts and figures
Growth rate
03
5%
Overview of the Russian
steel and iron market
04 Steel and iron market
Figure 2. Top-10 countries by percentage
share in steel output for 2015
2%2%
Expert forecasts
2016*
* Forecast
Source: World Steel Association, EIU, Financial Times (forecast).
3%
Overview of the global steel
and iron market
05 Appendix
2%
06 Contacts
5%
China
Japan
6%
India
60%
7%
USA
Russia
8%
South Korea
Germany
Brazil
Turkey
Taiwan
Source: World Steel Association
07
Overview of the global steel and iron market \ Production output trends
01 Key findings
02
As for steel production growth rates in 2016,
India has significantly exceeded its output from
last year. In May 2016, the country produced
over 8 million tonnes of steel, up 4.9 percent
on the same period in 2015, demonstrating the
strongest growth for the current period. Indian
smelters, thus, produced 38.6 million tonnes of
steel for the first five months, up 2.4 percent on
the same period last year.
North America produced almost the same
amount of steel as in the previous year.
At the same time, the steel-making industry
in Latin America has been seriously affected
by the economic crisis in Brazil accounting for
53 percent of the regional steel-making market,
and a decrease in domestic demand:
In 2016, Ukraine produced more than 1.35
million tonnes for the first five months,
demonstrating a record high growth of 14.6
percent on the same period in 2015, which is,
however, explained by a low base effect.
•• In Argentina and Mexico, output decreased by
15.3 percent and 5.9 percent, respectively
In Iran, smelters have also benefited from the
lifting of international sanctions. In May 2016,
Iran produced almost 1.65 million tonnes of steel,
up 13 percent on last year.
•• In Brazil, steel production is down 13.9 percent
for the first five months of 2016
Key trend
Figure 3. Top-10 countries by share in steel
output for 2007-2015 (thousands of tonnes)
Production output trends
1 400
Steel consumption trends
1 200
Expert forecasts
1 000
Global trade:
facts and figures
800
Taiwan
Turkey
Brazil
600
03
Overview of the Russian
steel and iron market
Germany
•• In Venezuela, the output is down 77.3 percent
The EU saw steel production decrease by almost
4.7 million tonnes (6.4 percent) for the first five
months (Table 1). More than one third of this
decrease occurred in the UK. France, Spain,
Hungary and Poland have also been affected
significantly.
Overview of the global steel
and iron market
South Korea
400
Russia
USA
200
India
04 Steel and iron market
05 Appendix
Japan
China
0
2007
2008
2009
2010
2011
2012
2013
2014
2015
06 Contacts
Source: World Steel Association
In 2016, Turkish smelters started using more
metal scrap and less billets, achieving an output
growth of 3.4 percent for the first five months.
However, it is the other way around with Egypt
where local producers are struggling because
of power and natural gas availability issues.
As a result, Egyptian smelters are increasingly
relying on semi-finished products. As a result,
the country’s output for January-March 2016
decreased by 28.9 percent on the same period
last year.
In January-March 2016, Russian steel-makers
produced 28.7 million tonnes of steel and 24.8
million tonnes of finished ferrous products,
with an annual production down 2.4 percent
and 2.2 percent, respectively. In May 2016, steel
production grew by 1.2 percent on the last
month and was up 0.4 percent on the same
month in 2015. Production of rolled metal
products has grown by 1.6 percent in year-onyear terms and also up 0.2 percent in April 2016.
(Please see the Overview of the Russian steel
and iron market section for more details.)
As a preliminary conclusion, the utilisation of
global steel-making capacities, which was 69.7
percent in 2015 (minus 3.8 pp), has hit its lowest
since 2011; it is also at its minimum, according to
observations by the World Steel Association for
the entire period evaluated. China has also been
affected by the continuing situation on the steelmaking market since 2015, with a decrease in
Chinese steel output down 2.3 percent in 2014.
According to Thachat Viswanath Narendran,
Chairman of the Economic Committee at the
World Steel Association, the steel-making
industry continues to be affected by volatile
financial markets, a slowdown in global trade,
decreasing oil prices and other factors affecting
consumption both directly and indirectly.
Moreover, industry experts believe that one of
the key issues facing the industry is continuing
overcapacity.
08
Overview of the global steel and iron market
Steel consumption
trends
01 Key findings
02
Overview of the global steel
and iron market
Key trend
Production output trends
Steel consumption trends
Expert forecasts
In 2015, steel consumption decreased
by 3 percent from 2014 to 1,500 million
tonnes. The positive forecast for 2015-2016
unveiled by experts in 2015 has fallen short of
expectations. Moreover, the previous forecast
for 2016 has also been adjusted extending into
2017. The existing trend of falling global steel
consumption has generally been decreasing,
with some growth expected in 2017 (Figure 4).
Global trade:
facts and figures
03
Overview of the Russian
steel and iron market
04 Steel and iron market
Figure 4. Steel consumption dynamics for 2012-2017
1.03
05 Appendix
1.03
06 Contacts
1.00
1.06
1 523
1 475
1 488
1 494
1 500
1 430
2012
0.99
0.98
2013
Consumption, million tonnes
2014
2015
2016*
2017*
Growth rate
* Forecast
Источник: Всемирная ассоциация производителей стали (WorldSteel Association)
09
Overview of the global steel and iron market \ Steel consumption trends
01 Key findings
Steel consumption dynamics, as analysed
by country/group of countries for 2012-2017
(Table 1), shows that growth in consumption is
the strongest in African countries (30 percent),
the EU (11 percent), ASEAN countries (9 percent)
and other European countries (6 percent).
This statistically defined trend agrees with
the conclusions made by the South East Asia
Steel and Iron Institute (SEAISI) as part of a
survey of the regional steel market. According
to the survey findings, ASEAN countries
enjoyed an 8 to 9 percent growth in steel
consumption from 1998 to 2015, second only
to China. However, most of the demand for
rolled products in this region comes from the
construction industry, which accounted for
73.5 percent of the demand in 2015. The car
manufacturing industry follows at a distant
second with 11 percent.
