The start of construction of blast furnace 3 at Severstal’s sprawling Cherepovets plant will signify more than just strong business optimism at the Russian steelmaker. It will feel like throwing off a decade-long hoodoo.
First announced in 2008, only to be postponed and cancelled as the global financial crisis and then the 2014 commodity crash whipsawed across the industry’s balance sheets, the Rbs28bn ($500m) project is one of a number of capital expenditure projects by Russian metals and mining companies forging ahead with renewed confidence.
Despite the threat of new western sanctions against the country and US tariffs on aluminium and steel, Russian metal executives have a spring in their step, as commodity prices continue to rise, borrowing costs come down and painful debt restructurings and strategy shifts over the past five years begin to bear fruit.
“Higher profits and, very importantly, lower interest rates result in better optimism and lower costs of financing for the projects,” said Kirill Chyuko, head of research at BCS Global Markets in Moscow. “Thus companies are more comfortable to restart projects and invest in the new ones.”
Initial work on blast furnace 3 — Severstal’s fifth furnace at Cherepovets — is part of a flurry of investments in new mines, plants and renovated facilities across the country’s metals industry.
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