NLMK Group has cut output about 1 mln tonnes since start of year vs. set targets

MOSCOW. July 20 (Interfax) - NLMK Group has cut production volumes by about 1 million tonnes since the beginning of the year versus the set targets, the company's chairman of the board of directors, Vladimir Lisin, said on Wednesday at the regional congress of the Union of Industrialists and Entrepreneurs in Lipetsk.

"It is already July, and we alone have actually lost one million tonnes, meaning that all Russian metal companies will lose from 30% to 50%, as we have forecast," Lisin said.

NLMK in June forecast that production volumes in Russia's iron and steel industry could drop 15%, over 11 million tonnes, to 59.6 million tonnes in 2022; and 26%, over 9 million tonnes, to 26.3 million tonnes in H2 2022 compared to the same period last year.

Lisin noted that it is difficult in the current situation to imagine metal companies implementing long-term investment programs. "We once had long-term programs, though they are now becoming rather short, and they are quite difficult for us to implement, even just imagining." Lisin also said that it was necessary to understand clearly the plans for production volumes and types of products for long-term investment programs.

"Clearly, implementing the investment programs has become considerably more complicated. Naturally, we will complete what we had, though with some delay, perhaps, because there are delays in supplying equipment. The question then arises as to what would be the possibility of replacing it, [with] domestic reproduction," Lisin added.

When commenting on the situation regarding domestic demand, Lisin noted that there was a "decrease in activity", while recalling the closure of export markets for Russian steelmakers, which had accounted for approximately 40% of total production, and low profitability when shipping to Asia-Pacific countries. "Some exports have been closed for us, and the existing Asian destinations and China are rather difficult in terms of logistics and freight costs. Chinese steel is practically at the price level of Russian steel today, for example."

"Forty percent [of metal companies' previously exported products] must go somewhere. Let us say that 10 or 15 percent would somehow be sold, even 50% of the 40%. What should be done with the rest? The domestic market has never consumed so much. Accordingly, among other things, the domestic market and prices have fallen, including owing to a large surplus," Lisin added.

Lisin has also noted that metal companies are operating at "negative profitability" at current prices for certain types of steel products on the domestic market. "We require at least 15% profitability in order to maintain our own production at a decent level. Otherwise, we simply cannot adequately support fixed assets, including reconstruction and repairs," he said.

As previously reported, NLMK Group produced 17.4 million tonnes of steel in 2021, and nearly 9 million tonnes of metal in H1 2021.

According to information available on NLMK's website, Vladimir Lisin owned 79.3% of the company through Fletcher as at November 1, 2021. Besides its assets in Russia, NLMK Group owns and operates facilities in the United States in Indiana and Pennsylvania, and produces rolled products at assets in Belgium and Italy.