In Vietnam, the construction industry
relies most heavily on the domestic steel
market, with 90 percent of steel products
consumed domestically in 2015. Vietnam also
demonstrates a particularly high consumption
rate for sheet metal (49 percent), which is
comparable or even higher than the most
developed ASEAN countries — Indonesia,
Malaysia and Thailand. SEAISI experts’
reasoning for this is that Vietnam is in the
process of extensive construction of plants and
warehouses that broadly use galvanised steel
for exterior finishing. Vietnam is also emerging
as a relatively large exporter of cold-rolled
products.
Table 1. Global consumption of steel (million tonnes)
02
Consumption (million tonnes)
YoY growth (%)
Overview of the global steel
and iron market
Key trend
2012
2013
2014
2015
2016*
2017*
2012
2013
2014
2015
2016*
2017*
EU
140
135
138
153
155
158
1
0.96
1.02
1.11
1.01
1.02
Production output trends
Other European
countries
35
37
38
40
41
43
1
1.06
1.03
1.06
1.03
1.03
Steel consumption trends
CIS
57
59
61
50
46
48
1
1.04
1.03
0.82
0.93
1.05
Expert forecasts
NAFTA
132
132
136
135
139
142
1
1.00
1.03
0.99
1.03
1.03
Central and South
America
47
49
51
45
43
44
1
1.04
1.04
0.89
0.94
1.03
Global trade:
facts and figures
Africa
27
28
30
39
41
43
1
1.04
1.07
1.30
1.04
1.06
Middle East
49
49
53
53
54
56
1
1.00
1.08
1.00
1.02
1.04
Asia and Oceania
943
986
1016
985
969
959
1
1.05
1.03
0.97
0.98
0.99
Total
1430
1475
1523
1500
1488
1494
1
1.03
1.03
0.98
0.99
1.00
Developed
countries
390
384
390
399.1
406
410
1
0.98
1.02
1.02
1.02
1.01
Emerging
countries
1040
1091
1133
1101
1082
1083
1
1.05
1.04
0.97
0.98
1.00
China
660
700
721
672.3
645
626
1
1.06
1.03
0.93
0.96
0.97
World
(except for China)
770
775
803
827.7
842
868
1
1.01
1.04
1.03
1.02
1.03
03
Overview of the Russian
steel and iron market
04 Steel and iron market
05 Appendix
06 Contacts
*Forecast
Source: World Steel Association
Meanwhile, experts from the European
Steel Association (Eurofer) have a different
view of consumption in the EU. Geert Van
Poelvoorde, President of Eurofer, pointed out
that overcapacity was also an issue for Europe
30-40 years ago as the industry underwent
restructuring. “Forty years ago it was regional,
today it is global and the root cause is
overcapacity in China,” he stated. On the whole,
the statistical data generally agrees with the
forecasts by Eurofer predicting zero growth for
steel consumption in the EU in 2016. However,
European steel experts see some potential for
slight growth on the market in 2017.
10
Overview of the global steel and iron market
Expert
forecasts
01 Key findings
02
Overview of the global steel
and iron market
Key trend
Production output trends
Steel consumption trends
Most experts generally expect a partial
rebound in the steel-making market over the
next two years. However, forecasts for global
steel production and consumption feature a
lack of certainty or dynamic change. Industry
experts in various countries predict either a
slight change of fortune or a further downward
trend, although at a slower pace.
•• According to a Financial Times survey of
experts, steel production is expected to grow
by a mere 0.15 percent in 2016.
•• Experts at RIA Rating suggest that this global
negative trend will continue in 2016. However,
a potential stabilisation of domestic demand
and an expected improvement in the pricing
environment on the global market will not let
the trend go beyond the recession of 2015.
•• In the US, growth in steel production is
expected to resume following a double-digit
decline in 2015. This recovery will be driven
by administrative barriers to imports and a
stronger demand for steel from builders and
the car manufacturing industry. However,
according to Platts, a limiting factor will exist in
the form of a continuing decrease in demand
from the oil and gas industry.
•• In the EU, steel production is expected to
grow, although at a rather slow pace. With
continuing overcapacity, production will
keep consolidating in the hands of the most
efficient producers. A growing demand for
steel, particularly from builders and car
manufacturers who have been increasing
their output at a fast pace, is a good sign for
the industry. However, the local market may
be threatened by cheap imports from China
and Russia.
•• The combination of low domestic coal and
iron ore prices as well as a weakening rouble
may put Russia in the most advantageous
position in 2016. Platts has already recorded
steel supplies coming from Russia to South
East Asia, a region with steel imports
traditionally coming from China, South Korea
and Japan.
Expert opinions on global steel consumption
are all but unanimous. While the World Steel
Association expects a further decrease in steel
consumption, Russian steel producer MMK
predicts a positive global trend in its annual
report for 2015.
•• The World Steel Association has published
a Short Range Outlook (SRO) for 2016-2017
predicting that global consumption of steel,
which contracted by 3 percent in 2015, will
continue to decline at a slower pace of 0.8
percent, with a contraction for 2016 and 2017
to make 1,488 million tonnes and 1,494 million
tonnes (plus 0.4 percent), respectively.
Expert forecasts
Global trade:
facts and figures
03
Overview of the Russian
steel and iron market
04 Steel and iron market
05 Appendix
06 Contacts
•• MMK expects that a year-on-year growth in
global steel consumption will be 1.4 percent
in 2016 and may also continue into 2017. The
situation of falling prices has been fuelled by
Chinese steel-makers ramping up exports
by 20 percent following a contraction in the
Chinese market in 2015, hitting a record of
112 million tonnes and posing a threat to
almost all regional steel markets, particularly
emerging South Asian markets. As a result,
global prices for hot-rolled coil steel went
down 32 percent last year.
