Steel grip: how the Russian metallurgists earned on the crisis

While the economy was plunging into crisis, steelmakers and exporters earned on sharp weakening of the ruble. Who was in the best position?
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In 2014 the Russian economy in crisis ends, but one industry can call him a positive for yourself - this is metallurgy. Dynamics of prices and devaluation of the ruble sharply increased foreign exchange earnings of exporting companies - "Norilsk Nickel" (the main owner - Vladimir Potanin) and "Rusal" (the main owner - Oleg Deripaska). Not bad feels and steelmakers, although most of their production goes to the domestic market. The weakest position of the company were tube - OMK, TMK, ChTPZ: they are focused on oil and gas projects in the country, and sales are in rubles, but have to buy steel at prices linked to the dollar.

Prices are on the positive

Price trend in the metals on the world market has divided the year into several parts: the first half of it was positive, although in general recognize the year for commodity assets can not be good, says analyst "Nord-Capital" Roman Tkachuk.

In the most advantageous position were aluminum and nickel. Prices of aluminum from January to September increased by 20%, but has since been corrected by 15%. On the London Stock ExchangeMetals December 24 aluminum worth $ 1834 per ton.

Exhibited similar dynamics nickel, copper and zinc. "Nickel since the beginning of the year to September showed a solid growth of 36%. Yesterday at the London Stock Exchange, it was worth $ 15 275 per tonne, "- says Tkachuk.

According to him, it looked good for a year and the steel: it on the London Stock Exchange since January has added almost 50%. This growth followed a strong fall in prices in 2013, when the metal has updated the historical minimum, almost reaching the level of $ 100 per ton. Current price in London - $ 500 in China - $ 444 per ton.

market Movers

the best results in the past year have shown MMC "Norilsk Nickel" and OK "Rusal" Among the major Russian steel companies.
"Norilsk Nickel" more than 90% of the products sold for export. Moreover, almost all the production costs of the company are in Russian rubles. "The company feels comfortable enough on the background of currency fluctuations. Although part of the procurement of raw materials, equipment is carried out in the currency exchange rate of revenue growth for the effect stronger. We regularly conductm sensitivity analysis of our performance to changes in macroeconomic conditions. This allows MMC to maintain financial stability ", - reported in Forbes," Norilsk Nickel ". Its debt load the company describes as a low - to mid-2014 net debt was $ 3.5 billion in 2015 to repay $ 500 million is planned..

The instability of the foreign exchange market did not prevent the shareholders of "Norilsk Nickel" December 13 to vote for the payment of dividends for the first 9 months - 762.34 rubles per share. Over the same period of 2013, the company paid 220.7 rubles per share.

"Rusal" exports about 80% of production. Cost reduction, increase in world aluminum prices and weakening of the ruble helped increase EBITDA for the 9 months to 57% -. To $ 863 million in the 4th quarter EBITDA could exceed $ 400 million if the current market situation.

The company carries out import substitution of machinery for its factories. Russian counterparts cheaper foreign cars to 40%. The estimated economic impact of "Rusal" has already made more than $ 1.5 million.

Goodbye America

Russian metalgi in 2014 actively took up the reduction of their property abroad. Two companies - "Norilsk Nickel" and "Severstal" - successfully sold to foreign enterprises, reducing the share of low-margin business, and reducing the economic risks due to the unstable political situation.

"Norilsk Nickel" in the autumn of the assets sold in Australia for $ 1 million (plus the economic benefit from the transaction is approximately $ 200 million) and Africa for $ 337 million.
"Severstal" in September, is completely out of the North American assets, which earned two steel plants and one coal producer $ 2.465 billion. According to analyst Andrew Tretelnikova RMG Securities sold by the company due to the low profitability eroded the result of "Severstal" in general. "Given the negative trends in the market, in order not to lose money, it is necessary to develop its own advantages - lower cost of production of steel in Russia, which in the conditions of surplus offer is a preferred strategy. The "Severstal" conducted a transaction at a good price, which enabled the company to pay spetsdividendy, reduce debtbut prepare for the deterioration of the situation on the market "- said the expert.

Pipe Metallurgical Company (TMK, the main owner - Dmitry Pumpyanskiy) and of Evraz (the co-owners - Alexander Abramov and Roman Abramovich) decided to reduce its share in the North American divisions through IPO. TMK in late November announced the start of preparations for the deployment of the American TMK IPSCO. IPO designed for the medium term and is intended to reduce the debt burden, explained in the TMK. Evraz planned to place on the stock exchange in New York, up to 35% stake in a subsidiary of Evraz North America up to $ 500 million, but, according to Bloomberg, postponed those plans for 2015 due to the fall in oil prices until the end of the year.

The fact that Russian steel part with foreign assets, explained the background to the surplus of steel in China, said Andrew Tretelnikov. "Prior to 2008, many saw in the growing Chinese steel imports long-term trend, but the crisis has adjusted expectations. And as China identifies global trends in the steel market, on the horizon of five years of positive decisions in this sector do not see "- he said.

healertion devaluation

Tangible benefits from the devaluation of the ruble gained not only the "Norilsk Nickel" and "Rusal". For example, the "Mechel" currency export sales make up a third of total revenue. the company's huge debt declined in dollar terms since the beginning of the year with $ 9 billion to less than $ 7 billion, as more than half is denominated in rubles.
Steel Division "Mechel" in the third quarter showed a record margin. Margin increased, as raw material for steel - iron ore and coking coal - 5-7-year price lows, says a company spokesman.

"Severstal" (the main owner - Alexei Mordashov) experiences a neutral impact on the ruble devaluation. On the one hand, the company has traditionally sends to export 30-40% of the products, and its main costs and capital expenditures are denominated in RUR. On the other hand, "Severstal" has a predominantly dollar debt, but it is long-term and 80% public, eliminating the need to negotiate with the creditor banks on restructuring, the company noted.
"Metalloinvest", more than half of products (iron ore, pellets, hot briquetted iron) is shipping to the domestic market. The company hit the global surplus of iron ore, for which prices are falling since the beginning of the year. In January iron ore (iron ore) was traded at $ 120 per ton, the December 24 - for $ 68. The Ministry of Industry of Australia predicts that in 2015 iron ore will cost an average of $ 63 per tonne (this year, the average price will be about $ 88). "The situation on the global market for iron ore equalized when weak players leave. devaluation of the ruble should also have a positive impact on the "Metalloinvest". We look forward to improve its results in the third quarter of 2014 ", - says Andrey Tretelnikov.

The cycle of global monetary expansion comes to an end, to Russian companies it's time to bet on the domestic market, he warns. According to the analyst RMG Securities, «from an economic point of view, we have a huge potential to increase the consumption of steel products in the construction industry, in mechanical engineering." "Also, the competitiveness is increased byit began to export to Europe, the Middle East. These things need to try to develop. With the devaluation of the ruble increased our advantage, the cost of production has become one of the lowest in the world "- sums up the expert.

Chinese barrier

Price forecast for 2015 on Metals neutral. "In non-ferrous metals in the next year growth should not be expected, perhaps even a slight decrease. This is due to the fact that the non-ferrous metals are sensitive to the state of China's economy, which is now slowing, "- says Roman Tkachuk.

For ferrous metals and iron ore situation is not very positive, as demand from industrial centers - China and Brazil - is falling, and the market is likely to react to the price decrease. In Russia, the decline in demand from major customers - the automotive industry, the construction industry - will be even more pronounced, as a worldwide trend is added ruble devaluation and economic crisis, concludes the analyst of "Nord-Capital".