Reuters reported that a growing number of Russian steel firms are likely to build new plants at home in a strategic shift away from foreign acquisitions, as they take advantage of high profit margins at low cost domestic mills.
Prior to the crisis, leading steelmakers paid a premium for plants in Western Europe and North America, saddling the Russian steel sector with debts of more than USD 30 billion and pushing many firms to the brink of bankruptcy when demand collapsed.
Now, leading Russian players such as Severstal, Evraz and Magnitogorsk Iron & Steel Works are building at home, where they have easy access to raw materials, cheap energy and labour.
Mr Dmitry Smolin analyst of Uralsib said that "The cash cost of steel in Russia is one of the lowest in the world. That makes other risks including political and inflation less important."
Russia also boasts some of the most profitable mills as recent data compiled by Citigroup shows. The top four producers reported USD 184 in average 2010 earnings before interest, taxation, depreciation and amortization per tonne of steel produced. That is more than seven times the level at US Steel Corporation though it trails Brazilian producer Usiminas' earnings of USD 252 per tonne.
Russian steel producers are boosting profitability, furthermore by increasing value added production such as the launch of a plate mill by Magnitogorsk Iron & Steel Works or MMK in 2009 to supply Russian pipe makers and other producers. An automotive steel mill will go on line this summer.
Mr Viktor Rashnikov chairman of MMK said that "In the last 10 years we have invested more than USD 8 billion. More than USD 5 billion of this amount was invested in the last 4 years at our production site in Magnitogorsk."
( Source: www.steelguru.com )