Reuters reported that Russia steel sector is joining the global race for key raw materials as prices rise, developing assets in remote locations at home while bidding for mines abroad, where competition from global rivals is intense.
Russia largest steel producer Severstal has made several moves in Africa this year. It has raised its stakes in two gold miners active on the continent and in May it said it would buy 16.5% of Core Mining, which holds the rights to iron ore mines in Gabon and the Republic of Congo.
Mr Alexei Mordashov CEO of Severstal said "Certainly, our priority is raw materials. At this time I am not prepared to say how much we plan to invest as it all depends on the quality of the projects. We want to start with raw materials and mainly iron ore and possibly coal, and we are already involved in gold production."
Though the trend towards internationalization is likely to continue, there are disadvantages for steel companies in moving beyond the borders of resource-rich Russia. Bidding against Chinese and other global rivals for licenses pushes up prices, while investing heavily in Africa exposes companies to risks from dealing with unstable governments.
Mr John Campbell a metals and mining expert at PricewaterhouseCoopers said "Russian companies are likely to be cautious when they buy on the global market. However, they will want to continue to expand globally and look for strategic opportunities."
He said that "China influence will cause volatility in pricing for raw materials and Russian companies will try not to get priced out of the market. He added that iron ore mined in Africa will be shipped to Russian owned mills and other buyers in Europe and North America.”
Mr John Campbell said "It's not so much a Russian strategy as part of the global strategy of some of the major Russian steel companies, as they have operations in North America and Europe. In terms of the logistics, this will give them assets that will provide better logistical access to their fabricating facilities located in end markets."
The recent surge in prices for iron ore and coking coal, used to fuel pig iron production in blast furnaces, has encouraged steel producers to expand their resource base.
Mr Dmitry Smolin Uralsib analyst said "The global market itself is experiencing some shortage of iron ore and coking coal. He said that it's due to China producing more steel and consuming more raw materials, mainly for steel produced in blast furnaces."
Russian coking coal prices have also risen after a May mine accident sharply reduced output of a key grade.