trending Market Intelligence /marketintelligence/en/news-insights/trending/k3eBwYtGHbyQOyo8_UNKIw2 content
Log in to other products

Login to Market Intelligence Platform


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

Analysts downbeat on Evraz spending plans

Greenhouse gas and gold mines Nearly 1 ton of CO2 emitted per ounce of gold produced in 2019

Essential Metals & Mining Insights - September 2020

Essential Metals & Mining Insights - August 2020

State of the Market: Mining Q2-2020

Analysts downbeat on Evraz spending plans

Russia's second-largest steelmaker, Evraz PLC, plans to lift annual capital expenditure to an average of US$1 billion from 2020 to 2023 as it seeks to increase sales of finished steel products, according to its Oct. 18 capital markets day presentation.

Of the US$1 billion earmarked, half would go toward maintenance while the majority of development funds would fall on three major projects at a cost of about US$335 million per annum. The remaining US$165 million per annum would be for "middle size and small development projects."

At a total cost of US$647 million, construction of an integrated flat casting and rolling facility at Evraz ZSMK, the largest steel mill in Siberia, would be the greatest component of the US$1.34 billion estimate for the three projects. The company expects to make an investment decision on Evraz ZSMK in October 2020, with its launch planned for 2023.

A new long rail mill at Evraz Pueblo in Colorado would account for another US$512 million, with a decision due at the start of 2020. The company has already committed US$31 million to the project, set to launch in 2022.

Modernization of Evraz NTMK's rail and beam mill in the Urals would cost another US$180 million, of which US$12 million has already been committed for 2020. The revamp would add 333,000 tonnes of value-added H-beams and sheet piles at a margin of US$231 per tonne.

SNL Image

The planned increase in capital spending will be negative for the company, according to BCS Global Markets analysts, who highlighted the steelmaker's already-high leverage compared to peers and the late stage of the steel market cycle.

Wood & Co. analyst Andrew Jones said in an interview that the proposed increase in capex was "very bad news."

"I was hoping they would have scrapped some of those projects in response to lower steel prices, but not only have they continued with them, the capex forecasts have gone up."

"The projects are circa 20% [internal rate of return] which is not high enough in my view, given the risk of rising rapidly leverage at current spot prices," Jones added.

Evraz estimates the IRR of the ZSMK flat casting and rolling complex to be 22%, while Pueblo's and NTMK's come in at 18% and 20%, respectively. Evraz does not accept projects below an IRR of 20%, CEO Alexander Frolov said during the capital markets day.

Global steel demand is expected to grow 2.4% year over year in 2019 due to China's economic stimulus and strong growth in India and Vietnam, according to Evraz. Chinese economic growth slowed to its lowest in 27.5 years in the third quarter.

In 2020, world steel consumption is forecast to grow 1.1% from 2019 as China's economic growth loses momentum, tempered by robust demand growth in India, according to a company presentation.

Evraz expects Russia's ambitious national projects program to spur domestic steel demand by 3.1% in 2019 as the government looks to invest about US$187 billion in infrastructure. In 2020, Russian steel demand is projected to rise 3.8% as the national projects progress, Evraz added, citing CRU forecasts, but they have so far been slow to get going.

"The money seems to have been allocated [for the national projects] but not much progress has been made yet," Jones said. "The other [steel] companies have been more conservative in their views on the market growth in recent times."

Evraz expects steel sales in Russia to jump year over year in 2019 to 9.9 million tonnes, including 5.4 Mt of finished steel products, compared to 9.3 Mt in 2018. Its three planned projects would add 3.0 Mt to domestic finished steel sales if implemented, for a rise in Russian sales to 10.7 Mt by 2024.

BCS said it was not as optimistic as the company about the Russian steel market's growth prospects, as the government's national infrastructure projects would only have "a limited impact on steel demand."