11
Overview of the global steel and iron market
Global trade:
facts and figures
01 Key findings
02
1
EU (28)*
37.7
1
China
111.6
NAFTA
Other
American
countries
Africa and
Middle East
China
Japan
Other Asian
countries
Oceania
Total
imports
Position
Production output trends
CIS
Position
Key trend
Table 4. Matrix of trade relations in 2015 (million tonnes)
Other
European
countries
Table 3. Top steel importers in 2015
EU
Table 2. Major steel importers in 2015
Overview of the global steel
and iron market
2
United States
36.5
2
Japan
40.8
EU
106.4
5.5
14.5
0.4
2
1.4
8.5
0.3
4.9
0.1
144.1
3
Germany
24.8
3
EU (28)*
33.8
10.3
0.7
8.8
0
1
0.1
3.2
0.4
1.3
0
25.8
4
South Korea
21.7
4
South Korea
31.2
Other European
countries
5
Italy
19.9
5
Russia
29.7
CIS
1.3
0.4
8.7
0
0
0
1.6
0.1
0.3
0
12.5
6
Turkey
18.6
6
Germany
25.1
NAFTA
7.3
2.5
3.1
17.4
6.4
0.6
4.4
4.3
9.1
0.4
55.5
7
Vietnam
16.3
7
Ukraine
17.7
Thailand
14.6
8
Italy
16.5
Other American
countries
1.4
1.1
0.6
1.3
2.9
0
8.4
1.4
1.3
0
18.3
04 Steel and iron market
8
9
France
13.7
9
Belgium
15.2
Africa
7.3
3.2
6.8
0.2
0.4
1.6
9.2
1.3
1.4
0
31.3
05 Appendix
10
India
13.3
10
Turkey
15
Middle East
1.8
4.9
4.7
0.1
0.2
0
10.7
1.7
4.9
0.1
29.1
11
China
13.2
11
France
14
12
Mexico
12.7
12
Brazil
13.7
China
1.3
0.2
0
0.1
0.1
0
-
5.2
6.1
0
13.2
13
Belgium
12.1
13
Taiwan. China
11.2
Japan
0.1
0
0
0
0
0
1.3
-
4.5
0
5.9
14
Indonesia
11.4
14
Netherlands
10.6
Other Asian countries
2.9
0.1
4.4
0.4
1.7
0.8
63.5
25.9
23
0.3
122.9
15
Poland
9.2
15
USA
10
Oceania
0.2
0
0
0
0
0.1
0.8
0.2
2.2
0.3
3.8
16
Spain
8.9
16
Spain
9.6
Total exports
140.2
18.5
51.7
19.9
14.8
4.7
111.6
40.8
59
1.2
462.4
17
Canada
8
17
India
7.6
18
Egypt
7.9
18
Austria
7.4
Including interregional exports
33.8
17.8
43
2.5
11.9
3.1
111.6
40.8
36
0.9
301.4
19
Taiwan. China
7.5
19
UK
7.3
20
UK
7.2
20
Canada
6
Net exports
-3.9
-7.3
39.2
-35.6
-3.5
-55.7
98.4
34.9
-63.9
-2.6
Region
Millions
of tonnes
Region
Millions
of tonnes
Region
Steel consumption trends
Expert forecasts
Global trade:
facts and figures
03
Overview of the Russian
steel and iron market
06 Contacts
Source: World Steel Association
* Excluding intra-regional trade
12
03
Overview of the Russian
steel and iron market
01 Key findings
02
Overview of the global
steel and iron market
03
Overview of the Russian steel
and iron market
Key trend
Production output trends
Steel consumption trends
Industry specifics
Ferrous product
exports in Russia
Expert forecasts
04 Steel and iron market
05 Appendix
06 Contacts
13
Overview of the Russian steel and iron market
Key trend
01 Key findings
In 2015 Russian steel-makers up against the deepest downturn in the previous five years,
therefore the current year’s growth may be a result of a low base effect.
In Russia, the steel-making industry
remains second in importance to the oil
and gas industry. According to the Russian
Ministry of Industry and Trade, in 2015, the
steel-making industry accounted for 4.7
percent of the country’s GDP, as well as
for 12 percent in the manufacturing sector
and 14 percent of exports, contributing a
total of over 5 percent in taxes on all fiscal
levels. As a consumer of products and
services offered by natural monopolies,
the steel-making industry consumes 2
percent of electric power generated for
industrial purposes and 5.4 percent of total
natural gas consumption. It also accounts
for 18.8 percent of railway freight traffic.
The steel-making industry also operates
fairly mature assets developed as a result of
active upgrading investments of about RUB
3.3 trillion made by companies over the last 15
years. With this upgrading, the steel and iron
industry has been able to significantly reduce
the physical deterioration of fixed assets,
from 54 to 40 percent, so that today Russian
companies offer almost a full range of metal
products.
Despite the steel-making infrastructure having
been developing dynamically over the last
ten years, 2015 saw Russian steel-makers up
against the deepest downturn in the previous
five years. According to the Russian Federal
Statistics Service (RosStat), the steel-making
industry did quite well during 1H 2015 thanks
to significant exports. However, the continuing
decline in global prices for steel and other
iron ore-based products changed the market
situation in 2H 2015. In December, the
production growth rate for steel and rolled
products was down 13.3 percent, hitting the
lowest point for 2015. In January-December
2015, the growth rate was down 6.5 percent.
According to the Russian government, the
situation remains difficult in 2016, with a potential
outlook for further decline in output due to three
main reasons:
01.Decreasing potential for growth, primarily due
to market constraints and additional foreign
entry barriers for Russian steel-makers
(please see the Production output trends
section for more details)
02.Shrinking domestic demand (please see the
Production output trends section for more
details)
03.Unfavourable market conditions
on the global markets
On the positive side, a significant decrease
in metal product imports, which is driven
among other things by sharp and unpredictable
forex fluctuations, has enabled Russian steelmakers to enhance their role in supplying Russian
customers with metal products. This kept prices
fairly stable, if compared to quotes on the global
market. According to Platts, 2015 saw Russian
prices for hot-rolled products drop by 24 percent
in US dollar terms, almost in line with the
global market. Investments and production
asset upgrades in recent years have enabled
Russian steel-makers to keep domestic prices
for flat-rolled products at a high enough level,
compared to export prices, thanks to the level
of quality and a growth in the sales of products
with high added value.
