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Russia’s steel enterprises face increasing competition

As an inherent advantage gradually
fades out, Russian steel enterprises will face a new challenge in the future. AndreyLaptev, Severstal steel company strategy director,
said in order to maintain its attractiveness to investors, the Russian steel
enterprises not only need to have the ability to provide pre-tax profits, but
also need to guarantee to enterprise capital holder on a regular basis to provide a certain number of
free cash flow , in Moscow Steel summit recently. Under the pressure of excess
capacity, these challenges only through long-term cost reduction and the
development of mergers, acquisitions and capital expenditures revenue
allocation rules to achieve.

Earlier, although Russian steel
production cost in the global is the lowest, but the steel transportation
distance is longer, and therefore its cost advantage on the delivery of
benchmark has decreased, especially in export markets. Russian part of the
production costs is also growing, and tends to increase more than general
inflation and its electricity and natural gas prices and the United States was
essentially flat.

Despite high inflation and temporary
excess capacity, in raw materials, utilities, natural gas, considerable pull
under population and a growing middle class, Russia is still the ideal place in
the world’s steel production. Laptev said the foundation of the Russian steel
industry is very strong, and because the vast land area and from external
competition.

Severstal steel company said the global
overcapacity in the steel industry will not be eliminated in the short term,
but the pace of expansion slowed down last year, and will continue to slow
down, because before the start of the project in Russia, India, Southeast Asia,
Brazil and China in 2008-2009 crisis is also nearing completion. Laptev
commented that if the Chinese government to fulfill its strategic goals, and
shutting down polluting steel enterprises, and limiting the new steel mill
project investment, the imbalance of global steel supply and demand is expected
to be eased in 2017-2018.

American Keystone Steel has announced
that the delivery price of wire rod will improve $ 15/ton in August. Other
mills are expected to follow the price increases in the coming days.

Although the market for scrap steel
trend is not good in August, but it seems to have a record low steel prices, so
Industry insiders estimate in August the U.S. wire rod prices will be a slight
rebound in the price driven by the trend of rising price.

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