Russian Steel Giant to Lift Output With Prices Near 10-Year High

Severstal PJSC plans its first big steel production ramp-up in seven years as prices climb to the highest in about a decade.

The steelmaker, controlled by billionaire Alexey Mordashov, plans to boost output by 15% to 13 million tons in 2023, according to an investor presentation on Thursday. Higher production will also help Severstal meet its target of increasing earnings before interest, taxes, depreciation and amortization, said Chief Executive Officer Alexander Shevelev.

“Increasing production is only one part of our growth program, which has a target of boosting profitability” Shevelev said in interview. “We see high demand in our key markets, including Europe, and especially for slabs, so increasing production makes sense.”

Russian Steel Giant to Lift Output With Prices Near 10-Year High

Steel prices have surged as a rebounding Chinese economy drives a recovery in demand following a slump during the early months of the pandemic. Severstal said this year the global steel industry will be in a position to work at more than 80% of its capacity for the first time in at least a decade.

Severstal, which has one of the industry’s highest Ebitda margins, can still meet its strategy goals, even as global output rises, Shevelev said.

The higher output could help Severstal almost draw level Russia’s No. 2 steelmaker Evraz Plc. Severstal will boost production by optimizing the efficiency of existing facilities and with a minimum of spending, Shevelev said. It will restart one of the company’s electric furnaces and boost output from the Yakovlevsky iron ore mine to 5 million tons per year.

Production at Severstal fell after the Russian company sold its U.S. steel mills in 2014 for $2.33 billion.

The steelmaker expects investment to be little changed in 2021 and 2022 at about $1.3 billion per year, with a portion of spending postponed until 2023, according to Shevelev.

©2021 Bloomberg L.P.

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