02
Overview of the global
steel and iron market
03
Overview of the Russian steel
and iron market
Key trend
Production output trends
Steel consumption trends
Industry specifics
Ferrous product
exports in Russia
Expert forecasts
04 Steel and iron market
05 Appendix
06 Contacts
14
Overview of the Russian steel and iron market
Production
output trends
01 Key findings
02
Overview of the global
steel and iron market
03
Overview of the Russian steel
and iron market
Key trend
According to RosStat, steel output in 2015 was
down 1.5 percent to 69.4 million tonnes (Table
5). In January-May 2016, Russian steel-makers
produced 28.7 million tonnes of steel and 24.8
million tonnes of finished ferrous products, with
a year-on-year output down 2.4 percent and 2.2
percent, respectively.
In May 2016, steel production grew by 1.2
percent on the previous month and was up
0.4 percent on the same month in 2015. Rolled
product output grew 1.6 percent year-on-year
and was also up 0.2 percent on April.
In May, pig iron output rates entered negative
territory (down 2.5 percent) for the first time
in two years, as growth rates slowed down this
April. At the same time, rolled ferrous products
grew slightly on last year, up 1.6 percent.
However, due to a significant drop in output,
down 7.7 percent in May 2015, the current year’s
growth may be a result of a low base effect
(Table 5 and 6).
The drop in output is mainly due to sharp
contraction in domestic demand, which is, in
turn, the result of decreasing demand from the
construction industry and several other active
steel consumers.
Table 5. Output of key and finished products
2010
2012
Production output trends
2013
Product
Pig iron (million tonnes)
2014
2015
Market share
Millions of tonnes
48
50.5
49.9
51.5
53.7
27%
66.8
70.4
68.9
70.5
69.4
34%
Finished ferrous products
(million tonnes)
55
60
59.2
61.2
60.3
30%
Flat-rolled coated products
(million tonnes)
3.6
4.7
5.4
5.6
5.6
3%
Steel tubes
9.2
9.7
10.1
11.3
11.4
6%
Steel (million tonnes)
Source: RosStat
Steel consumption trends
Industry specifics
Ferrous product
exports in Russia
Expert forecasts
04 Steel and iron market
05 Appendix
Table 6. Year-on-year growth rates on the Russian steel and iron market
March 2016 on March 2015 April 2016 on April 2015
06 Contacts
May 2016 on May 2015
Pig iron
9.4
3.5
-2.5
Finished rolled ferrous
products
2.2
3.5
1.6
Steel tubes
-9.2
-5.3
-14.2
Prefabricated steel
structures
-3.6
-14.7
-7.1
Source: RosStat, calculations by the Russian Ministry of Economic Development
15
Overview of the Russian steel and iron market \ Production output trends
Nevertheless, despite the slowing demand,
the Russian steel-making industry had a net
financial result of RUB 572.4 billion as reported
by RosStat, up 3.2 times on 2014, reaching an
historical high both in nominal terms and in
terms of growth rates. The last time comparable
growth occurred was in 2010 (up 2.1 times).
The stronger competitiveness of Russian metal
products is above all explained by the weakening
Russian rouble leading to a sharp growth in
exports. The depreciating rouble acted to offset
financial losses incurred by Russian steel-makers
as a result of falling global prices, with most of
the major steel producers showing profit by the
end of 2015, in US dollar terms.
•• Severstal reported a year-end profit of USD
552 million for 2015 against losses of USD 795
million in 2014. However, these losses were
attributed to the sale of Severstal’s operations
in North America in 2014;
•• NMLK earned a profit of USD 967 million, up
25 percent;
•• MMK’s profit was USD 421 million against a
loss of USD 44 million in 2014;
•• Metalloinvest’s profit went up 3.3 times
to USD 218 million;
01 Key findings
•• Mechel increased its profit by 10.6 percent
to RUB 101,807 million in 2015;
02
Overview of the global
steel and iron market
03
Overview of the Russian steel
and iron market
•• Evraz reduced its net losses 1.8 times, with a
net loss of USD 719 million in 2015 against a
net loss of USD 1,278 million in 2014. These
losses were mainly due to assets impaired by
USD 441 million and foreign exchange losses
of USD 367 million.
During the first five months, Russian tube
makers produced 4.3 tonnes of tubes, down 7.3
percent on the same period in 2015. May 2016
saw steel tube output decrease by 14.2 percent
in annual terms and 8.8 percent on the previous
month. Rolled product output grew 1.6 percent
year-on-year and was up 0.2 percent on April
(Table 6).
These trends are primarily explained by a crisis
in the construction industry, which is a major
consumer of tubes, as well as by a decreasing
demand from the oil and gas industry
accounting for 40 percent of the demand for
steel tubes.
Key trend
Production output trends
Steel consumption trends
Industry specifics
Ferrous product
exports in Russia
Expert forecasts
04 Steel and iron market
05 Appendix
06 Contacts
16
Overview of the Russian steel and iron market
Steel consumption
trends
01 Key findings
02
Overview of the global
steel and iron market
03
Overview of the Russian steel
and iron market
Key trend
According to the data for 2015, domestic
demand for Russian steel was down 10 percent
to about 39 million tonnes. The demand from
the construction industry, the biggest consumer
of rolled products, and the car manufacturing
industry dropped by 12 percent and 25 percent,
respectively. On the Russian market, a decrease
in demand for rolled products resulted in rolled
metal product imports dropping by 27.3 percent
to a market share of 9.7 percent in 2015.
It should be noted that this demand is to a
significant extent met by importers supplying
cheaper steel of lower quality, including China
where producers have almost unlimited
government support. Unlike the steel markets
in Europe or America, the Russian market has
almost no tariff barriers. As a result, some
companies have to reduce output, sell auxiliary
foreign operations and put investment projects
on hold. For instance, Novolipetsk Steel had to
shut down one of its blast furnaces in 2015 due
to negative developments on the steel market.
