Flash Report /
Russia

Russian steel majors sign long-term supply contracts with local developers

  • According to Interfax, Russian steel majors signed the first long-term supply contracts with local developers in January

  • The price formula includes specific parameters to mitigate sharp fluctuations of exchange-traded steel product

  • The Ministry of Industry discussed introducing 12-13% and 15% export tariffs on semis (billets)

Boris Krasnozhenov
Boris Krasnozhenov

Head of Research (Managing Director)

Follow
Yulia Tolstykh
Yulia Tolstykh

Analyst, Metals & Mining

Follow
Alfa
14 January 2021
Published byAlfa

According to Interfax, Russian steel majors signed the first long-term supply contracts with local developers in January. The price formula includes specific parameters to mitigate sharp fluctuations of exchange-traded steel product and steelmaking raw material prices. More contracts based on a developed price formula should be sighed in the near future. The news is positive for major suppliers of long steel products including Evraz, Mechel, NLMK and MMK. Evraz has c.60% market share in the local construction steel sector followed by Mechel with c.9% market share. The long-term contracts between developers and long steel producers reduce the risk of implementing export tariffs to curb domestic steel prices. The Ministry of Industry discussed introducing 12-13% and 15% export tariffs on semis (billets) / rebar and ferrous scrap, respectively, before the New Year. We believe that steel price benchmarks face a downward correction in 1Q21E due to the winter slowdown in the construction sectors, Lunar New Year factor, slowing credit growth in China in 1Q21E, the EU steelmaking capacities restarts and a possible iron ore price downward correction. Therefore, the Russia steel majors, representatives of the construction sector and state authorities have decided to find consensus in the situation with rising steel prices.