Although the ruble has collapsed, Russian steel mills are making a profit

MOSCOW – The collapse of the ruble, which pushed up prices for millions of Russians as the economy slipped into recession, wasn’t bad for everyone, as Russian steelworks are suddenly world champions.

Steel producers, including Severstal and Novolipetsk Steel, pay salaries and other expenses in rubles. Time when the profit for exported steel is in dollars or euros. This allows them to undercut rivals such as ArcelorMittal, the largest steel producer in the world, while maintaining profitability.

A good period for Russian steelworks

„This is a fantastic time for the Russian steel industry,” said Kirill Chuyko – BCS Financial Group. „Most companies are enjoying their best returns since the pre-crisis period of 2007 and 2008 as a result of the ruble’s decline.”

Even before the 47% decline of the ruble last year, the industry was in good shape. Production in 2014 reached the highest level since the global financial crisis. Russian steel producers have invested billions in modernizing factories from the Soviet era. And Russia produces more than any other country in Europe, one of its main export markets.

Now, the decline of the ruble cuts the costs of Russian mills by almost half in dollar terms. Hot-rolled coil production, a benchmark product, now costs $244 to $250 per metric ton in Russia compared to $405 per ton in Brazil and $434 per ton in China. According to CRU Group, an industry consultant.

Russia produced 70.65 million tons of steel last year, the second-highest output since the collapse of the Soviet Union in the early 1990s, according to data from the World Steel Association. Even if demand contracts domestically, exports are expected to increase.

„Russia’s steel exports are very competitive.” Aditya Mittal, ArcelorMittal’s chief financial officer, said at a conference this month. „The Russian economy has gone into recession, which means lower domestic consumption and more tons of steel for export.

Article source: http://www.chicagotribune.com/news/sns-wp-blm-news-bc-russia-steel03-20150303-story.html