In 2015 a growth in steel consumption in the
energy sector was the only opposite trend in
Russia, which is mainly explained by the sales
of large-diameter tubes for large investment
projects. In particular, the first four months
of 2016 saw metal imports to Russia grow
2 percent to 905 thousand tonnes. Foreign
imports of steel tubes have demonstrated a
much stronger growth, up 28 percent to 151
thousand tonnes. It is worth noting that this
growth is driven by imports from CIS countries,
with tube imports up 72 percent on the same
period last year.
Given the differences identified between the
segments within the market of interest, we
recommend referring to the Industry-specific
trends section for a discussion of the key steelmaking sectors.
On the whole, according to experts, a slump
in production could have been even deeper
if it were not for an increase in exports
offsetting a sharp decrease in domestic demand.
According to the Russian Federal Customs
Service, steel product exports grew 8.5 percent
in 2015. Interestingly, the growth took place
in the face of unfavourable conditions on the
global market. On average, global prices for
rolled steel products dropped by 25 percent in
US dollar terms.
Production output trends
Steel consumption trends
Industry specifics
Ferrous product
exports in Russia
Expert forecasts
04 Steel and iron market
05 Appendix
06 Contacts
17
Overview of the Russian steel and iron market
Industry-specific
trends
01 Key findings
02
Overview of the global
steel and iron market
03
Overview of the Russian steel
and iron market
Key trend
Tube industry
According to news agency Metall-Courier,
Russia produced 8.1 million tonnes of welded
tubes in 2015, down 1.3 percent on 2014 (8.2
million tonnes). The growth mainly came from
increased metal consumption, which resulted
in the production of 3.4 million tonnes of large
diameter tubes (LDT). LDT production increased
by 0.5 million tonnes, up 17.7 percent on 2014
(2.9 million tonnes). This increase was due to the
demand from large trunk pipeline projects such
as the Power of Siberia, the Bovanenkovo-UkhtaTorzhok pipeline, the Sakhalin-KhabarovskVladivostok and other initiatives.
According to preliminary estimates, in 2015 the
sales of rolled metal products to major Russian
automakers were 0.9 million tonnes, down 23
percent from 2014 (1.16 million tonnes).
A squeeze in the consumption of rolled metal
products is caused by vehicle production
shrinking as a result of a weakening rouble and
lower consumer activity.
In May 2016, steel tube production contracted
at a double-digit pace. However, it is only welded
large-diameter tubes, which account for 22.3
percent (in physical units) of total steel tube
production, that had a negative growth rate
of 53.8 percent in May. Production of steel
structures also shows a negative growth of 7.1
percent on May 2015 (Table 6).
Rolling stock manufacturing
According to RosStat, 30,000 mainline cars were
produced in 2015, down 45.6 percent from 2014.
According to preliminary estimates, in 2015 sales
of rolled metal products to major Russian rolling
stock builders were 0.43 million tonnes, which is
twice lower as in 2014 (0.86 million tonnes).
Decreased consumption of rolled metal
products occurred as a result of a squeeze in
rolling stock production caused by an excessive
fleet of gondola cars in Russia and railway cars
remaining in service beyond their operating
lifespan.
Automotive industry
According to RosStat, the industry produced
1.37 million vehicles (trucks, passenger cars and
buses) in 2015, down 27.5 percent from 2014.
Shipbuilding industry
According to the rolling-stock manufacturing
statistics, a growth in shipbuilding orders
resulted in sales of rolled steel plate products to
Russian shipbuilders reaching 114.8 thousand
tonnes in 2015, up 23.8 percent from 2014.
A growth in demand from Russian shipbuilders
and ship repairers for hot-rolled steel plate
products was boosted as a result of the initiative
to renovate the Russian atomic-powered icebreaker fleet for the needs of Rosatom and
Gazpromneft.
Construction industry
According to RosStat, 2015 saw 83.8 million
square meters of housing stock put in service
in Russia, down 0.5 percent from 2014 (84.2
million sq. m.). Non-residential stock put in
service in 2015 was 29.4 million square meters,
down 14 percent from 2014. Despite an
economic downturn, the housing construction
industry remains a major consumer of rolled
metal products in Russia. There are several key
reasons for this:
•• Russia’s housing stock is smaller relative to
Europe or even China;
•• Russia has a significant amount of rundown
housing stock;
Comfortable Housing and Utilities for Russian
Citizens) have been launched;
•• Infrastructure initiatives are underway to
develop high-speed railway transportation
and build roads, bridges, etc.
Production output trends
Steel consumption trends
Industry specifics
Ferrous product
exports in Russia
Additional comments
As a result of a significant decrease in metal
product imports in Russia due to sharp and
unpredictable forex fluctuations, Russian
steel-makers have ramped up sales to Russian
customers. This has enabled fairly stable prices
to be maintained relative to those on the global
market. According to Platts, 2015 saw Russian
prices for hot-rolled products drop by 24
percent in US dollar terms, almost in line with
the global market. Investments and production
asset upgrades in recent years have enabled
Russian steel-makers to keep domestic prices
for flat-rolled products at a fairly good level,
compared to export prices, thanks to quality
and growing sales of products with high added
value.
Expert forecasts
04 Steel and iron market
05 Appendix
06 Contacts
•• Several government programs (Housing for
Russian Families, Incentive, Affordable and
18
Overview of the Russian steel and iron market
Ferrous product
exports in Russia
01 Key findings
02
Overview of the global
steel and iron market
03
Overview of the Russian steel
and iron market
Key trend
Table 7. Russia’s ferrous product exports around the world
Production output trends
In physical units (thousand tonnes)
Export items
2014
2015
Ore and iron concentrate
22 997.4
21 254.5
Ferrous metals
39 258.6
Ferrous metals other than pig iron.
