Russian steel giant Severstal calls for global steel to drop production

Alexei Mordashov, CEO of Russia's second largest steel mill Severstal appeal, hopes the global large-scale steel mills and governments to reach an agreement to reduce steel output and excess capacity.

He said: "As long as we do not solve the problem of supply and demand of steel, the steel industry outlook would not be optimistic. Even worse is many steel enterprises will face bankruptcy or off. "

"Steel overcapacity is a very serious problem if we do not solve this problem, the crisis in the steel industry 10-15 years ago will be repeated. At that time, the United States 1/4 steel enterprise go bankrupt."

U.S. and European steel mills are facing with deficit, but Severstal is still profitable. Mordashov said: "Severstal can be profitable, we are fully capable to survive. However, our goal is not to survive, but to thrive, and Severstal's development depends on the prosperity of the entire steel industry. "

Mordashov thought that the steel industry leaders and governments should reach an agreement to reduce capacity, as in 1994 the practice of treating the aluminum industry. At that time, the European Union, the United States, Russia, Canada, Australia and Norway have agreed to reduce aluminum production. According to their agreement, the global aluminum output fell by 6%.

ordashov said that if the steel industry does not take similar measures, then the steel plant would be forced to lay off more workers and close the door. This trend is intensifying. The world's largest steel company Arcelor Mittal has closed steel mills in France and Belgium, and carried out layoffs. Meanwhile, ThyssenKrupp and Salzgitter also have decided to layoffs.

Mordashov said: "We are facing a serious risk that the steel industry suffered huge losses and upheaval. If we do not pass an order way to restructure inefficient steel mills, so our budget and the customer will suffer more serious damage. "

BCS Financial Group analyst, Oleg Petropavlovskiy said, although Mordashov's proposal is a good idea, but it is almost unenforceable. "Even the United States, Europe and Russia steel plant agreed to drop overcapacity, China is still a key issue."

Petropavlovskiy said, "China exports a large number of steel products to worldwide" while the Chinese government is unlikely to drop capacity. As long as China does not solve the problem of excess production capacity, steel prices will not rise.

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India's "12th Five Year Plan" steel production capacity difficult to complete

Recently, foreign media reports, Due to the current economic slowdown makes the steel mills in India postponed to expand production capacity, meanwhile the Indian government delays in the approval of new projects, will make India's steel industry difficult to achieve previous setting of the "12th Five Year Plan" steel capacity growth targets.

Indian government's "Twelve Five" (2012 - 2017) plan say that, Indian steel production capacity from the current 90 million tons increase to 142.3 million tons in 2017.

India, a securities analyst said that it is clear that India can’t achieve steel production capacity of 142 million tons of goals in 2017. The vast majority of Indian domestic steel companies have delayed the expansion of production capacity, estimated that India's steel production capacity can‘t exceed 100 million tons to 1.05 million tons.

India's "Twelfth Five-Year Plan" relevant documents show that with India's gross domestic product (GDP) to maintain growth of 9%, steel consumption is expected to grow by 10.3%, on this basis the 2017 Indian steel production target is set at 142.3 million tons. India-related industry sources said that the target is indeed high, because this data is established on sustained GDP growth of 8% in the basis. According to Rao, India Commercial Bank chief economist introduces the next three years, the average growth rate of India's GDP expected to be 6%.

Due to steel construction project approval delays, as well as environmental permit applications and other unfavorable factors effect, India's steel production capacity increase has emerged signs of deceleration. According to analyst introduced, like Tata Steel, JSW Steel and Steel Authority of India and other Indian steel companies are also facing the problem of delays and postponement. Although India's steel companies have announced before the "twelfth five" increase71 million tons of steel production capacity, however, due to the lack of project delays or regulatory permits, this will be the uncertainty of future production capacity.

Indian steel prices may rise

Future steel prices rose mainly due to:

First, the Indian government approved a series of infrastructure projects that will lead to rising steel demand in the coming months.

Second, in October, the Indian state-owned bank announced that it would cut 0.20 percent interest on the car, within three years to buy a new car the lending rate is 10.45% -10.75%. India's largest car manufacturer Maruti Suzuki India has announced its October car sales rose 1.91 percent, reaching 105,087 units, and according to the analysis in the next few months, sales will continue to rise.

Third, the Indian government has injected 140 billion rupees to state-owned banks, This will encourage banks to lend in the coming festive season to stimulate consumers to buy cars and consumer durables.

Finally, the Indian rainy season ends, the new construction activity will increase.

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