The rise in the value of the ruble could lead to higher dollar-denominated spending for Russian metallurgists, which is eating up export earnings while the sector was looking to capitalize on the nascent economic recovery.
The outlook for the sector revolves around the return of the Russian economy to growth in 2017, with gross domestic product rising to 2 percent this year, driven in part by rising oil prices. But higher oil prices, coupled with Russia's central bank's policy of high interest rates, also pushed the ruble 7 percent against the dollar this year.
For Russian steelmakers, whose export sales are in dollars, this means higher production costs domestically in dollar terms, which could hit profits and lower margins, analysts say.
Nonetheless, NLMK, Evraz and Severstal believe that the strengthening of the ruble will reduce the profitability of export sales, but this will not affect broader revenues due to the surge in global steel prices and improved demand on the domestic market. Magnitogorsk Iron and Steel Works (MMK) sees benefits from the strength of the ruble, because 80 percent of its products are sold on the domestic market.
The growth of the ruble casts a shadow on the rosy mood of Russian metallurgists
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Azovpromstal® 10 April 2017 г. 11:16 |