ferroalloy. waste products and scrap
Growth rate
In monetary terms (USD millions)
Growth rate
2014
2015
-8%
1 951.1
1 013.8
-48%
42 191.7
7%
20 522.2
15 220.4
-26%
26 089.5
28 312.2
9%
14 474.8
10 871.1
-25%
4 359.4
5 339.5
22%
1 692.8
1 381.1
-18%
912.5
752.4
-18%
1 965.2
1 276.2
-35%
Carbon steel semi-products
1 3511.8
14 641.8
8%
6 587.4
4 636.7
-30%
FRP of carbon steel
7 614.5
7 968
5%
4 436.5
3 321
-25%
Pig iron
Ferroalloy
Source: Russian Federal Customs Service
Steel consumption trends
Industry specifics
Ferrous product
exports in Russia
Expert forecasts
04 Steel and iron market
05 Appendix
06 Contacts
19
Overview of the Russian steel and iron market \ Ferrous product exports in Russia
Table 8. Russia’s ferrous product exports to the CIS
In physical units (thousand tonnes)
Export items
2014
2015
Ore and iron concentrate
3 050
2 955.70
6 062.4
Growth rate
In monetary terms (USD millions)
01 Key findings
Growth rate
02
Overview of the global
steel and iron market
03
Overview of the Russian steel
and iron market
2014
2015
-3%
213.9
113.4
-47%
5 748.10
-5%
3 555.9
2 442.9
-31%
4 524
4 336.80
-4%
2 973.6
2 071.8
-30%
Pig iron
142
100.80
-29%
63.6
31.6
-50%
Ferroalloy
53.1
31.30
-41%
95
48.3
-49%
242.2
325.70
34%
107.4
91.8
-15%
Steel consumption trends
1 691.5
1 446.50
-14%
1 160.9
791
-32%
Industry specifics
Ferrous metals
Ferrous metals other than pig iron.
ferroalloy. waste products and scrap
Carbon steel semi-products
FRP of carbon steel
Expert forecasts
Table 9. Russia’s ferrous product exports to non-CIS countries (thousands of tonnes)
In physical units (thousand tonnes)
2014
2015
Ore and iron concentrate
19 947.4
18 298.80
Ferrous metals
33 196.1
Ferrous metals other than pig iron.
ferroalloy. waste products and scrap
Pig iron
Ferroalloy
Carbon steel semi-products
FRP of carbon steel
Production output trends
Ferrous product
exports in Russia
Source: Russian Federal Customs Service
Export items
Key trend
Growth rate
In monetary terms (USD millions)
Growth rate
2014
2015
-8%
1 737.3
900.4
-48%
36 443.60
10%
16 966.3
12 777.5
-25%
21 565.4
23 975.40
11%
11 501.2
8 799.3
-23%
4 217.4
5 238.70
24%
1 629.2
1 349.5
-17%
859.4
721.10
-16%
1 870.2
1 227.9
-34%
13 269.7
14 316.10
8%
6 480
4 544.8
-30%
5 923
6 521.50
10%
3 275.6
2 530
-23%
04 Steel and iron market
05 Appendix
06 Contacts
Source: Russian Federal Customs Service
20
Overview of the Russian steel and iron market
Expert
forecasts
Forecasts for the steel and iron market in
Russia are in line with the global trends, with
most experts agreeing that the market will
be recovering within the next two years. In
addition, a weakening rouble will help smelters
strengthen their positions in global trade.
•• Russian steel-makers will stay competitive
on the global market in 2016, with their
production capacities remaining loaded at
more than 80 percent on average. According
to a forecast by Moody’s, a decrease in prices
in export markets will have a less serious
impact on Russian steel-makers because
Russia generally produces steel cheaper than
its European competitors;
•• According to experts from RIA Rating,
the existing negative trend will remain
in place for 2016. However, potential
stabilisation of domestic demand and
expected improvement in the global pricing
environment will probably not let this trend
worsen beyond what we had in 2015;
01 Key findings
•• In 2016, hot- and cold-rolled products will be
the most exposed segments on the Russian
market due to continuing depreciation of the
Russian rouble, fluctuations in the effective
demand for metal products in Russia and
stabilisation of global prices for flat-rolled
products, according to a forecast by MMK;
•• The forecast of the socio-economic
development of Russia for 2016, 2017 and
2018 suggests a lower demand in the steel
market. According to Steel Market Research,
year-on-year growth rates will be 1.95 percent,
2.3 percent and 5.4 percent for 2016, 2017
and 2018, respectively.
02
Overview of the global
steel and iron market
03
Overview of the Russian steel
and iron market
Key trend
Production output trends
Steel consumption trends
Industry specifics
Ferrous product
exports in Russia
Expert forecasts
04 Steel and iron market
05 Appendix
06 Contacts
21
04
Steel and iron market
01 Key findings
02
Overview of the global
steel and iron market
03
Overview of the Russian
steel and iron market
04 Steel and iron market
The current state of the
steel-making industry
Challenges facing Russian
steel-makers in 2016
Business growth
strategy in 2016
05 Appendix
06 Contacts
In 1H 2016, Deloitte CIS carried out an
integrated research project Current
State and Outlook for the Manufacturing
Sector in Russia — 2016. As part of the
research objective, we surveyed experts
from a number of steel- and tube-making
companies. Conducting a detailed analysis
of this survey allowed us to get a picture
of the Russian steel-making industry and
identify the sentiments and expectations
of the market players, as well prospects
they have for the future direction of their
businesses and the industry as a whole.
22
Steel and iron market
The current state of the
steel-making industry
01 Key findings
We asked the survey participants several questions about the current situation as regards the
market, the situation in their companies and the prospects of the industry as viewed from both the
corporate and market perspectives.
What is your view of the current state
of the Russian manufacturing industry?
Manufacturing sector
50%
50%
Steel-makers
67%
Negative view
33%
Positive view
What is your view of the development
prospects of the Russian manufacturing industry?
Manufacturing sector
38%
37%
25%
Steel-makers
33%
The situation
will improve
27%
The situation
will generally
remain the
same
40%
The
situation
will worsen
02
Overview of the global
steel and iron market
03
Overview of the Russian
steel and iron market
04 Steel and iron market
The current state of the
steel-making industry
Trends
Steel-making companies tend to have a less
positive view of the current state of the industry.
The number of respondents with a negative
view of the situation for 1H 2016 is higher than
the average by 17 pp.
What is your view of the current
situation of your company?
Generally, opinions on the current condition
of the manufacturing sector in Russia
are divided equally.
