The World Steel Association (WSA) has recorded new signs of a negative situation on the global steel market. Overall production in 71 countries around the world fell by 1.9% over nine months, in Russia by 5.5%, to 54 million tons. In Russia, the market is affected by the high rate and reduction of preferential mortgage programs, and analysts do not expect the situation to improve in the coming year.

According to the results of September, Russia reduced steel production by 10.3% year-on-year, to 5.6 million tons. Over nine months, output in the country decreased by 5.5%, to 54 million tons, according to the WSA report. This is the largest drop in the indicator among the ten countries that account for the bulk of steel production in the world.

The reduction in steel production is a global trend. In September, in 71 countries that provide WSA data, output fell by 4.7%, to 143.6 million tons, over nine months - by 1.9%, to 1.39 billion tons. According to the WSA report, China produced 71.1 million tonnes in September, down 6.1% from a year earlier, while India produced 11.7 million tonnes, down 0.2% from a year earlier. Steel production in Japan fell by 5.8% to 6.6 million tonnes during the reporting period, while in the US it grew by 1.2% to 6.7 million tonnes.

In addition to Russia, year-on-year production declines were also seen in China (down 3.6%), Japan (down 3.2%) and the US (down 1.6%) over the nine months.

“The global steel industry faces a challenging 2024 largely due to the manufacturing sector continuing to grapple with challenges such as declining household purchasing power, aggressive monetary tightening and escalating geopolitical instability,” the WSA said in October. The weakening of the housing construction sector due to difficult financial conditions and high costs, the association reported, further worsened demand for steel.

Evraz Steel reported a cooling of demand in the Russian metal structures market in October. The company linked this to the increase in the key rate of the Central Bank, which has a noticeable effect primarily on small and medium-sized investment projects in the commercial and industrial sectors. In the context of expensive credit funds, investors prefer to pause some of them (see Kommersant of October 15). According to the WSA, steel consumption in Russia will fall by 2% by the end of the year, to 44.2 million tons.

MMK reduced steel output by 26.6% in the third quarter, to 2.48 million tons. The company explained the dynamics of the reduction by repairs in the blast furnace process, a decrease in purchasing activity in the Russian Federation due to the growth of interest rates and the end of the preferential mortgage program, as well as unfavorable conditions on the steel market in Turkey. The group's sales of metal products fell by 18.7% compared to the previous quarter, also to 2.48 million tonnes. MMK expects that the impact of the high key rate on investment activity, a decrease in mortgage lending volumes and the seasonal factor will continue to affect the slowdown in purchasing activity on the Russian market. Severstal reduced production in the third quarter by 8% year-on-year, to 2.47 million tonnes, amid repairs in the blast furnace and converter production.

"Of course, the trend is unhealthy and indicates both a deterioration in the global market situation and a slowdown in domestic demand," comments Maxim Khudalov, chief strategist at the investment company Vector Capital. In Russia, there has been a decline in purchases of pipe products over the past eight months, and in the individual construction segment, since the cancellation of preferential mortgages, there has been a sharp drop in demand, he notes. Export markets, the analyst continues, are closed by sanctions on the one hand, and China is increasing steel exports on the other. "In this regard, in the coming year, in the absence of a large-scale increase in liquidity on the steel market, there are few prospects," he believes. But, according to Mr. Khudalov, in a year, European plants may begin to go bankrupt, which will likely cause a deficit and an increase in steel prices. For Russian players, the expert believes, the situation is not so critical, especially against the backdrop of the weakening ruble.