Severstal Plans Strategic Upgrades and Investments Amid Tough Market Conditions
Severstal, one of Russia’s largest steel producers, has outlined significant plans to revamp its production capabilities in response to challenging market conditions. The company intends to upgrade its blast furnace No. 4 at the Cherepovets plant to boost its pig iron output and meet customer demands despite the declining steel consumption in Russia. Severstal CEO, Alexander Shevelev, shared these developments in an interview with local media outlet Channel 12.
Decline in Russian Steel Consumption
According to Shevelev, steel consumption in Russia has seen a noticeable decline in 2024, dropping by 5.7% to 43.7 million metric tons (mt). This reduction in domestic steel consumption is a significant concern for steelmakers like Severstal, especially given that production capacities in the industry still exceed 70 million mt. This disparity between consumption and production has prompted Severstal to seek new opportunities to expand its customer base and optimize production.
Revamping Blast Furnace No. 4 for Increased Output
To address these challenges and improve efficiency, Severstal plans to upgrade its blast furnace No. 4 at the Cherepovets plant, one of the company’s key production facilities. The revamp is expected to increase pig iron output, which is a critical input for steel production. By enhancing this furnace's capabilities, Severstal aims to meet both domestic and international demand more effectively, even in the face of weakening market conditions in Russia.
Investment Growth and Future Plans
Despite the ongoing challenges in the steel sector, Severstal has continued to focus on its long-term growth. The company reported a 60.0% increase in its investment program year on year in 2024, signaling a strong commitment to improving production infrastructure and maintaining competitive advantage. However, with higher interest rates and weaker steel demand anticipated in 2025, Severstal expects a correction in investment spending, focusing more on strategic, high-impact projects.
One of the most ambitious investments in Severstal's portfolio is the planned construction of a RUB 116 billion ($1.18 billion) pellet production complex. This significant project is aimed at increasing the company’s iron ore processing capabilities, particularly in the production of pellets, which are an essential raw material for steelmaking. By enhancing its pellet production, Severstal hopes to further secure its supply chain and reduce dependency on external suppliers for key raw materials.
Navigating Market Challenges and Looking Ahead
Shevelev emphasized that, despite the challenges of weaker demand and higher borrowing costs, Severstal remains committed to its strategic objectives. The company is positioning itself for future success by investing in both technological upgrades and raw material production, which will allow it to better adapt to market fluctuations.
With its plans for expanding production capacity and enhancing operational efficiency, Severstal is preparing to navigate a potentially tougher steel market in 2025. The company’s ability to adjust its investment strategy and pursue high-priority projects, such as the pellet production complex, positions it well for long-term growth, even as the market remains unpredictable.
Severstal’s plans to upgrade its facilities and invest in a new pellet production complex are a testament to its commitment to adapting to a changing steel market. By improving its capabilities, the company aims to stay competitive, even in the face of declining steel consumption in Russia and challenging market conditions ahead.
