Vladimir Potapov

T

he RF Federal Agency for Statistics has published data on Russian industry performance in 2004. According to official data steel industry companies have stepped up their production by 5%, those of nonferrous metallurgy by 3.6%. In 2004 the country mined 94.9 mln tonnes of iron ore (an increase of 2.5%) and produced 33.8 mln tonnes of coke (an increase of 2%) and 53.8 tonnes of rolled steel that was 6.2% more compared to 2003. At the same time contrary to the expectations steel pipe production has dropped by 2.3% to total only 6 mln tonnes.

The whole year through prices for raw materials and products in the metallurgical sector remained at a pretty high level. In 2004 prices for steel increased by approximately 60%. Companies and lobbyists of metal consumptive industries tried to resist the tendency but failed.

World market conditions facilitated growth in export. According to data of the RF State Customs Committee during January-February an overall volume of metals and metal products supplied to the external markets increased by 64.8 % to total $ 27.3 bln. USD. Out of this volume, export of steel industry products increased by 82.1 % to reach $ 16.9 bln. USD while that of nonferrous metals went up by 42.1% to amount to $ 9.6 bln. USD. It is interesting to note that in the metallurgical sector an export income growth rate nearly doubled to overrun dynamics of this parameter for oil companies (+35%).

Favorable conditions on internal and external markets made it possible for Russian producers of steel and nonferrous metals to accumulate considerable profits. By estimations of different analysts by the end of 2004 this branch of economy had got from $5 bln USD to $7 bln USD in surplus funds. Companies stepped up the volume of their investments into renovation and upgrade of their production facilities, development of raw material base and acquisition of new assets, including those abroad. In experts` opinion Russian businesses` interest in foreign assets can be explained by an intention to strengthen their position on sales markets sometimes by way of bypassing protectionist barriers and other trade restrictions.

While making a forecast for 2005, Russian analysts pay a close attention to China, where the volume of steel consumption can increase from 306.1 mln tonnes up to 330.5 mln tonnes. It is expected that the Russian market will keep on developing as well. According to Adrew Klepatch, the head of a department of the RF Ministry of Economic Development and Trade, the growth rate of GDP in Russia, which in 2004 totaled 7.1%, will remain the same at least in Q1, 2005.

Anyhow, for Russian steelmakers and producers of nonferrous metals this year will not be worse than the previous one. According to the forecast published by the RF Ministry of Economic Development and Trade it is expected that in 2005 prices for steel will increase by yet another 20% to maintain the high level of profits.