New crisis in Russian metallurgy promises to be protracted

In the last year, Russian metallurgy showed all signs of the recurrence of the crisis that was in 2008-2009. But this time it has another nature. Four years ago the sector dramatically fell on the tide of the flap and financial problems, but quickly recovered. Now the market is sure in long-term demand stagnation and doesn’t expect any serious increase. Metallurgical companies can only close excess capacities, struggle with the tariffs of the monopolies and wait for the growth of prices.

The current situation in metallurgy bears a strong resemblance to crisis 2009. Besides the decrease of investment programs, postponement of projects and staff reductions, regular meetings with bankers and officials – with cap in hand – became one of the main occupations of shareholders and management. The protocols of such meeting recall the situation that was 4 years ago: issues of state guarantees of debts, the creation of an alumunium stabilization fund and the support of company towns. Bankers also accepted the familiar stipulations of the play. At the beginning of the year, ChTPZ renegotiated loans for 86.5 billion rubles. Mechel, having debt in the amount of $9.4 billion, renegotiated and refinanced the majority of their loans; UC Rusal, agreed about covenant vacations till the end of 2014, should also agree about refinancing the majority of its debt (the net debt is $10.14 billion). Bankers acknowledge: there is no other way, but to make concessions.