7%
Trends
Less positive views also prevail in answers to the
question about the development prospects
of the Russian manufacturing industry. While
every fourth respondent (25 percent) from
the manufacturing industry predicts worsening
conditions, the number of respondents from
steel-making companies expressing this view
is higher by 15 pp.
What is your view of the development
prospects for your company in 2016?
Manufacturing sector
12%
88%
Steel-makers
93%
Negative view
Positive view
60%
12%
Steel-makers
33%
The situation
will improve
60%
The situation
will generally
remain the
same
Challenges facing Russian
steel-makers in 2016
Business growth
strategy in 2016
05 Appendix
06 Contacts
Manufacturing sector
28%
Trends
Based on the replies, the steel-making
companies appear to begin having more
positive views of the situation in regard to their
business. Ninety-three percent of respondents
from companies producing metal products
expressed a positive view of the situation of
their company in 1H 2016, which is 5 pp higher
than the average for the industry as a whole.
7%
The
situation
will worsen
Trends
Most steel-makers (60 percent) do not expect
any significant changes in the prospects for
their business in 2016.
Given the optimistic views of the market’s
current state, the perceptions expressed reflect
an improving situation in the industry, which
also agrees with the findings obtained based on
the available statistical data.
23
Steel and iron market
Challenges facing Russian
steel-makers in 2016
01 Key findings
Top challenges
Trends
Top-5 challenges facing
steel-makers in 2016:
We asked the respondents to name the most significant challenges regarding support and growth
of business. We performed an analysis to rank the challenges facing the market.
•• Currency risk (40 percent)
•• Shortcomings of government regulation of the
industry (40 percent)
Currency risk (Weakening Russian rouble)
40%
Shortcomings of government regulation
(administrative, trading, economic and other barriers)
40%
Low appeal of the Russian manufacturing
industry for foreign investors
27%
Corruption
25%
Lack of qualified executive staff
25%
Geopolitical risks (EU sanctions, Russia’s embargo, etc.)
23%
Insufficient government support and financing
21%
Insufficient production capacity
and technological potential
9%
Insufficient purchasing power of the population
9%
Lack of qualified workers
8%
Insufficiently optimised logistics
7%
Expensive energy sources for production purposes
5%
•• Lack of viability of the Russian manufacturing
sector for external investors (36 percent)
•• Corruption (25 percent)
•• Lack of qualified executive staff (25 percent)
02
Overview of the global
steel and iron market
03
Overview of the Russian
steel and iron market
04 Steel and iron market
The current state of the
steel-making industry
Challenges facing Russian
steel-makers in 2016
Business growth
strategy in 2016
05 Appendix
06 Contacts
In spite of the depreciating rouble acting to
offset losses incurred by Russian steel-makers
in 2015 (please see the Overview of the Russian
steel and iron market/Production output trends
sections for more details), the weaker rouble
and government regulation continue as top
challenges for the steel-making industry. The
primary reason is that a depreciating rouble
only benefits industries with low to middle level
of processing. Meanwhile, producers of metal
products, equipment and related products have
to deal with direct exposure to risks such as
growth in production costs, lower demand and
a loss of share on the global market, including,
above all, risks expressed in monetary terms.
24
Steel and iron market \ Challenges facing Russian steel-makers in 2016
The weakening rouble’s
impact on steel-makers
01 Key findings
A weakening rouble is the key factor significantly impacting steel-makers.
Therefore, we asked the experts surveyed to tell us more about the consequences
facing their companies as a result of the depreciating rouble.
Stronger competitiveness on foreign markets
due to sales denominated in a foreign currency
47%
Higher production costs
47%
Lower production costs
33%
The depreciating rouble has had no impact
on the operations of a company
20%
Stronger competitiveness of a company
due to higher import prices
Improved business appeal for foreign investors
20%
7%
Trends
On the whole, the depreciating rouble was
noted by 80 percent of the representatives from
steel-making companies, including 58 percent
of those who mentioned the positive impact of
the depreciation.
As regards the individual business situation,
almost every second respondent mentioned
increased competitiveness on foreign markets
(47 percent) and a growth in production
costs (47 percent) as the key impacts of the
depreciation, which also agrees with our
findings.
At the same time, every third respondent saw
a decrease in production costs (33 percent),
which is by 5 pp higher than the average for the
manufacturing industry as a whole.
02
Overview of the global
steel and iron market
03
Overview of the Russian
steel and iron market
04 Steel and iron market
The current state of the
steel-making industry
Challenges facing Russian
steel-makers in 2016
Business growth
strategy in 2016
05 Appendix
06 Contacts
In addition, every fifth respondent mentioned
better competitiveness as a result of imports
becoming more expensive (20 percent).
Only 7 percent of respondents pointed out
a growth in interest from foreign investors.
25
Steel and iron market
Business growth
strategy in 2016
Fundamental changes on the global steel-making market have
led to notable transformations in how companies plan and
manage their business. Uncertainty and higher operational risks
have affected both the current situation of companies and their
strategy for at least the next five years.
01 Key findings
We asked respondents to share their views on what factors
could help their companies become more competitive and
what strategy they are planning to employ in a situation of
greater uncertainty for 2016 and 2017.
02
Overview of the global
steel and iron market
03
Overview of the Russian
steel and iron market
04 Steel and iron market
The current state of the
steel-making industry
Competitive factors ranked for the
steel-making industry in 2016
Challenges facing Russian
steel-makers in 2016
Lower labor costs
37%
Higher domestic demand
36%
Lower production costs, including energy costs
36%
Lower administrative barriers,
including trading barriers
28%
Higher demand outside Russia
16%
Availability of financing sources
16%
Marketing
13%
Government support for
the manufacturing sector
12%
Stronger technological and manufacturing
potential (building new capacity)
12%
More efficient logistic processes
11%
A broader range of products
9%
Better trained staff
8%
Limited imports, including “grey” imports
5%
Trends
Top-3* factors that could potentially
drive the development of steel-making
companies:
•• Lower labour costs (37 percent)
Business growth
strategy in 2016
05 Appendix
06 Contacts
•• Higher local demand (36 percent)
•• Lower production costs (36 percent).
