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Russia's new long-term investment plans less steel-intensive


National Projects' steel-related plans limited to housing, waste

Major state infrastructure projects shelved amid COVID-19 pandemic

London — The Russian steel industry is to re-evaluate government-financed demand as the number of the country's long-term goals and associated investment programs was cut in half and their deadlines moved back to 2030 from 2024.

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On July 21, Vladimir Putin made a new decree defining Russia's five development goals dubbed National Projects through 2030. The document automatically cancels the one the president signed in May 2018 that outlined about a dozen National Projects effective through 2024.

"The decision to move the projects' implementation should be seen as part of budget optimization triggered by the coronavirus pandemic, a major rise in emergency funding needs and a collapse in the budget's oil and gas revenues," said analysts from Moscow-based BCS Investment Group.

The budget needed for the plans has yet to be disclosed.

The National Projects adopted back in 2018 were worth Rubles 25,725 billion ($404 billion). S&P Global Platts then estimated national budget spending on five projects most relevant to the steel sector at Rubles 10,518 billion ($165 billion), but it is not clear to what extent the respective budgets have been spent.

In the new set of goals, the most relevant to the steel industry is the aim for a "comfortable and safe human environment" that aims to improve living conditions for a minimum of 5 million families annually, growing housing construction to 120 million square meters/year and to bring separate waste collection to 100% reducing the volume of waste sent to landfills by half. The goal implies lots of steel-intensive construction such as waste management facilities, including recycling plants.

Infrastructure plans dropped

The new list does not mention the Major Infrastructure Upgrade Masterplan -- a cornerstone of the 2018 National Projects that was supposed to use huge amounts of steel. At this stage, it is not clear whether the new goal to grow 2030 investments in fixed capital by 70% from 2020 will have any overlap with the discarded infrastructure expansion.

That plan had many promises for metals manufacturers as it had been designed to expand and upgrade railway, aviation, road, maritime and river shipping infrastructure with a view of boosting cargo shipping. It envisaged the construction/upgrade of highways: parts of the Western Europe-Western China International Transit Corridor, a more than fourfold growth in cargo traffic on the Northern Sea Route to 80 million mt/year, and 35% growth in the Baikal-Amur and Trans-Siberian Railways to 182 million mt/year.

Sheremetyevo expansion postponed

It is not clear to what extent this infrastructure masterplan has been realized, if at all. One of its chief participants -- Russia's largest airport Sheremetyevo -- has just postponed by at least five years the $415 million construction of C-2 terminal (15 million people/year throughput).

According to media reports, the airport will now break ground for C-2 in the 2030s. Its launch was initially planned for 2026. Also, the $120 million refurbishment of Terminal F, the airport's oldest, previously scheduled for the second half of this decade, has been put off till 2031.

The projects' delay is associated with the coronavirus epidemic. Sheremetyevo envisaged building new capacities when its annual traffic reaches 70 million people. In 2019, the airport, whose maximal throughput is 80 million/year, served around 50 million passengers. This year, the number is expected to fall to 20 million-25 million -- in January-May it processed just over 9 million travellers.