COVID19 Tested the Resilience of Russian Steel Makers in 2020
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COVID19 Tested the Resilience of Russian Steel Makers in 2020

Fitch Ratings last week affirmed Long-Term Issuer Default Rating and senior unsecured rating at 'BBB' with Outlook on the Long-Term IDR as Stable for

Fitch Ratings last week affirmed Long-Term Issuer Default Rating and senior unsecured rating at 'BBB' with Outlook on the Long-Term IDR as Stable for three Russian steel makers NLMK, MMK & Severstal. Fitch said “Russian steel companies were less affected by a collapse in demand due to the pandemic, as their low-cost position has allowed them to offset weaker domestic sales with export supplies and to remain profitable even at depressed steel prices. Russian steel demand fared better than initially expected in 2020 by declining only around 3%, since domestic steel consumption is heavily skewed towards construction activities, which are more resilient than manufacturing. We expect that in 2021 domestic consumption recovery will offset the previous year's decline, supported by construction activity aided by government stimulus and infrastructure projects and forecast 3.3% Russian GDP growth. Over the medium term domestic steel demand will be constrained by low growth and lacklustre industrial production.”

Fitch added that “Earnings to Peak in 2021 - Global steel companies responded to 2020 demand collapse in a disciplined manner by idling up to 30% capacities or operating at reduced run rates. Since the lockdowns eased, capacity restarts have been trailing demand rebound, which along with low inventories, triggered a price rally across the steel value chain. We anticipate the current price rally to be short-lived, but it should support robust 1H21 results before gradually moderating in 2H21. Given that Russian steel prices have been lagging global market growth, the overall price gain effect should be smoother for domestic sales.”

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