Moody experts believe that Russian metallurgists such as Severstal and MMK will benefit from a 30-year Russian contract to supply natural gas to China, which will entail many huge construction projects.
Ratings agency Moody's believes the more than $ 400 billion deal, which was signed last month, marks a triumph for Russia, which risks losing European gas customers following the annexation of Crimea and ongoing events in Ukraine.
Russia and China have agreed to a $ 25 billion advance payment in the deal, which bolsters Moscow's plans to invest $ 55 billion in exploration and construction of a pipeline to China. The deal involves the development of two gas fields and the construction of 4,000 kilometers of the pipeline.
These projects will require a significant amount of oilfield and large diameter pipes. Demand will have a positive impact on TMK, Severstal and MMK. Tenders for construction projects will swing in the third quarter, defining a positive effect for the near future.
Under the terms of the deal, Russia plans to start gas supplies in 2018, gradually increasing volumes to 38 billion cubic meters per year. Gas will be transported through a new pipeline connecting Siberian gas fields with the main consumption centers of China near its coast. Moody estimates the total investment in the project will exceed $ 55 billion between 2014 and 2019.
