Severstal notes decline of 25%-30% in steel business - Mordashov

MOSCOW. June 17 (Interfax) - The decline in production in the steel business is 25%-30%, Alexei Mordashov, the principal owner of Severstal , said at a business breakfast of Sberbank as part of the St. Petersburg International Economic Forum (SPIEF) 2022.

"Our production volume in the timber business has dipped sharply, and we have noticeably dipped in steel. Output in the timber business has dropped 80%, whereas the decline in steel is somewhere around 25%-30%," Mordashov said.

Severstal CEO Alexander Shevelev said at a session at SPIEF that the company's capacity is currently underutilized by about 20-25%.

"That is, today we cannot attract orders and produce these products in an economically justified way, although Severstal, being a vertically integrated company, is among the top three global companies in terms of costs," he said. "But today, with the current exchange rate of the ruble, which is insanely strong, with sharply increased costs of logistics, freight, transshipment, delivery, we can not sell to the seemingly friendly markets of the Southeast countries, the Pacific and so on. Economically it is simply not profitable," the CEO said.

Shevelev identified the inability to find new markets to ensure the stability of production as the main risk for the company, and also drew attention to problems with the supply of foreign equipment and components.

"The second obvious risk is that we consume a large amount of components, spare parts, materials and so on to maintain production. We are very active in import substitution today, have done a lot of work and we can say that we have replaced technological materials almost completely today. But speaking of spare parts, we have 17,000 imported items, because all equipment is imported, which requires substitution, and it is very difficult to do," the CEO said, adding that any of these components, not delivered in time or not produced in time, can lead to problems in continuous production.

"In fact, the situation is extremely tense. The partnership represented by the state, represented by the financial structures, represented by the partners in the value chain will be very much tested at these moments in terms of the efficiency of interaction, the speed of using those tools that generate the maximum effect in the moment," Shevelev said.