Steel Mills

Evraz Posts Big 1H Profit, Warns of 'Possible Correction' in 2H

Written by Michael Cowden


Steel prices can’t go up forever and could correct downward from their historic highs later this year, steelmaker Evraz said.

“Steel prices look unsustainable at current levels and there is a possibility of a gradual price decline in the coming months,” the company said in outlook commentary released with earnings data on Thursday, Aug. 5.

EvrazEvraz Chief Executive Officer Alexander Frolov specified that the second half of 2021 could see “a possible correction in steel prices” even as global markets remain “fairly healthy.”

The Russian steelmaker also operates steel mills in the western U.S. and western Canada.

Evraz recorded profits of $1.21 billion in the first half of 2021, more than double profits of $513 million in the first half of 2020 on revenue that rose 24% to $6.18 billion over the same period.

The stellar result came thanks to a trend of higher prices that began in the second half of 2020 and accelerated in the first half 2021. Demand from steel-consuming industries outstripped supplies, sending both steel and raw materials prices sharply upward.

Prices then skyrocketed to historically high levels on government stimulus measures and as global industrial activity recovered to pre-pandemic levels. The trend was led by China with North America, Europe and the Commonwealth of Independent States following in short order.

But the same cycle might now be at risk of happening in reverse, Evraz suggested. “For the rest of the year, the steel market may face the effect of the Chinese government’s initiatives to reduce carbon emissions, its fight against ‘unreasonably’ high commodity prices, as well as an expected decline in domestic demand from China,” the company said.

As for North America, Evraz has benefitted from increased activity in the oil patch. Monthly oil country tubular goods (OCTG) consumption reached 308,647 tons (280,000 metric tonnes) in June 2021, up 99% from June 2020. The gains there came thanks to oil prices nearing five-year highs on recovering demand and on the Organization of Petroleum Exporting (OPEC) countries limiting supply.

And across the North American steel industry, significant price increases were announced as limited domestic mill supplies collided with low service center inventories. But the price gains have varied widely by product, noted Evraz, which operates a plate mill in Oregon, a long products mill in Colorado, and pipe and tube mills in western Canada.

Case in point: Hot-rolled coil prices were up 154% and carbon plate prices up 108% in the first half of 2021 compared to the same period in 2020. Wire rod prices were up only 30% over the same comparison and rebar prices up a comparatively modest 35%.

On the operations front, Evraz is proceeding with its plans to build a new $500 million long-rail mill in Pueblo, Colo. A general contractor for construction and equipment installation has been selected. And upgrades aimed at modernizing and increasing capacity at the company’s energy tubulars mills in Regina, Saskatchewan, and Red Deer, Alberta, are also progressing, the company said.

By Michael Cowden, Michael@SteelMarketUpdate.com

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