Russian metallurgists do not want to leave the US market

Russian companies refused to sell their American assets and plan to make good money for them: the prices for metals in the US due to import duties went up.
10.08.2018
Kommersant
Origin source
Evraz, even against the background of sanctions risks, does not plan to sell assets in the US. The company is talking about the positive effects on the business due to the introduction of Donald Tramp duties on the import of steel in the US and rising prices. Other Russian steelmakers are also not talking about the possible withdrawal from the States. Analysts say that steel imports to the US declined to the level of 2016, and prices have risen, which plays into the hands of all local producers.

Evraz Alexander Abramov, Roman Abramovich and Alexander Frolov does not plan a withdrawal from assets in North America (Evraz North America, ENA), despite the strengthening of sanctions risks, said August 9, Mr. Frolov (owns 10.53% stake).

Recall, this year Washington has made a "Kremlin list" of Russian businessmen, which, in the opinion of the US authorities, are close to the government of the Russian Federation. All top-100 "Russian list" of Forbes billionaires went there. In April, under the sanctions of the United States, Oleg Deripaska and Viktor Vekselberg were already caught. Evraz did not answer "Kommersant", whether they discussed with the US government the risk of getting under sanctions and received any guarantees.

According to Alexander Frolov, US assets for Evraz "are of strategic interest": "This applies to rails, and large-diameter pipes, and supplies of slabs, which continue despite the introduction of tariffs (25% of the duty on imports of steel in the US - ). Therefore, we do not have any immediate plans for selling. "

According to Mr. Frolov, the duties worked positively for Evraz Pueblo: "The prices have grown, the demand has increased".

"It's a bit worse with the asset in Portland (Evraz Portland), which receives slabs from Nizhny Tagil," he added, explaining that there is a duty on imports, but domestic prices for finished goods increased and the margin became higher than before the introduction tariffs.

"Quite difficult" for customers, he called the situation with the Canadian asset Evraz Regina - because of the introduction of both American and reverse Canadian import duties on steel. "But gradually we agree, and the situation should stabilize at least until the end of this year," the businessman said. "The demand for products is quite good, this applies to both the American and Canadian markets." According to Evraz's IFRS report, in January-June amid rising demand, steel sales in North America grew by 30.9%, while sales increased by 8.8%.

The Ministry of Industry and Trade of the Russian Federation earlier noted that the most strongly from the introduction of duties from the US metallurgists from Russia could suffer Evraz, NLMK and TMK with assets in the US. In the materials filed in March in the US Department of Commerce materials of US subsidiaries NLMK - NLMK Indiana and NLMK Pennsylvania - it is said that "if the company can not get rid of the barrage tariffs, it will be forced to withdraw from business, depriving its American employees of jobs." The company still has not received a reply. TMK told Kommersant that the company has no plans to exit American assets, noting that the introduction of import duties "did not have a significant impact on TMK's business."

"The duties affected some types of semi-finished pipes that TMK imports from its factories in Russia," the company added. "In April, TMK filed a number of applications for the seizure of these species from the 232nd article of the US Commerce Development Act 1962. The decision is expected. "

NLMK's factories in the US released 2.16 million tonnes of rolled steel in 2017 (2.24 million tonnes sold for $ 1.7 billion), the division's steel production amounted to 623,000 tonnes (90% of the load). Evraz North America smelted 1.75 million tons of steel, releasing 1.85 million tons of products (rolling, rails, pipes) for $ 1.77 billion. The American division of TMK IPSCO, which in early February postponed the IPO in New York in 2017 sold 671 thousand tons of pipes for $ 994 million.

Andrei Lobazov from Aton says that since the beginning of the year steel prices in the US have demonstrated rapid growth, exceeding $ 1000 per tonne of hot rolled steel: "The premium to European quotations increased from $ 100 to $ 350 per ton." At the same time, in May and June, imports of steel in the US dropped significantly - to about 2.5 million tons per month - and returned to the levels of 2016, he notes. According to the analyst, such a situation is very conducive to steel producers in the US, "and Evraz is no exception": "High oil prices stimulate demand for pipes, EBITDA of North American assets continues to grow, reaching $ 40 million in the first half. But in the context of the group, the division remains a drop in the sea, bringing only 2% of the consolidated EBITDA. " In the first half of this year, Evraz increased by 65.5%, to $ 1.9 billion.

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