💎 Fed’s first rate cut since 2020 set to trigger market. Find undervalued gems with Fair ValueSee Undervalued Stocks

UPDATE 1-RusSpetsStal eyes defence orders to survive crisis

Published 06/08/2009, 08:56 AM
Updated 06/08/2009, 09:00 AM
MT
-

* Red October steel output a quarter of last year's level * Defence sector demand will sustain production

* Avoiding mass lay-offs

* General director backs creation of Russian steel giant

(Adds details, quotes, background)

By Robin Paxton

MOSCOW, June 8 (Reuters) - State firm Russian Technologies is counting on defence sector demand to sustain its Red October steel mill through an economic slowdown that has slashed output to a quarter of last year's levels, a company official said.

RusSpetsStal, set up by Russian Technologies to manage its special steel assets, wants to acquire other plants when the economy emerges from crisis, but is concentrating now on avoiding mass redundancies, General Director Sergei Nosov said.

"We have not laid anybody off. We are trying not to repeat the experience of Pikalyovo," Nosov said, referring to the town where Prime Minister Vladimir Putin publicy rebuked billionaire Oleg Deripaska last week over unpaid salaries.

"Red October has a chance. The defence sector, one way or another, will spend money. Our support will come from the defence sector," he told reporters on the sidelines of the Metal Bulletin Russian Steel Summit.

Steel makers in Russia, the world's fourth-largest producer, have cut output as orders dry up from the crisis-hit automotive and construction sectors. Production fell almost 30 percent in April, year-on-year, official data showed.

The Red October, or Krasny Oktyabr, plant in the southern city of Volgograd -- RusSpetsStal's main production unit -- is producing a monthly average 10,000 tonnes of finished steel this year, compared with 40,000 tonnes last year, Nosov said.

RusSpetsStal was founded in 2006 with the aim of grouping some of Russia's main producers of special steel for the defence, machine-building and aerospace sectors. It acquired Red October in January 2007 but has yet to buy another major plant.

Parent company Russian Technologies, run by businessman Sergei Chemezov, is a state-owned empire that spans titanium producer VSMPO-Avisma, leading Russian car maker AvtoVAZ and one of the world's biggest arms exporters.

NATIONAL CHAMPION

Nosov, a former Evraz Group executive, said Russia should follow the example of ArcelorMittal and create a steel giant to challenge the world's largest producers.

"The Russian steel industry would be so much stronger if it worked together," he said. "A company that could produce 20, 30 or 40 million tonnes a year would be a serious player on the market. And if it were vertically integrated, all the better."

Russia produced 68.5 million tonnes of steel last year, 5.2 percent of global output. Four firms, Severstal, Evraz Group, Magnitogorsk Iron & Steel Works and Novolipetsk Steel, each melted over 10 million tonnes.

Nosov said he supported a merger between steel makers, not the ambitious mega-merger proposed by some Russian billionaires that might also have included Norilsk Nickel.

"I'm not prepared to say that Russian Technologies is playing a role, or will play a role. It's too early to say."

He added: "It would be interesting to make acquisitions for pennies, but on the other hand where are the market prospects?

"Whoever comes through this period -- and it might be an extended period -- will be successful in the future."

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.