26
Steel and iron market \ Business growth strategy in 2016
Business development
strategies in 2016
01 Key findings
Trends
Top-5 priority growth strategies for steelmaking companies in 2016:
02
Overview of the global
steel and iron market
03
Overview of the Russian
steel and iron market
04 Steel and iron market
Expansion into new markets
83%
Improvement of production
and technological capacity
77%
Business development through organic growth
73%
•• Expansion into new markets (83 percent)
Higher prices for end products
67%
Challenges facing Russian
steel-makers in 2016
Launches of new products
•• More efficient production and technologies
(77 percent)
67%
Investments in personnel
63%
•• Business development through organic
growth (73 percent)
Business growth
strategy in 2016
Reduction of costs in Russia
63%
•• Higher prices for end products (67 percent)
Exports to countries in the Customs Union
60%
Review of the procurement strategy
53%
Separation and/or sale of non-core/
low-priority operations
43%
Construction of new plants in Russia
43%
Reduction of procurements from foreign companies
40%
Finding external financing sources
37%
M&A strategy for the same market segment
37%
Joint ventures with a Russian/foreign producer,
including contract manufacturing
37%
Currency risk hedges
33%
•• New product launches (67 percent).
All of these strategies reflect the recovery taking
place on the Russian steel and iron market.
The current state of the
steel-making industry
05 Appendix
06 Contacts
27
Appendix
Top-20 M&A deals
on the steel and iron
market in 2015 and 2016
Date
Deal target
Buyer
Seller
Deal size (USD millions)
1
04.08.2015
Shougang Jingtang United Iron & Steel Co. Ltd
(51% stake)
Beijing Shougang Co., Ltd.
Shougang Group Corporation
2
13.05.2016
Nisshin Steel Co., Ltd. (42.78% stake)
Nippon Steel & Sumitomo
Metal Corporation
2981
3
10.09.2015
Chongqing Iron & Steel Company Limited
(22.47% stake)
An investor group led by
Chongqing Yufu Assets
Management Co Ltd
777
7584
4
25.10.2015
North Star BlueScope Steel, LLC (50% акций)
BlueScope Steel Limited
Cargill, Incorporated
760
5
14.07.2015
Gerdau Acominas S.A. (3.5% stake); Gerdau
Acos Especiais S.A. (2.39% stake); Gerdau
America Latina Participacoes (4.9% stake);
Gerdau Acos Longos S.A (4.77% stake)
Gerdau S.A.
Itau Unibanco Holding S.A.;
ArcelorMittal Netherlands
B.V.
629
01 Key findings
02
Overview of the global
steel and iron market
03
Overview of the Russian
steel and iron market
04 Steel and iron market
6
01.04.2016
Thyssenkrupp CSA Siderurgica do Atlantico
(26.87% stake)
ThyssenKrupp AG
Vale S.A.
500
7
21.08.2015
Fujian Sanan Steel Co Ltd
Fujian Sansteel MinGuang
Co Ltd
Fujian Sansteel (Group) Co
Ltd; Fujian Sanan Group
Co Ltd; Fujian Anxi Rongde
Mining Co Ltd; Xiamen
Xindaan Trading Co Ltd
431
Outokumpu Oyj
420
05 Appendix
06 Contacts
8
19.10.2015
Shanghai Krupp Stainless Co Ltd (55% stake)
Lujiazui International Trust
Co Ltd
9
20.06.2016
Vallourec Group SA (13.85% stake)
Nippon Steel & Sumitomo
Metal Corporation
10
26.04.2016
SKF (Kaydon velocity control business)
Stabilus S.A.
SKF AB
339
11
07.01.2016
Fame Risen Development Limited
Intelligent Wealth Limited
Kai Yuan Holdings Limited
307
12
10.09.2015
Taihan Electric Wire Co., Ltd. (74.66% stake)
IMM Private Equity Inc
13
30.07.2015
Formosa Ha Tinh Steel Corp (5% stake)
JFE Steel Corporation
Formosa Plastics Group
14
13.08.2015
Shanxi Antai Section Steel Co Ltd
Shanxi Antai Group Co Ltd
Xintai Iron and Steel Co Ltd
218
15
18.05.2016
Cambridge International Inc.
Rexnord Corporation
Industrial Growth Partners
210
16
20.05.2016
Gerdau Sidenor
Clerbil Sociedad Limitada
Gerdau S.A.
17
21.12.2015
IPE Group Limited (95.16% stake)
China Baoan Group Co., Ltd.
18
01.07.2016
SeAH Changwon Integrated Special Steel
(19.94% stake)
SeAH Besteel Corporation
POSCO
145
19
07.12.2015
Nga Chun Holdings Company Limited
Zhejiang Jin Cheng Asset
Management Company
Limited
Vantage International
(Holdings) Limited; Fung
Chuen (Private Investor);
Fung Chi Wing (Private
Investor)
108
20
03.02.2016
Anhui Tianda Oil Pipe Company
Limited (80,55% stake)
Vallourec Tubes S.A.S.
Anhui Tianda Enterprise
Group Co., Ltd; Anhui Tianda
Investment Co. Ltd
91
390
251
225
174
171
28
Contacts
01 Key findings
02
Overview of the global
steel and iron market
Overview of the Russian
steel and iron market
Andrew Sedov
Vladimir Perfiliev
03
Leader of the Metals
group in Deloitte, CIS
Director, Consumer
and Industrial
Products Audit (Metals)
04 Steel and iron market
Partner, Head of Consumer
and Industrial Products
Audit department
+ 7 (495) 787 06 00, доб. 2260
[email protected]
Deloitte CIS
05 Appendix
+ 7 (495) 787 06 00, доб. 8060
[email protected]
06 Contacts
Marina Elovskaya
Lora Zemlyanskaya
Artyom Belyaev
Senior Manager
Manager
Designer
Business Development
Department
Research Centre Leader
Deloitte CIS
Business Development
Department
Deloitte CIS
[email protected]
Deloitte CIS
[email protected]
[email protected]
29
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