Metallurgy of the Black Earth region

Traditionally metallurgy is the most sensitive industry to the crisis in the economy and it is the first, which responds to negative news. And as the largest enterprises in the Black Earth region are metallurgical enterprises (structures of NLMK and Metalloinvest), their problems can wither regional budgets, and even threaten social tensions. Metallurgists don’t have illusions about the fast economic recovery and even don’t hope for the state support, adhering to the principle that if you’re drowning, you’re on your own.

Today global problem of the industry is overcapacity. According to experts, it is about 500 million tons, while the total consumption in the world is 1.5 billion tons. At the end of 2012, market participants expected that metal products prices finally reached the bottom and would begin to grow in 2013. However, this didn’t happen. A similar situation is observed in Russia, but the situation is fixed by the fact that there is a foundation for the growth of the market, such as the lack of accommodation: 23 square meters of accommodation fall per head of population in Russia, and about half of it is old housing stock. For comparison, this rate is 67 square meters of housing in the USA. Meanwhile, the Russian economy is in stagnation and we can’t expect improvement in the short term.

However, there was enough high (as far as possible in the current situation) demand for steel due to the construction sector in the most part of last year. That's why in general the results of the Black Earth Region’s metallurgical companies were not so bad in the past year against the background of poor market conditions, results of their Russian colleagues. For example, the increase in demand from the construction industry allowed NLMK to increase sales of steel in the domestic market by 17% to 3.8 million tons in the previous year. As it is known, the main part of NLMK's steel capacity is located in Lipetsk. On the whole, in 2013 the Lipetsk enterprise’s metal production remained at the level of the previous year (12.1 million tons), and the rate of the steel production grew a little: by 1.8 % to 12.4 million tons.

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