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Russian steel giant Severstal calls for global steel to drop production

Alexei Mordashov, CEO of Russia’s second
largest steel mill Severstal appeal, hopes the global large-scale steel mills
and governments to reach an agreement to reduce steel output and excess capacity.

He said: “As long as we do not solve
the problem of supply and demand of steel, the steel industry outlook would not
be optimistic. Even worse is many steel enterprises will face bankruptcy or
off. ”

“Steel overcapacity is a very serious
problem if we do not solve this problem, the crisis in the steel industry 10-15
years ago will be repeated. At that time, the United States 1/4 steel
enterprise go bankrupt.”

U.S. and European steel mills are facing
with deficit, but Severstal is still profitable. Mordashov said:
“Severstal can be profitable, we are fully capable to survive. However,
our goal is not to survive, but to thrive, and Severstal’s development depends
on the prosperity of the entire steel industry. ”

Mordashov thought that the steel industry
leaders and governments should reach an agreement to reduce capacity, as in
1994 the practice of treating the aluminum industry. At that time, the European
Union, the United States, Russia, Canada, Australia and Norway have agreed to
reduce aluminum production. According to their agreement, the global aluminum
output fell by 6%.

ordashov said that if the steel industry
does not take similar measures, then the steel plant would be forced to lay off
more workers and close the door. This trend is intensifying. The world’s largest
steel company Arcelor Mittal has closed steel mills in France and Belgium, and carried
out layoffs. Meanwhile, ThyssenKrupp and Salzgitter also have decided to
layoffs.

Mordashov said: “We are facing a
serious risk that the steel industry suffered huge losses and upheaval. If we
do not pass an order way to restructure inefficient steel mills, so our budget
and the customer will suffer more serious damage. ”

BCS Financial Group analyst, Oleg
Petropavlovskiy said, although Mordashov’s proposal is a good idea, but it is
almost unenforceable. “Even the United States, Europe and Russia steel
plant agreed to drop overcapacity, China is still a key issue.”

Petropavlovskiy said, “China exports a
large number of steel products to worldwide” while the Chinese government
is unlikely to drop capacity. As long as China does not solve the problem of
excess production capacity, steel prices will not rise.

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